Shifting and increasing consumer demands mean major brands rethinking supply chains
Putting the consumer at the heart of procurement decision-making was a key theme at this year’s Gartner Supply Chain Executive Conference in London.
Buyers were told the three traditional pillars of FMCG – mass communication, mass distribution and mass production – had altered dramatically.
Marc Engel, chief supply chain officer at Unilever, said mass communication, exemplified by the creation of soap operas in the 1960s by FMCG firms to create advertising audiences, was no longer relevant when “no one watches TV”.
“New FMCG is about focused communications to consumers and building a relationship,” he said.
Engel said online retailers such as Amazon and JD.com provided distribution networks that meant small firms could compete with much larger and more established companies.
Mass production is also being replaced with small volume, customised products, he said, adding: “Scale is no longer a competitive advantage.”
He said Unilever’s 2017 turnover was €53.7bn, with an annual procurement spend of €34m. It works with 488 third-party manufacturers and has 306 factories in 67 countries.
Stéphane Lannuzel, operations chief digital officer at L’Oréal, said consumers wanted “triple A” – any product, anywhere at any time.
He said: “To meet today’s consumers’ expectations you have to bring supply chain operations to the next level of agility. The consumer has changed more in three to five years than in the last 30. They want experience; they want specific products. Consumers are in control.”
L’Oréal works with 70,000 suppliers and has 41 manufacturing plants, 7bn products and 500,000 delivery points.
It began a digital transformation two years ago. “Personalised products change flows within and between factories,” said Lannuzel. Foundation is made at “mini factories” at point of sale and L’Oréal will soon market 3D-printed products.
Gareth Davies, head of global logistics at Lenovo Group, said it was essential to build around customer experience.
“It’s a focus on customer centricity,” he said. “People don’t want another piece of plastic in their homes.” Instead they want the ability to do things such as communicate with family and friends.
“We are selling things that enable people to enable their dreams and we try to make sure everyone in our organisation has that mindset,” he said.
Lisa Callinan, research director at Gartner, said: “Customer experience will overtake price and product as the key differentiator.”
Davies said acquisitions had made Lenovo’s portfolio “more complicated” and that a changing customer base has “made problems” for logistics.
Alongside this, it is dependent on third-party logistics providers, shipping companies and road and rail services. He said factors including only 70-75% of ships arriving on time, a lower capacity for cargo in air freight and rail and road driver shortages created challenges.
To help, Lenovo is using collaboration, digitalisation and end-to-end modelling.