The Consumer-Packaged Goods industry faces several supply chain challenges, including:
a. Complex distribution network: CPG products are often distributed through a complex network of retailers, distributors, and wholesalers, making it difficult to manage the supply chain effectively.
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b. Short product shelf life: Many CPG products have a short shelf life, which can create challenges in managing inventory and ensuring timely delivery.
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c. Changing consumer preferences: CPG companies must constantly monitor and respond to changes in consumer preferences and demand, which can create supply chain challenges.
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d. Increasing pressure for sustainability: Consumers are increasingly demanding environmentally friendly and sustainable products, putting pressure on CPG companies to make their supply chains more sustainable.
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e. Competition for resources: CPG companies are competing for limited resources, such as raw materials, packaging materials, and skilled labor, which can impact the supply chain.
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f. Supply chain visibility and traceability: Ensuring visibility and traceability throughout the supply chain is a major challenge in the CPG industry, particularly in light of food safety concerns and regulations.​
Important supply chain KPIs:
1. Inventory turnover: A measure of the efficiency of inventory management, calculated as the number of times inventory is sold and replaced per given period.
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2. Fill rate: The percentage of customer orders that are fulfilled without backorders. Used to measure the ability of the supply chain to meet customer demand.
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3. Perfect order rate: The percentage of customer orders that are delivered complete, on-time, and in good condition. Used to measure the overall effectiveness of the supply chain.
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4. Freight cost per unit: The cost of shipping and handling each unit of product. Used to measure the efficiency and cost-effectiveness of the transportation component of the supply chain.
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5. Supplier performance: A measure of the performance of suppliers, including delivery time, quality, and cost. Used to identify opportunities for improvement and to manage supplier relationships.
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6. Carbon footprint: A measure of the environmental impact of the supply chain, including emissions and waste. Used to assess the sustainability of the supply chain and to identify opportunities for improvement.
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Potential Supply Chain solutions:
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1. Supply planning along with distribution
- Improvement in inventory turnover, fill rate and perfect order rate
2. Supply chain visibility
- Control tower functionality to monitor KPIs and adopt management by exceptions
- Improvement in freight cost per unit by tracking, supplier performance and cost of goods sold
RETAIL AND CPG
MANUFACTURING
There are several challenges that the manufacturing industry faces in its supply chain management, including:
a. Volatility: The demand for manufactured goods can be highly volatile, making it challenging for manufacturers to maintain stable supply chains. This can lead to stockouts, excess inventory, and inefficiencies in the supply chain.
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b. Complexity: The manufacturing industry is complex, with multiple stakeholders involved in the supply chain, including suppliers, manufacturers, distributors, and customers. Coordinating the activities of stakeholders can be difficult and time-consuming.
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c. Visibility: Lack of visibility into the supply chain can make it difficult for manufacturers to track deliveries, monitor supplier performance, and respond to disruptions.
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d. Sustainability: Manufacturers are under increasing pressure to reduce their carbon footprint and improve sustainability. This requires a rethinking of supply chain management strategies, as well as investments in more sustainable technologies and practices.
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e. Globalization: The manufacturing industry is becoming increasingly global, with suppliers, manufacturers, and customers located in different countries. This makes it difficult to coordinate activities and manage risk, particularly with regards to shipping and logistics.
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f. Complex Regulations: The manufacturing industry is subject to a variety of regulations, including trade, environmental, and labor laws. Compliance with these regulations can complicated, particularly for companies operating in multiple countries.
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g. Cybersecurity Risks: The increasing digitization of supply chains has introduced new risks, including cyber threats and hacking. Manufacturers need to be aware of these risks and implement measures to protect their data.
Important supply chain KPIs:
1. Perfect Order Fulfillment Rate: Perfect order fulfillment rate measures the percentage of orders that are delivered complete, on time, and to the correct location. This KPI is an important indicator of customer satisfaction and helps to identify areas for improvement in the supply chain.
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2. Inventory Turnover: Inventory turnover measures the speed at which a company's inventory is sold and replaced. High inventory turnover is an indicator of efficient supply chain management and effective demand forecasting.
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3. Lead Time: Lead time measures the amount of time it takes for a product to be manufactured and delivered to a customer. It is a key KPI for manufacturers, as it helps to ensure that products are delivered on time and to meet customer demands.
4. Supplier Performance: Supplier performance measures the quality and reliability of suppliers. This KPI is important, as supplier performance can have a significant impact on overall supply chain performance.
5. Cost of Goods Sold: COGS measures the cost of producing a product. This cost includes materials, labor, and overhead. It is an important KPI for manufacturers, as it helps to determine the profitability of products and identify areas for cost reduction.
Potential Supply Chain solutions:
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1. Demand planning
- Forecasting at predefined business level and disaggregation at SKUs
2. Supply planning along with distribution
- Improvement in perfect order fulfillment rate, inventory turnover
3. Supply chain visibility
- Control tower functionality to monitor KPIs and adopt management by exceptions
- Improvement in lead time, supplier performance by tracking, and improving supplier performance and cost of goods sold
HIGH-TECH AND SEMICONDUCTOR INDUSTRY
High-tech industries are the fastest-growing industries, globally.
Given the growth rate and
ever-changing nature of the high-tech industry, it faces several supply chain challenges:
a. Complexity: High-tech products often have many components and suppliers, which can lead to complex supply chain management.
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b. Globalization: With suppliers and manufacturers located across the world, there can be challenges in coordinating the flow of goods and information.
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c. Short product life cycles: High-tech products often have short life cycles, which can make it difficult to plan and manage the supply chain effectively.
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d. Intellectual property and data security: Protecting intellectual property and sensitive data is a major concern in the high-tech industry, which can create challenges in managing the supply chain.
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f. Increasing demand for sustainability: The growing demand for environmentally friendly and sustainable products places pressure on high-tech companies to maintain sustainability standards within the supply chain.
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Important supply chain KPIs:
1. Lead time: The time it takes from the placement of an order to the delivery of goods. Used to measure the speed and efficiency of the supply chain.
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2. On-time delivery rate: The percentage of deliveries that are made on or before the promised delivery date. Used to measure the reliability and efficiency of the supply chain.
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3. Cost of goods sold: The cost of the products sold, including materials, labor, and overhead. Used to measure the efficiency and competitiveness of the supply chain.
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4. Supply chain agility: A measure of the supply chain’s ableness to respond to changes quickly and effectively. Used to assess the overall effectiveness and flexibility of the supply chain.
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5. Intellectual property and data security: A measure of the success pertaining to the protection of sensitive data and intellectual property. Used to ensure the maintenance of security and confidentiality practices within the supply chain.
Potential Supply Chain solutions:
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1. Demand planning and demand sensing
- Accurate customer demand prediction using POS data
- Improvement of delivery standard
2. Supply planning
- Improvement in lead time and on-time delivery
3. Supply chain visibility
- Control tower functionality to monitor KPIs and adopt management by exceptions
- Improvement in cost of goods sold
IT & SOFTWARE INDUSTRY
Technology (Software Development and Platform) companies face several unique challenges in within their supply chains:
a. Short product life cycles: Technology products often have short life cycles, which can make it difficult to plan and manage the supply chain effectively.
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b. Volatility in demand: Technology products often experience unpredictable demand, which can create challenges in managing the supply chain.
c. Increasing demand for sustainability: The growing demand for environmentally friendly and sustainable products places pressure on technology companies to develop more sustainable supply chains.
d. Complex product design: Technology products often have complex designs and requirements, which can make it difficult to find suitable suppliers.
e. Intellectual property and data security: Protecting sensitive data and intellectual property is a major concern in the technology industry, which complicate the management of the supply chain.
f. Globalization: With suppliers and manufacturers located across the world, there can be challenges with coordinating the flow of goods and information.
Important supply chain KPIs:
1. Inventory turnover: A measure of the efficiency of inventory management, calculated as the number of times inventory is sold and replaced per given period.
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2. Cost of goods sold: The cost of the products sold, including materials, labor, and overhead. Used to measure the efficiency and competitiveness of the supply chain.
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3. Supplier performance: A measure of the performance of suppliers, including delivery time, quality, and cost. Used to identify opportunities for improvement and to manage supplier relationships.
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4. Supply chain agility: A measure of the ability of the supply chain to respond to changes quickly and effectively. Used to assess the overall effectiveness and flexibility of the supply chain.
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5. Intellectual property and data security: Protecting sensitive data and intellectual property is a major concern in the technology industry, which complicate the management of the supply chain.
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6. Carbon footprint: A measure of the environmental impact of the supply chain, including emissions and waste. Used to assess the sustainability of the supply chain and to identify opportunities for improvement.
Potential Supply Chain solutions:
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1. Demand planning and demand sensing
- Improved accuracy of customer demand prediction
- Improvement of supply chain agility
2. Supply planning
- Improved inventory turnover, cost of goods sold, and supply chain agility
3. Supply chain visibility
- Control tower functionality to monitor KPIs and adopt management by exceptions
- Improvement in cost of goods sold and supplier performance
“Sustainable development is the pathway to the future we want for all. It offers a framework to generate economic growth, achieve social justice, exercise environmental stewardship and strengthen governance.”
Ban Ki-Moon