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 Fulfilling the Three A's: Adaptability, Agility and Alignment
In the recent years, we have seen a transformation in consumer behavior. The use of social media allows consumers to exchange thoughts; the migration from controlled media and monitored media. Easy information access combined with more educated consumers is making promotion planning more important. Finally, the chase for "value" is not only changing the timing of purchases but also location and brand. All these changes on the demand side are forcing consumer products companies to think about supply side in terms of: Demand Driven Supply Networks.
The supply chains are being transformed into complex supply networks with the introduction of co-packers, co-manufacturers and service providers. Commodity price increases and fluctuations are adding to volatility and margin pressures. Overall, changing consumer behavior, and increases in complexity, globalization and cost reduction pressures all force consumer products supply chains to fulfill the three A's: Adaptability, Agility and Alignment.
The crux of these strategies relies upon the application of Business Analytics to help close the gap between planning and execution. In this case, Closed-Loop Dynamic Inventory Optimization is leveraged to set appropriate inventory targets throughout the global supply chain and ensure that the right products are positioned in front of the right customers at the right time.
Closed-Loop Dynamic Inventory Optimization is a core process that regularly tunes policies across the supply chain to keep inventory closely aligned with changing conditions. But, the organizational value of such an approach goes beyond the more obvious metrics of improving service levels, order lead times, and inventory positioning. For example:
- Higher performing supply chains can incur lower selling costs
- Better replenishment enables faster collection of receivables
- Utilization of optimal inventory targets results in less cash tied up in inventory
- Optimal use of existing distribution assets (warehouses, fleet) reduces need for capital investments.
- Better cash flow from lowered supply chain costs and unnecessary assets drive higher credit rating and lower borrowing costs
The application of Business Analytics on top of traditional supply chain planning and execution solutions gives CP Manufacturers the unprecedented ability to continuously improve operational efficiency, reduce costs, and enhance the customer experience.
Featuring Dr. Michael S. Watson, Ph.D., WW Optimization & Supply Chain Lead at IBM, Remzi Ural, Global Supply Chain Management Solutions Lead, Consumer Products Industry at IBM and SCDigest Editor Dan Gilmore.
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