To better navigate an environment where volatility has been the norm, top Consumer Packaged Goods (CPG) companies are implementing next-generation control tower technology to improve the end-to-end visibility of the consumer goods supply chain. Traditionally, the CPG space has seen supply stability with occasional item, transportation, or cost constraints. However, over the past two years, CPG companies have grappled with COVID-related delays, port congestion, material shortages, and rising costs—often simultaneously. Essentially, the landscape has shifted from companies facing targeted concerns to having widespread, longer-term disruptions. As a result, companies are adjusting their perspectives to adapt to a new world order, according to Chris Gaffney, former Vice President Global Strategic Supply Chain at The Coca-Cola Company.
“I think you’re in the phase now, where there’s a recognition that we’re likely to be in a period of uncertainty, for a variety of reasons, for a longer period of time,” Chris says. “So, the shift is truly back to what are sustainable tactics that we can take that enable us to be able to win and win effectively over time, both with customers and from a financial standpoint.”
Chris spoke with o9’s Vice President of Industry Strategy, Nikolas Coffrin, and Senior Director Industry Solutions, Sebastien Calais, about how CPG companies can navigate demand and supply uncertainties and how the consumer products industry can find solutions.
Here are three key takeaways from the conversation.
Winning companies can identify their weaknesses
At this point, every company is facing disruption. But the CPG brands that can manage uncertainty through market share or price premiums in the marketplace may be placing themselves well ahead of their competitors. Companies need to diversify their supplier base and find alternative sources to mitigate issues like raw material or supply shortages and transportation delays. As an example, winning companies are developing strategic relationships with multiple suppliers to ensure the availability of materials and move beyond transactional relationships.
“I think one of the biggest things we see is really around portfolio rationalization,” says Nikolas. “But not just rationalization, it’s focusing on what are the core items that your consumers expect and need, and prioritizing those throughout your supply chain.”
Leveraging next-generation control towers to manage alerts and exceptions
Control towers have evolved from providing planners with reports and analytics to offering end-to-end supply chain visibility and greater insights into how a brand’s products are doing in the market. Next-generation control towers can also help prevent CPG companies from getting bogged down in alert and exception management. Newer platforms allow companies to set more precise parameters to minimize the number of alerts and exceptions that need attention so that planners can refocus on strategic decisions that deliver greater value allowing technology to automate repetitive decisions.
Companies using control towers for execution may have also found they needed to adopt more structured business practices. If companies were giving suppliers greater slack capacity, a control tower would have shown that more disciplined practices would improve lead times and provide better outcomes for the business.
Better understand the impact external factors will have on a business
Next-generation control towers and mapping capabilities are also helping CPG companies better pinpoint which external drivers are influencing and shaping demand. This directly translates into how CPG companies can effectively manage their value chain and end-to-end supply. Companies can also take a more sophisticated approach to determine the external factors, like commodity futures, will have on how they manage their supply base, plan pricing strategies, and manage their bottom line.
“We’re starting to see companies get smarter, not just about managing from a cost basis but also starting to manage, by being able to sense disruptions before their competitors do,” Nikolas says. “Two weeks, a month lead time over a competitor and understanding the potential risk a disruption can have is a significant competitive advantage that can allow you to secure a supply base before that supply becomes at risk.”
Overall, next-generation control towers are shifting how CPG companies can respond to disruptions and keep their businesses moving forward. But the other benefits are seen in how companies build stronger relationships with their suppliers and in helping the next generation of supply chain professionals feel more confident in navigating market disruptions as they continue to develop their careers.
“This has been the most challenging period for most supply chain career professionals in their life,” says Chris. “But it’s another thing if we’ve got new people in the industry. In many cases, you start your career closer to that frontline execution and what we don’t want to do is have people say, ‘This is not where I want to spend my career.’ The [companies] that are more successful have created more discipline in that short-term horizon, and they’ve been willing to equip their teams with the right information to make tradeoffs in that hour, day, week horizon.”
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About the author
o9 SolutionsThe Digital Brain Platform
o9 Solutions is a leading AI-powered platform for integrated business planning and decision-making for the enterprise. Whether it is driving demand, aligning demand and supply, or optimizing commercial initiatives, any planning process can be made faster and smarter with o9’s AI-powered digital solutions. o9 brings together technology innovations—such as graph-based enterprise modeling, big data analytics, advanced algorithms for scenario planning, collaborative portals, easy-to-use interfaces and cloud-based delivery—into one platform.