Drinks companies must shift focus to revolutionise their supply chains

1 May 2014 | Crispin Mair

Drinks companies are losing competitive advantage as they obsess about production assets and don’t pay enough attention to managing suppliers and their routes to market.

Competition within the drinks business is vast, and fluctuating economies and a rise in demand driven by innovation has led to huge shifts in customer bases and product portfolios. It’s a complex headache for supply chain leaders, who are already struggling with bandwidth. 

Those in the drinks sector are making life more difficult for themselves, simply because they are focusing on the wrong end of the supply chain. In drinks, there is often an obsession with manufacturing but actually production is one area that the sector usually has under control with sharp, robust processes in place.

The harsh reality is this: if you look at the conversion costs in almost all cases, i.e. the numbers the manufacturing director actually controls – and compare them to the total logistics costs, logistics is significantly larger.

Supply chain leaders need to move on fast and examine areas of the supply chain that are typically less scrutinised, such as demand forecasting, supplier collaboration, network design and contractor management.

Retailers and consumers are throwing all sorts of demands and variables at the supply chain, and firms must become more responsive if they are going to survive. If supply chain leaders redeployed the problem solving skills of their manufacturing leaders to reviewing the processes outside of the production environment, it would revolutionise the front end of their supply chain.

The companies which tackle these areas first are going to be the ones that gain competitive advantage and stand out as leaders.

☛ Crispin Mair is director at supply chain consultancy Crimson & Co

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