For the consumer packaged goods supply chain, the last 10 years have been the decade of "The Next Big Thing."
One after another, a parade of new ideas and nifty acronyms has commandeered the spotlight. Phrases like "reengineering" and "continuous replenishment," "activity-based costing" and "EDI," have generated buzz and spurred a range of individual and collaborative initiatives.
All were aimed at helping the industry develop leaner, more effective and profitable supply chain processes.
After 10 years of what has sometimes felt like unrelenting hype, the time may have come for many companies to take a deep breath, clear their heads and set some clear objectives before proceeding further. This, at least, was the prescription of the consulting team at A.T. Kearney, during a presentation entitled "CPG Supply Chain IT 2010," delivered at the GMA ISLD Conference last spring.
Recently, in an interview with Food Logistics, Sean Monahan, who authored that report, expanded on some of the ideas it outlined.
"From ECR and CPFR to RFID and Data Sync, every year something has come out that promises to fix all of these problems plaguing the industry," says Monahan, vice president and leader of A.T. Kearney's supply chain practice.
"While none of these ideas has provided a solution in and of itself, in their responses, many companies have incrementally built new capabilities that they can now begin to leverage to provide real, significant benefits. Companies need to start leveraging these new capabilities if they are to succeed in the highly competitive CPG environment that is emerging."
Monahan and colleagues offer several recommendations to help companies prepare themselves with the underlying information technologies they'll need in order to perform to the demands they'll be facing in the CPG distribution world of 2010 and beyond.
First, Monahan says, people need to understand that no single organization can or should try to leverage every single one of the host of new, cutting-edge capabilities that have been the focus of so much discussion.
"Rather, they must prioritize [their] resource investment to build those capabilities that best align with the strategic intent of the organization, in their specific environment, with their key customers," Monahan says.
To try tackling all the latest supply chain trends with their enabling technologies would be overwhelming, he points out. Not only that, but in the attempt, a company would miss a key strategic opportunity that is becoming ever more important in the modern business landscape: differentiation.
What manufacturers need to do, Monahan suggests, is to identify the distinctive attributes their particular supply chain will leverage to carve out their particular competitive position. Then, a company should build its supply chain to perform to those parameters.
Aligning With Customer's Goals
With the tools and techniques available today, manufacturers have the latitude and ability to create any kind of supply chain they want. Given some general design specifications, such as target lead times, fill rates, levels of pallet configuration, transport methods, etc., a company can plan and build a supply chain to meet whatever objectives it chooses.
In developing a supply chain design manufacturers need to look not only at their product lines and other internal considerations, but closely at their customers.
"Each customer wants something different," Monahan points out. "Each has its own capabilities, priorities and strategies that suppliers need to align with."
To help planners conceptualize and analyze the attributes they'll opt to build into their supply chains, A.T. Kearney has added its own acronym to the list: SHELF3. It stands for: "Specific, Hybrid, Exact, Lean, Fast, Frequent, Flexible."
All these adjectives represent key qualities and capabilities that will, in varying degrees, characterize the shape of logistics and fulfillment operations in the CPG industry going forward, Monahan suggests.