Years ago, consumer packaged goods (CPG) executives measured the value stream from the point of production through the end use of their product. Today, that life cycle is a whole lot bigger. Not only are green-minded executives looking at life after first use for their products, they’re also looking upstream, adding supply chain to their oversight.
Understanding the complex supply chains associated with CPG and consumer products is a weighty endeavor. From identifying the different vendors and suppliers involved in the value stream, to the chain of custody of materials and products, to the distribution network for finished goods—it all culminates in a broad-scope view of a company’s total operational scope.
Until now, these different segments of supply chain have been siloed, handled by different facets of the business in pursuit of a common goal. Now, in the digital age, siloed operations are opening up, and supply chain foresight is vital for CPG and consumer products executives seeking to strengthen their company’s value stream.
Silos are crumbling
Supply chain has come to the forefront of CPG operations thanks to COVID-19. A true Black Swan event, it crippled global supply chains and strangled production for many companies. It’s easy to think back to the height of the pandemic, when shelves sat empty or unfilled for weeks at a time as producers either ramped up to meet increased demand or delayed production awaiting materials.
The turbulence caused by COVID-19 and the aftershocks following it have put supply chain operations front and center in the mind of discerning executives. Supply chains have the ability to impinge production, making them a foremost concern as CPG producers seek to satisfy growing demand for goods in an environment that’s increasingly hostile in terms of material availability, pricing and lead times.
CPG executives willing to pull down supply chain silos will gain powerful insights that improve operations. The foresight that comes with total supply chain visibility brings agility and flexibility to core production processes.
Supply chain foresight starts with mindset
Consumer products executives are known for their diverse methodologies. Some prefer a make-to-stock (MTS) approach; others, a make-to-order (MTO) strategy. Some are driven to reduce operational expenses; others prefer to focus on controlling COGS. Whatever the approach, it needs to fit with the company’s broader supply chain strategy.
Executive mindset needs to be broad when it comes to supply chain foresight. It’s not just about choosing the right supplier or ensuring visibility between custody points at a critical junction in the chain. Instead, it’s about implementing controls to prevent bottlenecks and building contingent strategies into the value stream—all in the name of ensuring production continues unimpeded.
How can CPG executives put themselves in the right frame of mind to embrace modern supply chain ops as part of the value stream? By following tried-and-true tactics from the world’s largest and most successful CPG producers.
- Investing in supply chain technologies brings visibility to a broader swath of the value stream. Beyond knowing where materials or products are, smart products can prevent loss, mobilize contingencies and create efficiencies that trickle down to the bottom line.
- Supply chain diversification is imperative right now. It’s not only about finding optimal pricing; it’s also about restructuring supply chains for expediency, contingency, flexibility and, with any luck, scalability.
- Bringing end-to-end data aggregation to the supply chain puts executives in command of valuable data that informs better in-house operations. It becomes easier to pinpoint trends, spot anomalies and extrapolate projections that impact the broader value stream.
Above all, the ability of CPG executives to understand the value stream and its broad implications for production and distribution is paramount. As supply chains exert themselves more and more over producers, it becomes the duty of executive leadership to propose mitigative strategies that enable smoother production operations.
Facing down supply chain uncertainties
The relationship between supply chains and producers has often been reactionary. Manufacturers bulk up inventories when prices are good and supplies are plentiful, then pivot accordingly when downturns occur. It’s cyclical. Now, moving forward, it’s essential for manufacturing executives to exercise supply chain foresight, to adapt and adjust to supply chain obstacles instead of reacting to them.
Supply chain uncertainties will always exist—hopefully, in a capacity less than the current disruptions created by COVID-19. The good news is that, thanks to technology and hard lessons learned during the pandemic, it’s possible for manufacturers to identify supply chains as part of the broader value stream. CPG executives need to take a proactive approach to modulating supply and demand. It starts with emphasis on supply chain foresight.
Looking for experienced consumer products professionals to lead your company? Contact M&A Executive Search today to speak with consumer products recruiters and expert consultants who understand supply chains and the future challenges they face.