March 12, 2024

Driving Efficiency in Consumer Products Supply Chains

Unlock efficiency in your CPG supply chain with Holocene's innovative solutions.
Romain Fayolle

In the Consumer Goods (CPG) industry, businesses face many challenges across multiple dimensions that test their resilience and adaptability. At the center are the changing customer expectations of great quality products, natural and ethically sourced ingredients, sustainability focus, personalized experiences, and the comfort of ordering from home through various electronic platforms.

These expectations are now reshaping the mindset of these companies, causing powerful brands to rethink their operations and strategies. The electronic transformation of retail, recognized by the exponential growth of e-commerce and the integration of skilled technologies, further complicates the situation. In addition to it, Gen Z customers' focus on sustainability makes meeting customer expectations a tremendous uphill task. In a recent survey of 525 supply chain leaders, about 1 in 4 felt pressure from their customers and employees to make their supply chain sustainable.

Companies are discovering that reinventing their supply chains is essential to meeting high customer expectations. This reinvention isn't only about enhancing efficiency, adding tech, or reducing costs. It is about creating transparent, responsive, and agile supply chain networks that meet the modern consumer's demands. This requires a holistic and fresh approach to the end-to-end supply chain to be looked at from the bottom up for building efficiency in the core. 

Here, we will discuss the strategies that are relevant for driving efficiency in the Consumer Products Supply Chains.

6 Strategies to Boost Consumer Products Supply Chain Efficiency

Whether it's a new D2C company or an established FMCG brand, boosting supply chain efficiency is a tough challenge. If you're stuck in your efficiency improvement journey, here are six strategies to improve supply chain efficiency:

1. Using AI and ML for Better Demand Forecasting

Using modern, AI-based demand planning and forecasting technology allows fine-tuning of all the downstream supply chain processes, making those processes more efficient and reliable. For example, a good forecast can help manage inventory better, avoid running out of stock, and meet customer needs on time and in full (OTIF). AI-led forecasting uses past data, current market trends, and predictive analytics to create precise demand forecasts. It helps companies sift through vast amounts of data to identify trends and forecast accurately.

AI and ML-based forecasting help simplify demand planning and complex supply chains by considering various factors, such as seasonal changes, market shifts, and consumer habits. This prepares the supply chain for faster turnarounds, shorter lead times, happier customers, and increased operational efficiency.

2. Adopting Digital Transformation

Digital transformation of supply chains is the first step toward improving efficiency. This includes leveraging automation, analytics, AI, and machine learning technologies to increase supply chain integration, visibility, accuracy, and intelligence. For instance, IoT devices can track products in real-time to help manage inventory and waste. Such visibility due to real-time tracking can considerably reduce the safety stock requirements for the multi-echelon inventory network, improving the cash flow. Such IoT-based visibility can pay for itself in just 12 months. Likewise, AI and machine learning algorithms can analyze massive amounts of data to anticipate consumer demand more effectively and help businesses adjust production and inventory distribution accordingly.

3. Sustainable Supply Chain for Efficiency and Cost Improvement

Sustainability is no longer a buzzword but a strategic supply chain lever. Companies are seeking cost reductions while reducing their environmental impact. About 2 in 3 executives see sustainability initiatives as a good business strategy for reducing supply chain costs. This includes implementing circular economy principles such as recycling, reusing materials, and utilizing renewable energies for manufacturing processes. And about 50% to 75% of the cost of running a business is impacted by supply chains directly. By building sustainability into the core of the supply chain strategies, companies can meet consumer demand and realize operational efficiencies in parallel.

4. Build Strong Relationships with Your Suppliers

A strong relationship with the suppliers helps you plan more effectively and prevent potential shortages, delays, or problems before they arise.

A reliable supplier plays a vital role in managing optimal inventory levels for the work-in-process stage when raw materials are transformed into finished products. This stage directly affects the quality of the products you offer and the speed at which you can replenish your inventory. Hence, maintaining open communication with your suppliers is crucial. 

5. Optimize The Inventory Management System for Efficiency

Most inventory optimization solutions involve minimizing the stock levels of all products, particularly slow-moving ones. It's crucial to carefully reduce inventory to avoid running out of stock, which can lead to unfulfilled customer demand and lost sales. Concentrating inventory in a few key distribution centers can help achieve cost savings by leveraging economies of scale. Multi-Echelon Inventory Optimization (MEIO) strategies in the consumer goods supply chain can further enhance this efficiency. MEIO considers the supply chain's complexities, optimizing inventory across multiple levels to ensure the right balance between meeting demand and minimizing costs. MEIO can be effectively utilized with the help of a good integrated planning tool.

6. Streamlining Logistics and Distribution

Logistics and distribution help to move products to consumers. This movement has to be done quickly but also at a price which is competitive. For this, CPG companies globally are investing in advanced logistics solutions that automate warehouses to deliver faster order fulfillment and lower costs. Solutions like AS/RS, TMS, Dock, and Yard Scheduling are focused tools that help companies achieve efficiencies in logistics operations. Further, route optimization and last-mile delivery can improve efficiency and lower the carbon footprint of distribution networks.

8 Benefits of Efficient Supply Chain in Consumer Products

Consumer product supply chains are becoming increasingly complex and require a data-driven supply chain management (SCM) strategy. We just discussed 6 strategies that can help make CPG supply chains more efficient. Now, here are the benefits that consumer product companies can realize with efficient supply chains:

  1. Better Collaboration: Sales opportunities are lost due to fragmented information like order status or inventory status. A few companies efficient companies have an automated information flow across the supply chain. Integrated software solutions enable information sharing for faster and more reliable decision-making.
  2. Better Quality Control: Early quality control can reduce the costs of correcting bigger problems later in the supply chain. An efficient supply chain ensures that the product is produced without any quality issues, that direct suppliers and suppliers meet your quality standards, and that quality control is ensured.
  3. Productivity improvement: Efficiency helps improve the end-to-end supply chain's productivity. For example, with improved efficiency, real-time information on raw materials availability and manufacturing delays allows companies to initiate the plan B quickly to avoid stock shortages or delayed customer shipments. Smart automation solutions also increase productivity and drive down inefficiencies.
  4. Better Demand Planning: Efficient supply chains benefit from real-time, accurate data for better demand forecasting. This allows them to respond quickly to market changes and limit the bullwhip effect, where small demand changes can cause large order variations up the supply chain.
  5. Logistics Optimization: With transportation costs continuously increasing, choosing the most efficient shipping method is key to reducing costs and improving customer service via faster delivery.
  6. Lower Overhead Costs: With accurate demand forecasting, companies can implement and enforce multi-echelon inventory optimization, which helps reduce slow-moving inventory, lower warehouse fulfillment costs, and free up space for more profitable products.
  7. Enhanced Risk Mitigation: Supply chain data analyzes risks, enabling companies to create contingency plans and respond quickly to unexpected disruptions to maintain operations.
  8. Better Cash Flow: Effective SCM empowers better decision-making and shorter processes to achieve lower disruptions, higher customer satisfaction, and a higher bottom line. Partnering with trusted suppliers and delivering cost-effective solutions deliver positive cash flow by reducing wasteful spending and overhead.

Efficient supply chain management impacts all areas of the supply chain, from procurement to logistics. Focusing on these benefits alone will help companies achieve a more effective, resilient, and profitable operation. Ultimately, these would help them improve their customer service levels

Making your CPG Supply Chain Effective & Future Ready with Holocene

From better collaboration and quality assurance to improved productivity and risk mitigation, efficient supply chain management delivers benefits. Together, these benefits result in better demand and inventory planning, logistics optimization, reduced overheads, and improved cash flow. Efficient SCM helps simplify operations, reduces supply chain disruptions, and enhances the business's profits.

For all those beginning or enhancing their supply chain journey to supply chain excellence, Holocene offers innovative solutions for the consumer goods sector. With Holocene, turn your supply chain into an intelligent, scalable engine that runs your company to meet modern customer demands and guide the way to a lucrative long-term.See how Holocene could enhance your entire supply chain management. Contact us today for even more details on our advanced solutions and begin the journey toward a more efficient, responsive & sustainable supply chain