From Me to We: The Need for More Collaborative Supply Chains
FMCG brands must develop more collaborative relationships with their external manufacturers and packagers in order to ensure long-term business growth and sustainability.
Global pandemics. Trade wars. Climate disasters. Social upheaval. The past year has thrown everything plus the kitchen sink at global supply chains. The heaviest blow was dealt by COVID-19, a global crisis that sparked a cascade of materials and inventory shortages, combined with demand spikes and reduced supplier capacity.
In that moment of crisis, supply chains buckled under the stress of the pandemic, and empty store shelves across the nation pointed to our collective lack of preparation to cope with unpredictable disruptions. But now, as we ease into recovery, supply chain leaders are faced with the wake-up call to increase flexibility, agility, and resilience in our supply chains in order to withstand future disruptions, and prevent history from repeating itself.
The pandemic exposed severe liabilities in a “just in time” supply chain model that prioritized cost efficiency over flexibility and resilience. Looking forward, in order to ensure stability and agility in our supply chains, it is imperative that supply chain leaders look beyond the traditional buyer-supplier relationship focused on cost management.
To help navigate this increasingly volatile landscape, FMCG companies need to collaborate more effectively with their contract manufacturing and packaging suppliers to better withstand future demand and supply variability. According to Gartner research in 2020, “deeper collaborative relationships with key customers and suppliers’ was the top-ranked strategy to build resilience, with 77% currently investing and 18% planning to do so in the next two years.” (Gartner, The Journey to Effective Supplier Collaboration)
To ensure long-term sustainability and growth, it is imperative to adopt a more collaborative approach to managing the external supply chain.
By transforming to a collaborative partnership model with their external suppliers—through a digitally-enabled network—FMCGs have the opportunity to dramatically slash costs, as well as remove inefficiencies that hamper responsiveness, encourage waste, and jeopardize quality control.
Case in point: A recent global survey by PwC of more than 1,500 senior managers and board members found that the companies that invest in collaboration and visibility generate 8% additional revenue while reducing costs by 7%.
However, in order to enable the level of collaboration necessary for external supply chains to generate these market advantages, technological evolution is necessary—namely, to enable real-time network visibility through digital transformation.
Digital transformation empowers FMCG brands and their external suppliers with the visibility needed to achieve greater business value, while ensuring business continuity and agility. Investing in external supply chain visibility and building digital twins enables a FMCG and its partners to visualize what is happening in the external supply chain in real-time, providing information about goods flow, thus improving OTIF performance and quality control, while driving waste and risk out of the supply chain.
The advantages of digitally enabled collaboration between a brand and its contract suppliers not only include increased internal efficiency, but tangible benefits to each company’s bottom line.
In a McKinsey survey of more than 100 large organizations in multiple sectors, companies that regularly collaborated with suppliers demonstrated higher growth, lower operating costs, and greater profitability than their industry peers (McKinsey, Taking supplier collaboration to the next level).
The Bottom Line: Digitization investments in external supply chain ecosystems enable FMCGs and their contract suppliers to work together at the speed of today’s market, while ensuring long-term business growth and sustainability.
"By enabling automation and increasing visibility across our network, Nulogy has helped us collaborate more effectively with our external contract packaging and promotional assembly partners to drive greater agility, sustainability, and cost optimization.Véronique Gravel, Logistic Director at L'Oréal Canada