Six Best Practices for Stressed CPG Supply Chains
Fluctuating consumer demands compounded by regional lockdowns and the e-commerce boom have bedeviled consumer packaged goods (CPG) companies in 2020. And, it doesn’t appear that situation will change soon.
“Even companies that had built resilient supply chains have experienced stockouts and bottlenecks; complex product portfolios have exacerbated these challenges,” McKinsey & Co. notes. “Meanwhile, overtaxed supply chain teams have been waging a valiant battle to manage manufacturing capacity and logistics amid persistent labor uncertainty. The coming months appear set to bring more of the same.”
To help CPG companies cope with this confusion and maintain service levels, McKinsey this week suggested six best practices to improve supply chain response. “Since the pandemic has essentially changed nice-to-have capabilities into table stakes, all of these best practices embrace a two-speed approach,” McKinsey explained. “They can help companies manage short-term fluctuations while laying the foundation for more effective supply-chain operations in the long term.”
The six are:
- Manage employee safety by implementing steps in the workplace such as distancing and symptom testing. Plus, look into ways to address mental health concerns for supply chain (and other) employees who have been working long hours.
- Embrace machine learning in demand forecasting to allow your organization to be more proactive regarding trends, rather than solely reactive.
- Adopt proactive customer management.
- Optimize SKU portfolio complexity. Companies that have simplified their SKUs “have seen anywhere from five to 10 percentage points of improvement in overall equipment effectiveness as a result and were able to meet the demand surge successfully,” McKinsey said.
- Expand supply options to mitigate risks.
- Increase productivity in manufacturing and distribution.
More details on each of the best practices can be found here.