7 minute read

For seventeen years we’ve worked with some of the largest CPG brands and their external suppliers (co-packers & co-manufacturers). Over those seventeen years, we’ve heard about issues on both sides.

Challenges in the Brand-Supplier Relationship

CPG brands are concerned about external suppliers missing delivery dates or the excessive chargebacks associated with expediting deliveries or scheduling overtime labor. Suppliers are concerned about brands’ last-minute P.O. changes, as well as delays in approving artwork, QA samples, or delivering finished goods. Both parties incur significant avoidable costs on a regular basis that impact margins. And both want a better way to collaborate to better manage these issues.

CPG brands work with external suppliers to leverage a number of advantages: supply chain agility, expertise, and flexibility, to name a few. The challenge CPG brands encounter in working with external suppliers, is that they are external, independent 3rd party companies with their own business software/technology systems, business processes, and infrastructure that don’t necessarily exchange data or information very easily with the CPG brand’s software systems.

Often, this mismatch between CPG brands and their external suppliers leads to delays in critical supply chain information or updates being communicated, usually via spreadsheets, keyed into portals, email chains, and verbal conversations, with little or no audit trail for changes. Little wonder that this has the potential to lead to finger pointing and misalignment when things go wrong because there is no single source of truth.

The technology disconnect between CPG brands and their external suppliers often leads to delays in critical supply chain information.

Here’s a perfect example. An external supplier misses a delivery date, which causes the CPG brand to miss their delivery date to the retailer. Penalties and expedited transportation costs are incurred and finger pointing ensues.

As it turns out, the reason why the supplier missed the delivery date was because the CPG had approved their artwork late and provided finished goods inventory late—it was not within the supplier's control at all. This resulted because the supplier had verbally communicated back to the brand that they didn’t have the capacity to fulfill the order in the originally requested time frame, but could do it one week earlier than requested, which the CPG had approved via e-mail, but that information wasn’t effectively communicated to the folks approving artwork or shipping finished goods inventory.

Sound all too familiar?

What is a Two-Sided Supply Chain Network and How Can it Help?

Visibility and collaboration to manage dynamic changes are the cornerstones of a two-sided supply chain network.

In a recent PWC 2020 report, “Supplying the Future”, PWC predicted that the supply chain would undergo three key changes over the next decade. One of those changes was that the supply chain “will become a two-way street, with information flowing upstream to drive the downstream flow of products and services.”

In short, external suppliers will have real-time access to CPG forecast, BOM changes, P.O. change data and information, and external suppliers will provide real-time data and information to the CPG’s regarding order exceptions (late/incomplete), finished goods and packaging inventory positions, electronically collaborate on P.O. delivery dates and provide data or automated reports regarding KPI (Key Performance Indicator) attainment.

Visibility and collaboration to manage dynamic changes are the cornerstones of a two-sided supply chain network.

A two-sided supply chain network will also allow change information to seamlessly integrate with the CPG’s ERP (SAP, JDA, etc.) as well as with the supplier’s ERP, MES, or WMS.

This is quite the prediction, but the real question is, “how do you practically execute on such a grand vision?”

Implementing a Two-Sided Supply Chain Network

The good news is that there are CPGs in the Food & Beverage, Cosmetics, OTC and Pharma industries who are already executing on this prediction of the future.

There are four straightforward steps to this process:

1. Standardize and digitize your external supplier data.

2. Agree to the KPIs you’re going to hold your external suppliers accountable for that can be extracted from their software/technology platforms.

3. Compare external supplier performance.

4. Engage in continuous improvement with your external supply chain to turn your supply chain into means of market differentiation and a source of economic value.

If this vision of the supply chain future resonates with you, chances are you’re on exactly the same journey as the other CPGs and external suppliers we’ve worked with over the last seventeen years.

See the work we’ve done with Colgate-Palmolive and their external supplier network to enable visibility and collaboration, and why they ranked #1 in the 2019 Gartner Supply Chain Top 25: Colgate-Palmolive Builds Supply Chain Agility with Nulogy.

Enabling brands and their external suppliers is what we do—see how we can help execute your vision of a two sided supply chain network. Contact us at info@nulogy.com or give us a call at +1 (888) 685-6491 (NULOGY1).

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Written By
davidl
PUBLISHED
Sep 25, 2019

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