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I was recently invited to speak in a Reuters virtual panel session on how consumer brands can leverage digital transformation to achieve more collaborative partnerships in their external supply chains. I was joined by:

  • Eric Rossi, Sr. Director Supply Chain North America, Valvoline;
  • Phil Short, Principal, PJS Process & System Improvements Ltd. & former Market CIO, Mars Canada; and
  • Michael Kennamann, Director of Supply Chain Planning, Wilton Brands.

Our discussion oriented around the need to break down walls between trading partners to gain greater network visibility and velocity, extend digitalization to key external partners, and drive digital transformation to support the entire supply chain.

1. Break down silos for end-to-end visibility

Consumer behaviors have changed significantly in recent times. Consumers today want everything faster, and as a result, FMCG brands and their external supply chain partners need to be able to efficiently and effectively support both long-term planning and short-term execution. When demand changes, these supply chain networks need to be agile enough to respond quickly—hence the need for more mature multi-enterprise collaboration and execution between brands and their external contract suppliers.

For the past few decades, however, supply chain relationships have been structured in a way that fosters lack of trust between brands and suppliers. The panel agreed that companies need to understand that siloed knowledge and processes don’t make sense: supply chains no longer exist solely within a company’s four walls, but rather extends end to end: from the raw materials to the end consumer. The perceived wall between a brand and its external suppliers drives a wedge into these relationships.

When 20% to 30% of an FMCG’s product is being manufactured or packaged by an external partner, the digital enablement needed to access that data needs to extend beyond those four walls as well, or else consumer brands risk missing a huge part of the picture when it comes to serving their customers through external supply chain operations.

Another issue perpetuating this lack of supply chain visibility is the prevailing yet outdated notion that supply chains are “linear”, when the modern supply chain is anything but. Panelist and supply chain veteran Phil Short said it best:

In today’s age where FMCGs commonly share third-party manufacturers, it’s more accurate to think of the supply chain as a mesh. Every ‘link’ in an external supply chain likely also serves other ‘links’ in the network, which makes it all the more critical to be able to gain a full view of your external supply chain.Phil Short, Principal, PJS Process & System Improvements Ltd. & former Market CIO, Mars Canada

A sea change, however, is already occurring: the panelists attested to FMCGs’ growing demand for third-party contract suppliers that can supply high levels of digitally-enabled visibility to their brand customers. This capability allows for more assurances and confidence in guaranteed outcomes, and is a critical step in building stronger brand-supplier relationships.

2. Extend digitization efforts to your external partners

Building on the previous theme: another focus of the panel session was discussing how brands can forge stronger relationships with their external networks by extending digitization efforts to their trading partners. All the panelists agreed that digitally-enabled data visibility was critical to building trust within an external supply chain—and by extension, increased efficiency and responsiveness.

For example, brands that share near real-time data such as demand forecasts could allow suppliers to track and respond to changes as they happen, instead of being “ambushed” by last-minute order changes. Sharing data also puts brands and suppliers on the same page and aligns them to work toward the same end goal: by positioning data visibility as a mutual benefit for both sides, the digital enablement of the brand-supplier relationship changes the dynamics of the relationship itself.

Eric Rossi, fellow panelist and Senior Director, Supply Chain North America at Valvoline, put it best:

“The key to developing supply chain partnerships built on two-way visibility is to sell the benefits to all the parties. Instead of saying, ‘You must do this, or else,’ show them how they can benefit from shared data visibility just as much as you can. It’s not just a one-way street.Eric Rossi, Sr. Director Supply Chain North America, Valvoline

There is no doubt that the technology to enable near real-time visibility of contract supplier operational data already exists; the challenge, as I’ll cover in the next section, lies in changing mindsets on how digital transformation should be leveraged to drive true collaboration in the contract supplier supply chain.

3. Point digital transformation toward a strategic goal

Another portion of the discussion revolved around the management of the digital transformation process.

Michael Kennamann, Director of Supply Chain Planning at Wilton Brands, summarized the dilemma perfectly:

A critical and understated element of digital transformation is that it is people who will implement the change. You can have the right technology and do all the data scrubbing you want, but if you don’t properly handle the change management aspect of digital transformation, the effort will fail.Michael Kennamann, Director of Supply Chain Planning, Wilton Brands

The panel agreed that digital transformation is an initiative that needed direction and to be driven at the executive level in order to succeed. Instead of simply handing the project to an IT department, the success of a digital transformation initiative hinges on aligning the process with strategic objectives that company leadership can champion and support.

Along those lines, digital transformation is sometimes viewed as an expansive, sprawling project, but can be even more effective if implemented surgically. Just as a digital transformation strategy needs to align with company goals, it should also be positioned as a solution to the problems that are blockading those goals.

The panelists were also in consensus on investing in additional resources that can consult or aid the digital transformation process. Digital transformation is not meant to replace the human aspect of contract supplier supply chains, but to augment employee performance with modern solutions.

Digital transformation is a strategy that can unlock a vast range of efficiencies for consumer brands and their contract supplier supply chain network. The challenge, however, is to shift mindsets and build the trust necessary to fully leverage digitally-enabled relationships. As we’ve seen from this discussion, though, the desire is there, the technology is there, and the proof is evident. Let’s start tearing down those walls.

Click here to watch the full webinar.

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Henry Canitz
Written By
hank-canitz
PUBLISHED
May 12, 2021

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