The consumer packaged goods (CPG) industry has found itself at a crossroads where new strategies are needed. In the “Henry Ford moment of the digital era,” this well-established growth model, focused on building global brands, broad distribution and economies of scale, is being challenged by fast-changing paradigms.
The world is changing at an unprecedented pace with blurred lines between professional, personal, and social worlds—and the pandemic has only accelerated this. Consumers expect to engage with authentic brands via seamless experiences across physical and digital channels. Simultaneously, in mature markets, growth is slowing and strategy refreshes are desperately needed. With new local competitors in emerging markets showing heightened agility, outdated processes have no place in the fast-moving world of complexity and micro-segmentation.
How can CPG organizations build a supply chain fast and smart enough to be both personalized and profitable at this scale and level of granularity?
Migrate from an Inside-out to Outside-in POV
If the old supply chain paradigm was built on an inside-out scale, the new one is built on a customer-centric outside-in scale. This is where artificial intelligence (AI) meets big data. Data hungry machine learning enables supply chains to sense and analyze market dynamics, understand and predict consumer actions, and know why a category is growing or why certain SKUs are proliferating while others are out of favor. By getting to know the customer and integrating with the ecosystem beyond the traditional walls of the supply chain, digital supply chains help manufacturers design the consumer experience sooner with a Predict and Pivot DNA.
The experience needs to be end-to-end and scale across all channels, presenting customers with options spanning selection, availability, pricing, fulfillment, and returns based on real-time network visibility. Delivering this capability mandates a shift to agile microservices across channels, integrating with predictive demand, adaptive pricing, and flow paths that optimize inventory while minimizing wastage.
In this reimagined future, CPG firms deliver the right product, through the customer’s preferred channel, at the right price. For example, with Blue Yonder’s inventory availability and omni-channel fulfillment microservices, a large pet supplies company can provide customers with the option to view inventory online, purchase products from nearby stores, and pick them up that same day.
Sense and Respond at Scale
The difference between “winner take all” and “also ran” in this new world depends on enabling real-time enterprise-wide orchestration, end-to-end visibility, and leveraging, where appropriate, decision automation to deliver profitable personalization. How do you evolve from a world where scale meant working at maximum capacity to one where it is about processes that can flex with complexity?
The first step is to digitally represent the end-to-end physical value chain and harness signals at the edge of the network to enable real-time visibility. The next is to leverage advances in computing and machine learning to sense, predict, and flexibly realign resources to deliver timely and profitable outcomes.
In parallel, take steps to grow stakeholder programs from cost-focused to value-network and platform approaches. Instill a framework to propel suppliers into thought partners and vested stakeholders that will lend agility, flexibility, and responsiveness.
Then, adopt dynamic segmentation as a foundational capability to recognize patterns across complex product structures, customer pools, and multiple markets, which will ultimately provide great customer experiences while also delivering the desired Operational Total Shareholder Return (OTSR).
Automate Your Processes
In a CPG environment, supply chains will need to be configured to support stratification of Base, Incremental, Custom, Innovation and eCommerce business types, modeled and optimized to deliver Operational Total Shareholder Returns with specific emphasis on revenue, margin, cost to serve and cash to serve from strategic joint business planning through digital fulfillment and customer service.
Of course, issues will still arise. But with an AI-powered supply chain, day-to-day decisions can be automated, leaving planners and stakeholders free to focus on more significant issues in a collaborative planning and execution environment, informed by outcome led scenarios.
The pandemic has shown us that resilience needs to balance with digital agility. The future is about creating seamlessly synchronized enterprises, connected to their customers, operating at scale and speed to create personalized and authentic customer experiences. Digital supply chains provide that new ‘Henry Ford’ moment, making the future of CPG bright and exciting.
As the world-leading end-to-end supply chain provider, Blue Yonder has delivered an AI-powered platform designed to scale with complexity and enable a predict-and-pivot paradigm. The outcome is complete synchronization with integrated planning and execution and dynamic control from supplier through to the last mile and on to the customer.
For more information on Blue Yonder’s solutions for CPG businesses, visit blueyonder.com.