Gustav Mauer, EY UK Associate Partner and consumer products supply chain lead, discusses ways in which companies can create responsive supply chains.
Consumers today have moved from being passive recipients of company brands and products to more connected, conscious and participating communities. This shift has introduced a whole new world of requirements for the supply chain. Successful companies are working hard to attract and retain consumers by creating a community or ‘tribe’ within which loyal customers can participate and belong. Ultimately companies’ supply chains are required to convert their understanding of their customers’ buying patterns and product needs to provide high quality and services.
Serving the customers of tomorrow
However, recent EY research suggests most companies are still behind when it comes to digitising their supply chains to deal with this changing consumer environment. Supply chain leaders are relying too much on inventory and external capacity to respond to demand volatility. They are also only just starting to invest in more innovative data driven and effective ways to improve their services. For example, to date, digitisation has been mostly focused on the areas where efficiencies can be improved using simpler technologies, such as Robotic Process Automation (RPA). But they should be moving towards using technologies with predictive and self-learning models that can anticipate and orchestrate the supply chain on a more dynamic and real-time basis.
Organisations that will thrive to serve the consumers of tomorrow need to embrace digital technologies to help their supply chains become more responsive. This means they will need to focus more on the customer they are serving, rather than overly focus on driving cost reduction.
There are three ingredients that organisations can use to set up the engine room for effective responsive supply chains of the future:
Embrace data and digital
Leaders need to create a “bottom up” digital movement, where employees are equipped with knowledge of core analytics and digital technologies to help them to digitise their own environments and work processes. For example, a leading consumer products company that encouraged a digital employee culture had an employee who created a self-learning model that improved the quality of planning parameters. This drove a 50% reduction in effort, as well as improving the quality of the company’s planning results. Ultimately, data and digital is becoming much more of a part of how we do business, rather than just something IT helps us with.
Connect external partners
Digital technologies not only help companies improve their internal processes, they also provide a more realistic way to connect with the suppliers and industry peers. Leaders should embrace digital technologies to make full use of the eco-system of their external partners. For example, a leading alcoholic beverages company has connected their manufacturing and logistics planning systems to fully incorporate their glass suppliers’ furnaces. This means that rather than having to place forward orders every three months, which results in poor service or high inventory, they can now schedule their suppliers’ capacity on a weekly basis to synchronise with real customer demands.
Nurture a culture of continuous innovation
To truly transform a company’s digital supply chain, the nature of work must change. The workforce needs to be able to influence and be involved in how they do their work and how they use digital tools to continue to improve it. If they do this properly, they will have more time to focus on creating value for their customers and consumers. With more information and better insight, businesses can drive a new wave of innovation. Take the example of a leading consumer products organisation, which recently set a goal to have 25% of time spent on structured innovation, funded by the improvements generated through their digital initiatives. Its employees wholly embraced this concept, as it offers them more time to step out of their day-to-day activity to engage in a creative and purposeful team activity which makes a difference to their business and the way they work.
If leaders embrace digital tools, they can cut down inefficiencies and create an intelligent cognitive supply chain which can orchestrate itself. This in turn will allow supply chain professionals to spend more time focusing on understanding and serving their consumer and ultimately getting more satisfaction out of their daily work.
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