4 minute read 20 Jun 2019
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Three steps for CPG firms and retailers to reinvent their supply chains

By

EY Americas

Multidisciplinary professional services organization

4 minute read 20 Jun 2019

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Nearly everyone is reinventing their supply chain but there’s room for improvement in meeting end-customer needs.

A supply chain reinvention always looks great on paper. But EY’s recent study indicates that many companies are still working toward on-the-ground success. We surveyed 500 senior-level executives from Americas-based businesses with over $1b (USD) in revenues. We found that the number one success factor for creating a successful supply chain is gaining end-to-end visibility. However, only 20% of surveyed enterprises were digitally networked with their customers and suppliers, which leaves end-to-end visibility as a lofty and distant goal.

Where’s the disconnect between intent and achievement? In the study, many respondents claimed to lack people with sufficient vision and experience to drive strategically appropriate supply chain transformation. Other enterprises also were stuck on traditional investment priorities that optimize traditional supply chain performance metrics (i.e., productivity and efficiency goals) but don’t lend themselves to going beyond the enterprise’s four walls.

If you want to get the most out of your supply chain reinvention program, our study suggests three primary actions to take.

Reconsider your supply chain metrics

Companies that still measure progress primarily by increased efficiencies and reduced costs tend toward investment profiles and compensation measures that reinforce the traditional way of doing things. Case in point, our research for CPG companies and retailers showed that today’s investment priorities centered on productivity, and efficiency.

These are admirable goals, certainly, but they have two limitations for success in the Transformative Age:

  1. They are based on incremental improvements to the status quo.
  2. They ignore the vast potential benefits of the fully connected supply chain, such as real-time responsiveness and agility, so critical to delighting today’s consumer.

How do companies surmount this hurdle? Retailers and consumer packaged goods enterprises should start thinking outside each function of the supply chain, and start using end-to-end metrics that look at the entire supply chain. Operational efficiency metrics are still important but can be measured across the supply chain, and even include suppliers and customers so that companies are optimizing the whole, not individual functions that create inefficiencies elsewhere in the chain. It’s about thinking “outside the function” and looking for areas in which truly collaborating across departments can change the way you engage with your customers.  Also, companies should think about adding KPIs for things that enhance the customer experience and consider factors such as customer satisfaction, loyalty, and returns.

Take new approaches to supply chain talent management

In the study, 56% of CPR respondents indicated a lack of skilled employees to be one of their top-three obstacles. However, supply chain reinvention is not just about building new skills for your employees. It’s about new ways of thinking that will increase the value of these skills – for example, leveraging technology to automate mundane tasks to focus your talent on the high value, underserved areas that simultaneously motivate and grow employees as well as drive tremendous bottom line value.  Think about breaking the mold by offering candidates the exclusive chance to reinvent the customer relationship in their category. Pitch candidates on the opportunity to help reinvent your supply chain for the digital age.

Make sure your talent is distributed throughout your supply chain. You will need their fresh approach and impact in every function from planning to logistics, so that they can help each function change the way it thinks and create the critical mass for change. It’s time to think about the use of a fully networked supply chain and a collaborative ecosystem – with the customer as the organizing principle.

Think beyond incrementalism

In the Transformative Age, incremental improvement simply isn’t enough anymore. That “present-forward” ignores the exponential rates of change in today’s world. Only by adopting a strategic approach with scale in mind can you make the great innovative leap toward that desired future state. Start with how you want to eventually work. Think frictionless. Think agile. Think ecosystem. Yes, you still need to make your targets, but there are ways of balancing traditional supply chain operational metrics with new ones that are customer-centric.

This all requires changing the way you think about your business. For example, you probably already segment your customer base – now, extend that thinking into segmenting your supply chain to best service the needs and expectations of each customer segment. If you are a consumer-products company, separate your channel partners from your end consumer and design your supply chain to cater to the needs of both.

The real difference-maker in supply chain reinvention is bringing an innovation mindset to the table. Going forward, your biggest competition is going to be the innovators, both from inside and outside your industry. Business as usual – focusing on efficiency metrics and incrementalism – is something to avoid – especially when companies are looking to leap frog one another by placing big bets.

A better approach is focusing on the needs of your end-customers and preparing your employees—right now—for a digital future. This also means continually investing toward fully digitally networking your supply chain with suppliers and customers. In this way, your company will set the pace for the future, instead of having it defined for you.

Summary

The real difference-maker in supply chain reinvention is bringing an innovation mindset to the table. It's important to focus on the needs of your end-customers and prepare your employees — right now — for a digital future.

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By

EY Americas

Multidisciplinary professional services organization