Can agile supply chains ease pressures for FMCGs?

By definition an agile supply chain is a strategy that prioritizes customer responsiveness, people and information, cooperation within and between firms, and fitting a company for change, which can help a business navigate difficult market conditions. An organization can have improved responsiveness and save money by enhancing operational efficiency through improved leanness, resilience against unexpected shocks, and staying ahead of the competition in adapting to market shifts.

 

Agile versus traditional supply chain

Agile supply chains focus on 3 core characteristics: flexibility, responsiveness, and adaptability. Flexibility comes from combining market sensitivity with the capability to deploy resources quickly, allowing firms to modify practices according to changing market conditions without altering the fundamental supply chain design. An organization’s responsiveness is improved by reducing transaction costs and total resource inputs, leading to cost efficiency, inventory reduction, and effective supplier integration.

Finally, adaptability comes from being attuned to rapid changes in demand via the visibility provided by effective forecasting, leading to efficiency gains and leanness. 

Traditional supply chain models are often too rigid to handle the unpredictability of the contemporary consumer product industry, therefore a consumer product supply chain that is adaptive to market forces can be a critical asset. When adopting agile supply chain practices, consumer needs become a greater priority. However, a key enabler of agility is implementing advanced data analytics for real-time decision-making that incorporates data for consumer habits, as well as data inputs from the entire ecosystem. 

To facilitate an agile supply chain model, a business must collaborate with suppliers who share similar ambitions and flexibility and can act as a partner in times of adversity.

Pressures facing the consumer products industry

Consumers’ preferences and behaviors are rapidly evolving. Advancements in advertising technology and near-constant access to information mean consumers are more informed than ever, placing pressure on companies to innovate and adapt their products to meet their demands continuously. Moreover, as sustainability and ethical consumption continue to grow in importance to consumers, businesses face increasing pressures to demonstrate environmental responsibility and social consciousness in their manufacturing processes and supply chains. Failure to do so can lead to reputational damage and loss of consumer trust, compelling companies to navigate these issues effectively to remain competitive. 

Recent high inflation has significantly driven up production costs, which are often passed on to consumers through higher product prices. As companies grapple with maintaining profitability amid rising input costs — raw materials, labor, and transportation, for example.

Managing the effects of inflation requires businesses to adopt flexible pricing models, enhance efficiency in production processes, and closely monitor consumer sentiment to navigate these pressures successfully. 

Geopolitical conflicts have also further fractured critical supply chain routes, adding to the severe supply chain disruption being experienced by the consumer product industry Ukraine, for example, was exporting 1.3 million tons less wheat and maize than before the Russian invasion. This restriction in supply has a significant impact on the customer experience if it leads to reduced product availability, with the potential of perceived value and availability being diminished, therefore harming brand image and loyalty.

Benefits of implementing an agile supply chain 

Advanced supply chain data analytics play a pivotal role in swiftly responding to the dynamic demand landscape of the consumer products industry, by essentially acting as the ‘oil’ flowing through the supply chain ‘machine’. By leveraging sophisticated algorithms and real-time data processing, companies can gain actionable insights into consumer behaviors, preferences, and market trends. 

This granular understanding enables businesses to anticipate shifts in demand patterns, identify emerging trends, and promptly adjust their production, inventory, and distribution strategies accordingly. Whether it’s adjusting inventory levels, optimizing transportation routes, or fine-tuning production schedules, the ability to analyze vast amounts of data gives companies the tools needed to remain agile and responsive in meeting consumer demands.  

Coupled with strategic locations for manufacturing and distribution facilities to minimize lead times, advanced data analytics can provide a significant competitive advantage that allows businesses to respond rapidly to consumer demand shifts and dominate their respective markets systematically analyzing and refining each stage of a business’ end-to-end operating process using renowned best practices, such as Lean and Six Sigma, waste is stripped out which can help offset inflation-induced cost pressures by ensuring only the correct resources are allocated per task. By operating in a leaner fashion, businesses can achieve their profitability targets, with the option to also pass on further savings to consumers, therefore restoring consumer confidence that may have been eroded from record-high inflation.  

Additionally, a company culture of continuous improvement fosters innovation and adaptability, and so offers the opportunity for the business’s strategic suppliers to develop themselves in parallel.