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How to Develop a Modern Supply Chain for Consumer Goods

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Linda Peel, Industry Lead for Consumer Goods and Retail, spoke about Oracle capabilities that can help Consumer Goods companies generate and evaluate forecasts, provide a base volume that shows trend and seasonality impacts, and evaluate each element of the trade spend across price, merchandising, special store placement, consumer incentives, etc.

The Challenge at Hand

Did you know that trade spend is the second-largest P&L cost? Research shows a whopping 70 percent of trade spend is not effective, but the article below looks at how a 3 percent increase in margin is achievable.

According to the World Economic Forum in 2017, “the consumer industry is going to change more in the next 10 years than it has in the last 40.”

Everything is changing, and the old rules no longer apply.

  • Consumer loyalty is a thing of the past.
  • Your offer is about much more than delivering a product.
  • Channels are everywhere. It’s no longer a value ‘chain.’
  • Technology has rapidly changed; it’s not your father’s ERP.
  • Competitors now have a level playing field thanks to funding and technology.

Regarding ordering systems alone, there are new points of sale created daily. Instead of traditional channels, now there are experience platforms. Touchpoints and content intrusions are rampant; every two days we create as much information as we did from the beginning of time to 2003.

Understanding where and why consumers are buying is the critical point for consumer goods.

Barriers in the Consumer Goods Industry

The consumer goods industry is experiencing many barriers to operational agility including:

  • High effort to identify, prioritize, and execute
  • Inventory not aligned to CDP/poor forecasting analytics
  • Lacking “connected” ability to capture, analyze, learn
  • Manual inventory decisions leading to overstocks and out of stocks
  • High complexity/low flexibility
  • Lack of data-driven insights

Consumer buying habits are changing, but many companies are still focusing on historical figures. Sales forecasting can best be compared to playing darts blindfolded, and capabilities are primarily manual.

Developing a Consumer-Driven Demand Process

In order to find success, the way you think about planning demand has to shift. Instead of operational efficiency, businesses must pursue operational agility that is consumer-driven, learning and adaptive, and collaborative and analytical.

A consumer-driven demand process is made up of five parts:

  1. Managing downstream data
    • Capturing, cleansing, harmonizing, and analyzing POS, on-hand, and other downstream data
  2. Managing channel/market forecast
    • Sell-thru to sell-in forecast calculations using target weeks of supply, channel inventory
  3. Managing product and store lifecycle
    • Product introduction through phase-out
    • Store openings, remodels, and closures
  4. Managing a consensus demand plan
    • Consensus demand using multiple demand signals
    • Forecast accuracy review
  5. Managing replenishment
    • Safety stock calculations using various methods
    • Replenishment plan

How Oracle Can Help

Oracle’s adaptive intelligence and machine learning enable you to use data to follow consumers. You can map store POS to market, map market to DC, and get closer to the consumer. The more accurately you understand the consumer, the more likely you’ll find success.

With Oracle consumer demand planning, you have access to:

  • Collaborative forecasting
    • Consensus internal & external
  • Demand segmentation
    • Affinity analysis
  • Demand shaping
    • New product launch
    • Promotions
  • Predictive analytics
    • Forecast decomposition

With adaptive intelligence, each function has the insights needed:

  • Sales & Category Management: Improve promotion effectiveness and new product introductions; ROI, growth trending, maintaining average sell price goals, margin
  • Marketing: Provide differentiated products and services to key customers/consumers; channel growth share, marketing effectiveness/sustainability, assortment optimization, consumer pull
  • Supply Chain: Reduce out of stocks/supply disruptions; consumption forecast driving replenishment, store/market SKU-week, optimized RDC/DC inventory and timing, customer service levels/penalty avoidance
  • Finance: Visibility and transparency; highly accurate forecast of revenue and profit, rough-cut capacity projections, revenue trends YOY, revenue, units, and profit

Consumer-driven demand forecasting results in the right inventory being located at the right place at the right time. Companies with a truly demand-driven supply chain can grow sales by up to 4 percent, cut operation costs by up to 10 percent, and reduce inventory by up to 20 percent. In a nutshell, following the consumer means driving the revenue up.

If this resonates with you, you could benefit from Oracle’s complete consumer demand planning solution. The system allows you to rapidly respond to demand changes.

Ultimately, the Oracle system helps you maximize revenue in three parts:

  • Predict
    • Forecast Demand
    • Manage Safety Stock
  • Align
    • Align Business Plans
    • Plan Product Requirements
  • Respond
    • Plan Location Capacity
    • Generate Supply Orders

Oracle enables you to respond faster to changes, reduce inventory investment, improve customer service, and reduce manual expedites. In the end, you leverage integrated data and intelligence for an innovative solution to managing consumer goods.

To learn more, check out the presentation and additional resources attached below.

Additional Resources

COLLABORATE 20 will take place April 19-23, 2020 at the Mandalay Bay Resort and Casino in Las Vegas, Nevada! Don’t miss this chance to share inspiration, insights, and solutions with your peers, vendors, and the Oracle team! Register before March 6, 2020, to take advantage of Early Bird pricing.