One thing made abundantly clear over the past year-and-a-half of supply chain turbulence resulting from the pandemic is the importance of end-to-end supply chain transparency through digital data sharing. It’s something that even pre-pandemic, Consumer Packaged Goods companies had begun increasingly recognizing the need for, as they began outsourcing more and more of their operations.
But what does end-to-end supply chain visibility really mean? What technology is needed to facilitate this type of data sharing? How do you get buy-in from management to invest in such processes? And, once the decision has been made internally to extend the supply chain outside your four walls, how do you get both your internal staff and your external suppliers on board?
These were just some of the topics discussed in a recent webinar, “Digitally Transform Your External Supply Chain for Flexibility and Growth,” held by Reuters Events and sponsored by Nulogy. Sharing their expertise were Eric Rossi, Sr. Director Supply Chain North America, Valvoline, Hank Canitz, VP Industry Solutions, Nulogy, Phil Short, former Market CIO, Mars Canada, and Michael Kennamann, Director of Supply Chain Planning, Wilton Brands.
One of the most fascinating takeaways of the event, which was ostensibly billed as focusing on digital transformation, was the idea that people, more so than technology, will power this transformation. Said Canitz, “Supply chain at its root is really people to people. Data is a facilitator, but collaboration is key.”
Why collaborate?
As the recent “2021 State of the Industry Report” from CPA, The Association for Contract Packagers and Manufacturers documents, the contract packaging/contract manufacturing (CP/CM) industry is forecast to grow at a 10.2% CAGR through 2025. According to Canitz, on average, 20% to 30% of CPG brand manufacturers’ product is now being produced through external partners.
As Phil Short shared, historically the CPG would deal with their customers, ultimately the consumers, while anything on the back end has been treated as a “black box” and a separate organization. “That’s just the way the industry evolved,” he said. “But I think we’ve got to get back to [William Edward] Deming’s [management] teachings of the 1950s. If you actually want to have strong partnerships, you have to have collaboration. You become more efficient not only individually, but as a whole supply chain, if you collaborate more and more closely.
“If we want to become more effective and more efficient within the supply chain, we’ve actually got to get visibility and trust between the partners and actually start to manage this thing end-to-end outside our four walls.”
To provide the greatest benefit, the speakers agreed, end-to-end means visibility into every step and by every party in the supply chain, beginning with mining, farming and raw materials manufacturing to multiple manufacturing stages, including third-party manufacturing, to retail and finally the consumer. “In the end, consumers are also demanding sustainability,” said Kennamann. “So going to your Tier 1 supply base isn’t really enough. You almost have to understand and have the ability and the connectivity all the way down to the raw materials and where they’re coming from.
“This is extremely important if you play in the food business, because if you end up with a recall, you’ve got to be able to quickly understand where the raw materials came from.”
The agility to quickly respond to a recall is one benefit of supply chain visibility, but there are many others. The idea, said Canitz, is to take the same type of information used internally for planning and extend that process to external suppliers in order to shorten lead times, improve fill rates, improve responsiveness, etc. “If I’m a CPG manufacturer today, I want to be able to have the same capabilities for my external plants that I have for my internal plants,” he noted.
Effective collaboration though depends on every party having the same data in real time. One enabling technology is Blockchain, which in its simplest form is a digital ledger of transactions that accompanies the product throughout the supply chain. Said Short, “It gets away from the silos of data because it actually becomes shared data. It’s not our data or your data, it’s the supply chain’s data and the consumer’s data.”
Having access to the same actionable data builds trust between partners. “If you’re looking at the same data, trusting where it comes from, that’s actually a big part of that change in mentality around trust along the supply chain,” Short added.
When external manufacturing suppliers have the same data in hand as their CPG customers, they can better plan for increased capacity or workforce requirements, and they better understand when adjustments are made by the CPG. “They’re seeing the same data you're getting from the market, they’re adjusting, and they’re understanding why they’re adjusting,” said Short. “They’re working with you just as your own factory would work with you.”
A shared vision and shared benefits
Implementing end-to-end supply chain visibility requires a multi-person, multi-level strategy that is aligned from the top. So how do you get support from company leadership?
“It comes down to the priorities and the problems you’re trying to solve,” explained Short. “It’s like any change you’re trying to make to a business—it’s got to make business sense.
“First of all, you’ve got to understand what we call the ‘North Star’ of the organization—which direction are we trying to go, and how fast are we trying to get there—and then align what you’re trying to do to with the company’s strategic objectives. Then you can talk to them [executives] about dollars and cents to enable whatever it is that needs to change, and you can show them how the technology enables that to happen.”
Before looking at technology, however, Rossi advised that companies must make sure their people, data, and processes are aligned first. “At my company, we could do a case study on the number of times we’ve said, ‘Hey, if we just get this technology, we’ll be good.’ But what you quickly realize is that it’s so key to work on the data, people, and processes first. I’m willing to bet that if you do that, you’re going to solve about 80% of what you need to solve. Then technology gets you over the hump.”
Rossi noted it’s also vital to get your own house—data, processes, and people—in order before working on external relationships as well. “Otherwise it’s difficult to achieve that win-win situation,” he noted.
A win-win situation is what you want to impress upon your external suppliers in presenting them with the idea of supply chain data sharing. Added Rossi, “It’s about that partnership and selling that partnership. It’s not about going to these third parties and saying, ‘You must do this or else.’ It’s about telling them and showing them how they can benefit from this information as well.
“They can benefit from gaining that visibility just as much as you can, because just as much as you want their information, they want your information. So everything from forecast to demand plans, they want to see that as well. It’s not just a one-way street. It’s a mutual sharing of information so that you can both benefit. Obviously, you want the customer to benefit the most, but you can all gain efficiencies further upstream if you’re sharing that information.”
Change management considerations
To enable a successful digital supply-chain transformation, one of the most important factors is managing change internally at the employee level. “The change management piece isn’t anything new to supply chain—there’s a whole practice and body of knowledge around change management and how you do that,” advised Short. “I would say, if anyone’s embarking on this, then go talk to some change management experts, because most change management methodologies take into account the human aspect.
“But to me, it’s really concerns-based: Understand where people are coming from, what they need, what their concerns are, and how do you address them as well as prepare and train them, give them the tools they need and the rest of it. But taking people along that change curve and understanding everyone starts from a different place, and they go along at a different pace.”
“It’s a complex matter all on its own, and it's not really a technical thing, it’s actually a human nature thing.”
Answering the question of who in the organization is needed as part of the transformation, Short answered: “You need unique business architects, because they’ll give you the whole big picture, the blueprints of what you need, then you need data experts, because they’ve got to make sure the data is accurate, you need IT folks, obviously, if you’re going to put systems in place, but you need human change management experts because we’re not replacing people with robots.
“I use this analogy quite a bit. I say, ‘We’re not putting C-3PO into the supply chain, we’re actually giving the supply chain analysts Iron Man suits—they get superpowers when you give them the right data and the right tools.’”
But, agreed all the speakers, all the right technology and the right tools will not enable successful supply chain transparency unless there is a shared vision, internally and with external partners. Digital transformation is not about the technology; it’s about enabling a better organization, greater trust, and more collaborative partnerships through technology.
Concluded Kennamann, “If you don’t pay attention to the human aspect, the technology and processes will fail wherever you try to implement them. Because at the end of the day, it’s the people who are going to implement the change.”
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