5 minute read

As our supply chains and economies continue to recover from the pandemic, CEOs and chief supply chain officers of fast-moving consumer goods (FMCG) companies around the world are assessing digital transformation as the most impactful way to bolster resilience and agility in their external supply chains—as I wrote in my previous blog post.

Traditional buyer-supplier relationships have been primarily focused on cost management. Due to the risks and costs exposed by this “just in time” supply chain model—exacerbated by the pandemic—FMCG leaders are turning to their extended supplier base for new opportunities to collaborate and increase value and flexibility throughout their external supply chain.

Recent industry research shows that, to this end, supply chain leaders are revisiting and reinvesting into new technologies. For example, a recent research report found that 63% of supply chain leaders have revisited their strategy due to the emergence of new technologies, with 78% believing it should be a higher strategic priority. In addition, Gartner’s 2020 Future of Supply Chain executive report found that 23% of supply chain leaders expect to have a digital ecosystem by 2025, up from only 1% today.

The numbers speak for themselves. However, despite the concrete evidence speaking to the benefits of improved supplier collaboration, change management and stakeholder buy-in continue to present challenges to many digital transformation strategy implementations.

First, let’s identify these roadblocks to deeper collaboration.

The markers of Inertia

Up until recently, most supply chain leaders have operated and led in business contexts where cost containment and efficiency were king. Due in part to the pioneering of “just in time” manufacturing by Japanese firms over half a century ago, this methodology has led to the norm of establishing short-term, transactional, sometimes adversarial relationships with suppliers.

Decades of operating under this model has created significant barriers to collaboration within supply chain networks, including:

  • Lack of buy-in and long-term commitment amongst leadership and internal teams to shift mindsets concerning the role that external partners can play in the organization’s success.
  • Lack of processes and tools to work as closely and effectively with external partners as with internal teams.
  • Lack of two-way visibility between businesses: suppliers are unable to see demand changes coming down the pike; conversely, buyers are unable to see available capacity from their suppliers’ operations.
  • Bandwidth limitations within the planning department, making it difficult to communicate with dozens or even hundreds of external suppliers.

Shifting from “Me to We”

The first step of shifting away from this outdated organizational mindset begins with the acknowledgement that there are new benchmarks and requirements for FMCG success. Cost containment and efficiency no longer reign as proven paths to financial growth; instead, in today’s turbulent market, agility and resilience are the key capabilities for success. To achieve these capabilities, according to Gartner, “The number one strategy for improving resilience and agility is to deepen collaborative relationships with key customers and suppliers.” (Gartner)

The next step for FMCG brands to shift mindsets from cost-cutting to collaboration is to acquire the technical capabilities needed to see, communicate, and collaborate effectively with external partners. For larger brands and their networks, this can entail the creation of a robust, complex network of hundreds of external manufacturers and packagers that provide various services to ensure products are customized and consumer-ready.

Increased digitization will result in a more resilient and agile supply chain, powered by technologies that interconnect the supply chain ecosystem and improve network collaboration, visibility, and risk management. Ecosystems that share end-to-end information in near real-time will enable supply chain organizations to support better and faster responses to unexpected changes in supply or demand.

Begin the mindset shift today

A Bain and Company research study tracked almost 4,000 companies worldwide during and after the economic recession of 2007, and found that well-prepared companies—the ones that are proactive in strengthening their strategic and financial positions—accelerated profitability during and after the recession, while the majority stilled or lost profitability during the same period.

We are seeing the same trend today, with the pandemic continuing to stifle economic conditions. As Bain and Company writes, now is the time to regroup and reinvest, as a downturn is “the best place to pass competitors, but requiring more skill than straightaways.”

The pandemic has highlighted the importance of a collaborative approach to leveraging external supply chain relationships, as well as the urgency to begin deploying strategies for long-term resilience. Purpose-driven supply chains are moving beyond transactional relationships to improve innovation and collaboration, which will provide the stability and agility needed for future growth and profitability. Don’t get left behind—the time to act is now.

Are you focused on developing the mindset, processes, and tools for improving collaboration within the contract manufacturing and packing supply chain?

Nulogy can help. Learn how we can illuminate the black box of your external supply chain and enable you to work better and smarter.

Hank Canitz
Written By
Mar 29, 2021

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