COVID-19 has highlighted how fragile the supply chain can be, but manufacturers and contract packers (CM/CP) can use predictive analytics to make their supply chain more resilient and gain an edge over their competitors.
That’s according to Lesley Hume, director of digital affairs at Everstream Analytics, a provider of software-as-a-service (SaaS-based) solutions at the Foundation for Supply Chain Solutions (F4SS) conference, held in October in Las Vegas.
Hume said CM/CPs should have a plan in place to mitigate challenges, such as upstream shortages affecting their suppliers. It starts with digitizing the data collection so that it can be entered into a predictive model from a supply chain analytics company. If a CM/CP adds supply chain risks to the planning in this predictive model and shares the generated insights and risk analysis with customers and suppliers, then they can plan based on anticipated supply chain challenges. supply chain that comes his way. This allows the CM/CP to reduce the impact of this challenge on its supply chain.
According to Hume, this method of mitigating supply chain risk requires identifying challenges all the way to the raw material supplier. In other words, a CM/CP needs to have greater visibility into their supply chain to better see current and future disruptions. These disruptions could include things like inclement weather, social unrest, and cybersecurity gaps.
She further explained that it is essential to identify and plan for risks in your areas of the supply chain: planning, procurement, manufacturing and delivery.
“If you can build small elements of risk into each of these supply chain categories, you can improve your overall agility, operational efficiency, and hopefully achieve better return with your customer,” Hume said.
She made the following suggestions to get started:
- Get real-time incident data from any source and automate its integration into your data. “With AI and machine learning, you can start getting insights specific to your business role,” Hume said.
- Visualize your network by looking at the vendors, warehouses, lanes, and ports you use. This simple mapping process can provide useful information.
- Have a source other than supply chain risk news.
- Integrate the data or risk signals you collect into your system for estimating on-time deliveries to customers and production planning.
Communication at the heart of efficient supply chains
However, the quality of the information a company collects depends on its communication with other participants in its supply chain. Hank Canitz, vice president of industrial strategy and chief evangelist at Nulogy, a supply chain software company, said supply chains should be viewed more as ecosystems that “revolve” around a consumer packaged goods (CPG) business. CM/CPs are part of this ecosystem, which relies on a community of partners working together, combining their capabilities, knowledge and understanding of the business to drive value for all participants, according to Canitz.
“You can’t just rely on blueprints. Yes, we all want good forecasts, but plans only get you to the start. You need visibility to detect and respond faster,” Canitz said. He explained that speed is key to identifying, planning and reacting to supply chain challenges, he said.
Creating a software platform with supply chain visibility allows CMs/CPs to move from paper to digital recording, increasing the efficiency of information sharing and providing a way safer to collect and keep data.
The highest value for all members of the supply chain ecosystem is in sharing detailed, near real-time operational information, not just high-level information. Seemingly insignificant details can give an early indication of order status and material availability.
“You put the data in the system and get actionable insights,” Canitz said.
How to Build Successful Brand and CM/CP Relationships
Effective communication mitigates supply chain issues, but it also strengthens relationships between CMs/CPs and CPG customers. Carl Melville, Managing Partner at The Melville Grouplisted six traits of highly effective and successful relationships:
- Operational transparency
- Functional alignment and communication between the different teams of the two companies
- Complementary capacities
- Structural collaboration between company structures
- Packing optimization by CPGs finding the co-man or co-packer early in the process
- Alignment of strategic outcomes at the enterprise facility level
More and more brands are also asking CMs/CPs to increase their efforts to be eco-friendly. But sustainability is either cost-neutral or an investment for CMs/CPs, requiring CPGs to help advance goals, according to Melville. For example, General Mills sponsors its CM/CPs and suppliers to participate in the Supplier Leadership on Climate Transition (SLoCT) program which educates and trains suppliers to collect essential data to advance development goals. sustainable. For more information, read the complete article on General Mills’ sustainability initiatives.
Relationships focused on innovation
Another request that CPGs place on their CMs/CPs is to reduce speed to market. “I asked brands how they perceived the innovation brought by CMs and the number one result was process innovation: how they could improve what brands do and what methods could they share. Second, product innovation,” Melville said. He also said one of his clients is meeting the challenge by growing his innovation team from four to 40 employees, which he says was unheard of in the industry.
During a CM/CP panel moderated by Melville, Paul Whitaker, director of consumer products at Wixonan industrial contract manufacturer of seasonings and flavorings, said innovation at his company focused on taking on new or challenging tasks in a shorter time frame.
Another panelist, Steve Sena, Vice President of CM/CP Business Development Truvant, said his company needed to innovate to reduce costs for its customers. Material costs have increased due to recent supply chain issues, which normally means a CM/CP will increase costs for its customers, but Truvant aims to keep costs constant for its customers despite these changes.
Among these innovations to solve challenges, all panelists agreed that clearly communicating challenges to CPG customers is key. “There has to be dialogue. It can’t be a transaction,” Sena said. “The best relationship between brands and CM/CPs is when you’re both in this together, you both care about each other’s business and you both benefit from the relationship. This requires, for lack of a better term, intimacy.
Renegotiating contracts each year can be tense, creates more work for both companies and wastes valuable time. “But if you have a three, five or seven year contract, you can create a longer relationship. You know you’ve been in bed together for a long time, so you’re much better stewards of that relationship,” Sena said.
This idea was backed up by a subsequent F4SS CPG panel which revealed that brand owners are also noticing the value of stronger relationships with their CM/CP partners and are moving towards longer contract lengths. Some contracts last up to five years, a length previously unknown.