Let’s face it, the consumer goods-to-retail supply chain gets a lot of attention – maybe too much so at times, relative to other industries.
However, consumer spending represents more than two-thirds of the US economy, so a proportional level of coverage probably makes sense.
Also, just consider how many important supply chain developments had their start or at least became mainstream in this sector:
- Bar coding
- Vendor Managed Inventory
- Efficient Consumer Response (ECR)
- Collaborative Planning, Forecasting and Replenishment (CPFR)
- The “Perfect Order”
- RFID (yes, used in many non-retail applications first but the work at MIT’s Auto ID Labs, which really was the catalyst for more widespread interest, focused on consumer goods-to-retail applications)
- “Demand-Driven” Supply Chains, etc.
Also, even if your company is not a consumer goods manufacturer or retailer, chances are you are part of that supply chain in some form anyways, as your products either go into or are used by companies in those sectors.
So, it was appropriate I think for the most recent issue of the Supply Chain Digest Letter to focus on developments in the consumer goods-to-retail supply chain. If you didn’t receive a copy in the mail (we target these mailings) you can download an electronic copy here (SCDigest Letter on Consumer Goods-to-Retail SCM); you can also find that electronic edition and a lot more information on our companion resources page: Consumer Goods-to-Retail SCM Resources.
As we did research for the Letter, a number of things occurred to me that I would like to discuss here – one of which is that more than any other industry this value chain is full of contradictions and conundrums, it seems to me. Some observations:
- The whole history of industry programs (Quick Response, ECR, CPFR, RFID) can be seen as continually chasing the same set of problems (too much inventory, too many out of stocks, etc.) In fact, if you go back and look at the wording in documents from various industry groups promoting say Quick Response back in the late 1980s, you could take certain passages and almost just cut and paste them into similar documents for CPFR a decade later and RFID a few years more after that.
Every one of these programs has delivered results, especially for individual companies, but I also think each has never fully produced the expected industry-wide changes many envisioned from them (I expect a retort from the very smart and passionate Joe Andraski of VICS). Why is that?
- Collaboration is a great example. There are in fact many areas of consumer goods-to-retail collaboration. Some even use the formal 9-step CPFR model, and there have been many documented cases of success.
|"I believe that in this (and other) supply chains, the next frontier is to really close the gap between supply chain planning and execution. "
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The “customer logistics team” concept used by large CPG companies like P&G, Campbell’s Soup, Unilever, and many more certainly is evidence of that collaborative mentality. So are many “one off” areas of collaboration embraced when the opportunity presents itself.
Yet, is anyone really happy with the current state of collaboration here? Very few on either side are, especially the manufacturers, it seems to me. We just completed a recent Videocast on “Strategic Supplier Management,” for example, where our experts opined that the concept of really viewing their suppliers strategically was really very new to most retailers. How well can you collaborate when you look at suppliers from a highly tactical perspective? (See our Videocast Listing.)
Then there is the whole area of “compliance” and chargebacks. Needed tools for supply chain improvement, or retail profit center? Some of both? We’ll look at this issue in more detail in the future (it was also covered in our Videocast series), but clearly it is a stretch to call many of the chargeback programs “collaborative.” As just one example, I continue to hear stories of manufacturers not being able to get a carrier appointment at the retail DC, then getting a chargeback for missing the delivery date on the PO.
- I believe that in this (and other) supply chains, the next frontier is to really close the gap between supply chain planning and execution.
You can see so many examples of this – the interest (if still lack of adoption) in RFID, especially in achieving better execution of promotional programs; the high level of interest and progress in the area of Sales & Operations Planning; the “demand-driven paradigm” and new technologies and approaches for getting POS and other data back into planning processes; efforts to unify demand signals across increasingly complex channels of distribution.
This I think really will be the next wave for industry leaders – and will have many process and technology implications as we begin to totally eliminate information latency and hierarchical flows.
(As a quick note, we recently did a major survey on this topic, the results of which will be released in the next couple of weeks.)
- Seeing the whole picture: A handful of consumer goods companies and retailers have an individual responsiblity for looking at the entire value and logistics chain – from manufacturing to the store shelf. For everyone in the past, and still most companies today, these views were often disconnected – manufacturers thought their job was done upon delivery to the retail DC; retailers had disconnected thinking across logistics and store operations. Now, a company like CVS, for example, keeps digital floor layouts of each of its thousands of locations, and picks and packs store orders to maximize stocking efficiencies.
There is a lot more, but I am out of space. You can find a lot more in the Letter.
I’d also love your thoughts about what is happening in this value chain.
What do you think are the key issues in the Consumer Goods-to-Retail Supply Chain? Why does the industry seem to make such jerky and inconsistent progress? What do you think will be the key supply chain trends? Let us know your thoughts at the Feedback button below.
Let us know your thoughts.
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