Consumer Products Consulting
The NEW Demand-Driven Operations
Consumer products are goods purchased for consumption by the average consumer.
A fast-moving consumer goods company also has goods that sell quickly, typically for a low price. Fast-moving consumer goods companies usually generate a relatively small absolute profit that reaches a substantially cumulative sum, and the consumer goods are replaced or fully used up over a fairly short period of time.
Major shifts are occurring in the consumer products industry, as retailers and manufacturers struggle through rapid changes in customer demands and e-commerce growth. Complexities of the global economy and requirements of highly mobile customers have changed the game for most consumer products organizations.
Tompkins, a supply chain execution firm, is working with consumer products industry leaders to develop and fine tune their supply chain strategies to address the leading supply chain challenges.
Industry Trends and Challenges
Companies are reducing costs, improving online strategy, and boosting customer satisfaction by eliminating waste and inefficiencies from their consumer products supply chains.
Issues that consumer products industry executives face on a daily basis include:
The Global Opportunity: Do you know how to leverage opportunities in Europe and Asia? Being a global player presents unique supply chain challenges as regions shift to a booming global marketplace. Learn more about Asia supply chain excellence.
Same Day Delivery / Next Day Delivery: Customer expectations have continued to rise in the area of fulfillment and online strategy. Retailers and consumer products companies alike are being pushed toward same day delivery and next day delivery as a central part of their e-commerce growth. This has huge ramifications for the supply chain as companies are striving to meet these lofty expectations. Companies that are unable to meet the challenge run the risk of losing customers to those with faster and more agile supply chains. Amazon is leading the charge in same day delivery. See more about the Amazon Effect in this video.
Inventory: The best performing companies have become demand-driven, sensing demand signals and reacting within a limited window of time. Once companies become demand-driven, they are able to optimize inventory at each link in the supply chain and greatly reduce total inventory levels with superior customer service.
Leading companies also continuously review their stocking policies. They examine product service levels, as well as set appropriate inventory levels that will minimize slow and obsolete inventory and adjust safety stocks to meet service levels.
Distribution Networks: Changing conditions call for changing distribution networks. For example, as fuel costs fluctuate and customer buying patterns go up and down, the network needs to be examined for more suitable alternatives. The main goal for distribution networks is to find the right location for distribution centers so that they minimize costs and optimize service.
Many factors are taken into consideration when determining costs. While some companies evaluate their landed costs, others more accurately base their network on their total delivered costs. Landed costs include those from the US point of entry through delivery to customers, whereas total delivered costs also look at international sources, ocean and air transportation, customs and duties, as well as port costs.
Sourcing and Procurement: When consumer products companies work with overseas suppliers, it is easy to overlook the necessity of good communication and the relationship between buyer and supplier, which occasionally can lead to disastrous results.
The focus in North America and Europe tends to be on supplier management, while the focus in Asia is on the relationship. It is essential to integrate these diverse perspectives. This focus on the relationship is called Supplier Relationship Management (SRM), which is expanding its use in the global marketplace. See Strategic Sourcing and Procurement for more on Tompkins’ services.
Global trade and risk programs are also a key component of sourcing for consumer product companies. Benefits such as regulatory compliance, margin protection, brand integrity and maximized customer satisfaction are the result of effective global trade programs.
Transportation: Top companies are able to isolate demand to the point where they are able to make direct shipments to customers from their US plants or international sources. Transportation management systems (TMS) are being used to integrate inbound and outbound transportation as well as manage interfacility transfers.
Leading companies are also performing risk assessments on their global shipments. This allows them to guard against theft, threats, and counterfeiting.
Other key transportation security practices include vulnerability analyses, governmental policy adherence initiatives, implementing C-TPAT, and supply disruption analyses. Learn more about these and other transportation solutions from Tompkins.
Distribution Operations: Consumer products companies that do not have the internal capabilities or wish to quickly expand their distribution networks so many rely on Logistics Service Providers (LSPs). LSPs can also provide seasonal processing and storage relief.
The current business climate dictates reductions in operating expenses and greater productivity. As a result, companies are using more advanced Warehouse Management Systems (WMSs) to facilitate improvements to their DC operations.
Enhanced WMS features such as crossdocking, cycle-counting, slot management and dock scheduling are being implemented more frequently in today’s environment.
Many companies are achieving the goal of more flow and less storage. Flow through and crossdocking have resulted in fewer goods being held in storage, which is particularly important for fast-moving consumer goods.
Revenue Growth: Consumer product companies can increase revenue by either evaluating the market potential of new products and new geographies, or creating a competitive advantage to increase market share. In today’s very competitive consumer products market, leveraging specific attributes allows companies to avoid low-cost product strategies.
Going “Green”: Top consumer products companies are re-evaluating the packaging of their products. They are looking at this from a product protection and freight reduction perspective, in addition to reducing packaging materials as a “green” initiative. Several software packages exist to help make packaging more sustainable. More information is available in the sustainable business section of the website.
Get a quick look at the powerful impact demand-driven supply chains can bring to your customer satisfaction and operational value in this short video from Jim Tompkins, CEO of Tompkins International, and Greg Brady, CEO of One Network.