Apparel — speed and agility come to the fore
- The trend toward centralization
Today, apparel companies have a trend toward greater centralization, with the main hub often located in Asia. Centralized procurement models tend to deliver the most operational benefits, enabling the creation of economies of scale. Regionally focused principal companies adapt quickly to changing consumer demands and provide rapid time to market.
- Aggregating inventory to minimize markdowns
Apparel companies should also seek greater flexibility through their distribution centers. By aggregating as much inventory as possible, they can react quickly to changing demand, reallocating goods among wholesale, retail and e-commerce sales.
- Optimizing relationships with licensees
In recent years, stronger relationships have emerged between apparel companies and licensees. Licensees must develop the brand and align their own operations with the operating model of the apparel company.
Beverages — leveraging global scale
There are strong, global-scale dynamics at play within beverages. Products are frequently global and may only differ subtly across markets. Only a few beverage companies have, however, implemented true regional or global supply chain management. There is significant untapped potential to pool resources across countries to improve product availability, working capital and asset utilization.
- Effective procurement operating models
The most effective procurement operating models typically consist of: a centralized core, with regional and local variants for specific categories also mega categories, like packaging or bottles. This provides maximum control while also enabling a degree of local variance. By optimizing procurement, beverage companies have cut input costs by 3% to 12%.
- Exploring the buy-sell model
CP companies are exploring buy-sell models, where the central procurement company becomes the only supplier to the group. This ensures optimal forecasting and capacity planning across the supply and demand networks. For some, toll manufacturing is the next step. The manufacturing entity charges a “brewing fee” to the supply chain company but never owns the product.
- Co-location with other functions
Co-location of procurement with other functions enables a more integrated approach. Procurement teams could play a bigger role in areas such as product and packaging.
Food — a new approach to market clustering
- Tailoring the supply chain to the needs of the consumer
Food companies must constantly adjust their operating models to “unlock” value from their global business operations. Many food companies have arguably become too centralized in recent years. They recognize that they need a more regionally driven model. In this case, proximity to the consumer is key because tastes vary widely from market to market.
- Clustering markets by stage of development
Companies should consider clustering markets according to their stage of development.
Markets such as Japan, Australia and South Korea can be grouped together due to similar dynamics in terms of the maturity of modern trade. Another cluster could comprise Myanmar, Vietnam and Laos, where traditional trade still dominates.
This clustering approach enables companies to stay close and relevant to the market, while still realizing some scale benefits by bringing similar markets together within the same regional structure.
- Taking constraints into consideration
The constraints of markets should be factored into the design of these clusters. For example, various economies in Asia-Pacific have restrictions on the cross-border movement of products, and may apply significant duties or not provide the required licenses. While this may restrict the size of clusters, it can also introduce further opportunities in choosing locations where fiscal regimes and talent differentials exists.