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The supply chain challenge for the consumer goods and retail industry

Bridging the gap between today's supply chains and the cognitive future

  • Mike landry

    Mike Landry

    Supply Chain Management, Global Service Line Lead

Published

10/10/2018

As someone new to Genpact following the Barkawi acquisition, I enjoyed attending its recent consumer goods and retail (CGR) forum - both as an opportunity to meet our supply chain and order management clients, and to hear first-hand the challenges and opportunities they are dealing with in today's hyper-competitive business landscape.

Global CGR companies with heritage supply chains are facing a bleak future – they risk becoming monoliths with expensive SKUs and channel complexity due to customization and multi-party networks. They're also struggling to deliver direct to consumers and serve the last mile without taking a massive hit to profits.

Social media, e-commerce, and mobile connectivity have dramatically changed consumer behaviors and simultaneously reduced the capital required to launch a new CGR brand. This means increased competition for legacy CGR players against newcomers that aren't burdened by big distribution, manufacturing, and marketing overheads.

The hallmarks of future success

As part of the forum we discussed the characteristics of the enterprise of the future, to see how CGR businesses can stay ahead of the competition. Successful companies will evolve in radically different ways to make faster, more accurate decisions for the benefit of customers. Ultimately, this evolution will lead to "instinctive enterprises."

Organized around the customer, instinctive enterprises will have AI as their neural wiring, connecting people, processes, and domain knowledge. They will thrive via connected ecosystems – internally and externally – predictive insight, and adaptive workforces, which will enable them to have more agile supply chains and meet the demands of business customers and consumers alike.

To become instinctive enterprises, however, CGR companies will need to transform manufacturing, transport, third-party logistics, warehouses, supplier relations, planning, forecasting, inventory, and order management. If we look at the planning and forecasting challenge specifically, how can supply chain teams create predictive insights to balance over-optimistic sales forecasts with lean inventory levels that keep finance happy? Eighteen-month forecasts don't help, as predictions are hazy after the first three months and rapid changes in consumer behavior make them redundant. Fire-fighting these types of issues makes it hard to prioritize large-scale digital change.

Taking the cognitive first steps

Because CGR companies know the size of the prize, they are increasingly adopting cognitive supply chains, which enable them to anticipate – rather than react to – changes in demand and collaborate with suppliers to minimize disruptions. AI is the game-changer: dynamic routing systems analyze the real-time status of shipments, delays, and traffic conditions to suggest route changes, and intelligent alert systems prompt real-time action to maximize on-time, in-full orders and reduce retailer penalties.

Some CGR companies are taking huge steps along this path, reimagining their entire operations. Others are investing in tech start-ups to piggy back on new technology and nurture innovation.

Those taking baby steps are mindful of the risks and the scale of the task. So they're starting with smaller projects where there are tangible benefits for a particular headache or a process that is too costly to do manually. Trade pay promotions is one area that's being tackled enthusiastically with digital technologies, or small regions where the scale of change is more manageable. These pilot projects help organizations become accustomed to digital change, get the underlying processes right, and build trust in new data while breaking down silos and building strong partnerships.

This is the path to a cognitive supply chain for a lot of our clients. And small steps often make the journey feel less theoretical and more achievable.

Culture is essential

But it's not all about the technology. During the forum, one of the biggest talking points was around the cultural challenges posed by digital transformation. How do you nurture a culture to embrace digital change across an organization? And how do you create teams that are willing to adapt their processes, trust the data, and collaborate with each other?

At the forum, the consensus was that having the right skills in supply chain teams – as well as the appetite and tenacity to tackle new problems – was critical. And once the right skills have been identified, ensuring plans are in place to skill-up or re-skill. CGR senior leaders need to empower employees with training and technology, and align them around a common purpose: the customer.

We also agreed that the benefit of looking at other industries to learn from organizations that already have some of the attributes of instinctive enterprises – and the benefits they've delivered. In other words, it's useful to have global examples that can give a roadmap for the level of transformation needed.

All food for thought, in any case, as we help clients move towards a cognitive supply chain, making the challenge more manageable so that companies, their customers, and suppliers can realize the benefits.

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