Consumer goods firms must invest more in supply chains

21 June 2017

Many consumer-facing companies need to invest more time, money and leadership in their supply chains, according to research from KPMG and the Consumer Goods Forum (CGF).

KPMG and CGF surveyed more than 520 consumer and retail executives for its fifth annual Global Consumer Executive Top of Mind survey, Think like a start-up: How to grow in a disruptive market.

The research found that supply chain is a top priority for executives in consumer and retail, but that more innovation and vision is needed to reap the benefits of a fully integrated supply chain.

“Companies are making customer service and brand loyalty a priority, but many of them aren’t recognising the part that supply chains can play in that,” said Erich L Gampenrieder, KPMG global head of operations advisory and Centre of Excellence. “No matter how good your product or pre-sales service is, you need the product to be delivered in a way that at least meets the customer’s expectations to ensure their loyalty.”

According to the survey, the top supply chain priorities are around improving speed and efficiency, with 36% saying a priority was to improve speed and efficiency in distribution and 31% in manufacturing.

“The demand that emerges most consistently in the survey is for greater speed – speed of delivery, speed of manufacture, speed to market and the speed with which companies can go from concept to finished product,” said Gampenrieder.

KPMG’s data shows demand-driven supply chains can grow sales by 1-4%, cut operating costs by 5-10% and reduce inventory by 20-30%.

Almost a third of respondents (31%) said they wanted to forecast trends in supply and demand more effectively; 31% said they wanted to ensure quality and standards throughout their supply chains and 30% were prioritising measuring product profitability.

A third (33%) said their supply chains were fully integrated, with 54% saying more than half their functions were integrated.

Agile, demand-driven supply chains require a fresh skillset from supply chain professionals, according to the report. It says supply chain leaders should produce “simple, impactful graphics” and data to build a case for change and focus on collaboration and embracing new technologies, such as RFID scanning, AI and robotics.

However, this is a challenge as 31% executives were not confident they had the right data analytics skills within the organisation.

Gampenreider said an understanding of data analytics was critical. “Supply chain leaders can go to their CFOs with a compelling argument to run an initiative to provide the right data because they could then calculate the contribution of every stock keeping unit,” he said. “Just imagine what they could do with that degree of transparency.”

The report calls on supply chain leaders to embrace innovation, but warns they are “not always adept at making their case”, perhaps because “they don’t understand the nuances of wider business discussions.

“This increases the danger that the board, not fully understanding the gains to be made, may prioritise another issue that seems more pressing or immediately rewarding,” it warns.

Willy Kruh, global chair of consumer & retail for KPMG International, added: “Many different models are being formed: subscription models (Netflix), fremium (LinkedIn), on-demand (Uber), marketplace (eBay) and experience (Apple). As a consumer company, you need to understand what’s driving these models, how your business fits in – or doesn’t – and whether this model is relevant for you.”

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