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December 1, 2023

Why the Future of CPG Supply Chains is Autonomous

Consumer goods companies are at a critical juncture in their supply chain planning strategies. Traditional forecasting models have become unreliable in the face of evolving circumstances, prompting the need for autonomous supply chains. In a recent panel discussion featuring industry experts from McKinsey and o9, the challenges and principles of implementing this transformative approach were explored. Data quality, human involvement, master data management, comprehensive change management, and executive sponsorship were identified as key factors. The potential benefits, including revenue uplift, improved service levels, inventory reduction, and cost reduction, make it imperative for companies to adapt. Here are the key takeaways:

Motivation and Focus: 

What is the driving force behind autonomous supply chains for consumer goods? The escalating demand for accurate and timely delivery metrics necessitates an evolved and integrated planning system, distinct from traditional forecasting models. Notably, 40% of surveyed CPG companies have already transitioned from traditional sales and operations planning (S&OP) to embrace collaborative, continuous, and real-time planning. These companies are now prioritizing real-time replanning, proactive risk management, and agile and resilient planning to meet evolving customer requirements, even in the face of COVID-related challenges.

To successfully navigate this new landscape, companies should consider the following actions:

1. Evolve and integrate planning systems:

Implement advanced planning systems that align with the demands of autonomous supply chains, moving away from outdated forecasting models.

2. Investigate the shift from traditional S&OP:

Explore why a significant portion of CPG companies has transitioned away from S&OP and identify their new areas of focus.

3. Meet customer requirements amid COVID stress:

Devise strategies to ensure 90% on-time delivery and 1-2 day lead times while considering the challenges posed by the pandemic.

4. Build supply chain resiliency:

Embrace an adaptable approach to create a resilient supply chain capable of withstanding unpredictable changes.

Survey Findings and Planning Process: 

Participants shared insights from a survey conducted with 36 Asian CPG leaders. The survey revealed that approximately 40% of companies have already abandoned traditional sequential planning in favor of collaborative, continuous, and real-time planning. These companies are placing emphasis on real-time replanning, proactive risk management, and agile and resilient planning. The discussion also shed light on the challenges and blockers hindering the adoption of autonomous supply chain planning, underscoring the need for executive sponsorship and a transformative approach.

To effectively implement autonomous supply chain planning, the following actions are recommended:

1. Real-time replanning and collaborative exception resolution:

Explore the implementation of real-time replanning strategies and enable collaborative resolution of exceptions.

2. Proactive, predictive planning:

Adopt proactive planning methodologies to sense and respond to risks across the entire value chain.

3. Agile and resilient planning:

Extend agile and resilient planning practices beyond the value chain by establishing a dedicated center to enable such capabilities.

4. Integrating product development:

Consider integrating product development into the planning process to enhance overall efficiency and alignment.

5. Overcoming adoption hurdles:

Address obstacles to adopting autonomous planning, including changing key performance indicators, retraining personnel, taking a transformative approach, and having the right technology stack and executive sponsorship in place.

Implementing Autonomous Planning and Change Management: 

The panelists delved into the challenges and principles associated with implementing autonomous supply chain planning in CPG companies. The importance of data quality, human involvement, solid master data management, and comprehensive change management with executive sponsorship were emphasized. The potential benefits, including revenue uplift, improved service levels, inventory reduction, and cost reduction, were underscored. Additionally, involving employees at all levels, creating a compelling case for change, managing the transition in a step-by-step manner, and understanding current processes and perspectives were highlighted as essential elements.

To successfully implement autonomous planning and navigate change, the following actions should be taken:

  • 1.

    Find a sponsor to drive the autonomous supply chain journey and provide guidance throughout the transformation.
  • 2.

    Help customers embrace the journey by understanding their starting point and mapping out the path to autonomy.
  • 3.

    Follow the crawl, walk, and run approach to gradually implement autonomous planning.
  • 4.

    Conduct small bite-size pilots to test and refine the new planning processes.
  • 5.

    Align functional matrices with the new way of working to drive widespread adoption.

Consumer goods companies find themselves at a pivotal moment, requiring the evolution of their planning systems to adapt to changing circumstances. Autonomous supply chains offer a promising solution, characterized by collaborative, continuous, and real-time planning. Embracing this transformative approach necessitates overcoming challenges, ensuring data quality, involving human expertise, and managing change holistically. By doing so, companies can reap the rewards of revenue uplift, improved service levels, inventory reduction, and cost reduction. Implementing the suggested actions will enable CPG companies to thrive in an ever-changing business landscape, ensuring resiliency and meeting customer requirements with efficiency and precision.

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