License to grow
Consumer packaged goods (CPG) companies are under intense pressure to profitably grow. Yet, incumbent companies are losing out to nimble, digital-native competitors. For large, global CPGs, it's no longer enough for supply chains to be engines of efficiency.
Supply chains must become laser-focused on delivering the outcomes that enable the company to meet consumer and customer needs. The value of these outcomes will vary by consumer segment. Since it is neither possible nor practical to be differentiated across all outcomes, CPGs will need to prioritize which are most important to each consumer segment. Then, the organization must align around building the required capabilities to deliver these outcomes.
Value at stake
The supply chain, traditionally viewed as a cost center, can help a CPG organization pivot to growth. Those CPG companies that do not invest in essential capabilities that enable resilience are, essentially, holding growth hostage.
Our analysis indicates a $10B CPG company that develops an intelligent supply chain could grow revenues up to 3% through improved availability of the right products, better customer service and reduction in lost sales. It could increase profitability up to 4% through cost reductions and improve working capital by almost 3%. Furthermore, the company could also increase trust and sustainability through reduced energy consumption and carbon emissions.
Delivering on consumer value propositions
Accenture’s 2020 Supply Chain Survey of 178 supply chain and operations executives in consumer goods shows a small group of companies that have excelled versus their peers. These leaders have prioritized for the next three years consumer value propositions including: Connected customer experience, price competitiveness, and trust and sustainability.
Supply chains that are agile and responsive are more resilient to disruption and better equipped to deliver on a variety of customer value propositions. But CPGs must make choices about what’s most important. They should prioritize desired outcomes per segment and then build the right capabilities to deliver them. Only a small number of companies have successfully done this.
Customer-centric CPG supply chain leaders report higher maturity than their peers, according to our research, in several areas: customer and product segmentation, design-to-margin and collaborative innovation, and concurrent planning and execution. Leaders have strategically invested in areas that would help them to shape more customized products and services, while their peers often struggle with a variety of challenges and spreading investments across capabilities.
How to develop a consumer-centric supply chain
Building a consumer-centric supply chain calls for rethinking the supply chain configuration, advanced technologies and people. Our research showed CPGs’ legacy supply chain operating models and organizational structures are a barrier—so it’s time for change.
CPGs need to establish a set of supply chains with a network and assets that meet the needs of each segment. The supply chain assets need to be leveraged at scale across these segments, where possible, to manage the cost base and adjust dynamically to enable responsiveness and resilience. Some companies are adopting more asset-light structures in which they outsource a significant portion of assets and use an ecosystem to be more flexible.
Advanced digital technologies
Customer and product segmentation, collaborative and agile innovation and other mature capabilities rely on digital technology. Companies we surveyed say they lack the right digital architecture and digital capabilities to be connected across the enterprise and ecosystem. This connectivity is needed to enable cross-functional decision making that leads to a consumer-centric supply chain.
Many CPG organizations are siloed, with accountability that is process-based and domain-oriented versus demand-driven, cross-functional decision making. These silos trickle down into the way talent is skilled. Many employees are skilled for a single functional domain and don’t have access to analytics and capabilities that will support strategic decision making.
RELATED WEBINAR: The Consumer Brands Association (CBA) hosted a virtual discussion with Chris McDivitt and Maria Rey-Marston, Accenture, to discuss how to break the supply "chain" to build a supply network. Get the digital download of the ‘Thriving in disruption: Supply networks for growth.’ webinar.