Vanguard Blogs
FinanceAugust 17, 2021

4 tips for building an agile and flexible CPG Supply Chain

By: CCH® Tagetik

Read this blog to learn 4 tips for building an agile and flexible CPG Supply Chain.

Consumers spent $861.12 billion online with U.S. merchants in 2020, up an incredible 44.0% year-over-year, according to Digital Commerce 360.  That’s the highest annual U.S. e-commerce growth in at least two decades.  But for this high-SKU-count industry, where demand is unpredictable, the conditions of many consumer goods supply chains are far from perfect.

With the continued uncertainty persisting from the COVID-19 pandemic, an organization’s ability to swiftly mitigate disruptions hinges on the agility and flexibility of its supply chain.  Here we will discuss the best tips for building a better CPG supply chain that is agile and flexible.

Tips for Building a Better CPG Supply Chain

1. Anticipate CGP Demand and Supply Chain Uncertainty using Predictive Planning

No forecast could have predicted the demand the pandemic brought with it.  That said, modern planning solutions that leverage predictive analytics provide the resilience and flexibility needed to mitigate large-scale disruptions when it includes the capabilities for modeling uncertainty.  According to Gartner,

“Predictive Analytics is a form of advanced analytics that examines data or content to answer the question “What is going to happen?” or “What is likely to happen?” The analysis uses techniques such as regression analysis, forecasting, multivariate statistics, pattern matching, predictive modeling, and forecasting.”

Leveraging a predictive analytics-based solution is the most reliable forecasting method for uncertain demand environments, taking inaccuracy and uncertainty into account.

Predictive analytics allows CPG supply chains to gain a solid footing in uncertain demand environments by using historical sales, seasonal changes, new product introductions, and external market data.  Planners use the analyses to run scenarios to project potential outcomes as probabilities that may occur – providing an accurate picture of real-world variability so you can guarantee service to consumers.  Predictive analytics drives service levels and allows you to prepare for several outcomes through the supply chain.

2. Use Demand Sensing to Fine-Tune Forecasts

With reliable forecasting as a foundation, you have the basis for fine-tuning the process.  Demand sensing is the art and science of noticing short-term trends as they take place so that your organization can better predict what consumers want and when and where they will need it.  Instead of working with one forecast for an entire month, you can infuse the latest sales data into your forecast to make improvements that boost the bottom line.

In addition to short-term internal forecasting, you can bring in external data to gain further insight into current demand changes.  CPG supply chains are particularly well suited for advanced demand sensing due to the rich downstream consumer data available.  Advanced analytics that uses AI and machine learning can help gain better insight from downstream demand data to fine-tune and improve near-term forecasts.

3. Rx Your Inventory

Having healthy inventory levels is a natural result of leveraging downstream demand with demand sensing.  Achieving this within CPG supply chains can be difficult due to seasonal demand, new product introductions, and, of course, unpredictability in social, political, and economic environments.  With the added challenge of demand and supplier instability given the COVID-19 pandemic, CPG supply chain organizations are stockpiling excess safety stock and increasing holding costs as a result.

Traditional inventory approaches create stockouts and waste.  However, a multi-echelon inventory optimization approach optimizes inventory levels at each stage in a CPG supply chain, simultaneously balancing multiple echelons, locations, and different levels.

4. Infuse Predictability into Your Environment of Demand Uncertainty

Whether you are planning within one line of business (e.g., Demand Planning) or connecting plans across all lines of business with Integrated Business Planning, CCH® Tagetik Planning is the most scalable, flexible, and user-friendly option on the market.  It is your end-to-end, cloud-based supply chain management platform enabling planners to achieve resilience and overcome uncertainty through probability-based, collaborative planning.

To learn more about CCH® Tagetik Supply Chain Planning for CPG, get a demo today.

CCH® Tagetik
TAA - CCH® Tagetik

Wolters Kluwer (AEX: WKL) enables finance, legal, tax, and healthcare professionals to be more effective and efficient. We provide information, software, and services that deliver vital insights, intelligent tools, and the guidance of subject-matter experts.

We understand the complex challenges that face the Office of the CFO and translate that knowledge into intuitive, enterprise-scale CCH Tagetik performance management software solutions that drive business results.