Current market developments are pushing the consumer goods industry to take action along the entire value chain. On one hand, due to inflation, businesses are facing more and more cost pressure in supply chain. On the other hand, sustainability goals are leading to the implementation of new supply chain solutions.
As a result of this tension, the supply chain industry has recognized that collaboration can be a key to success. Collaboration outside a business’s own supply network can present an opportunity to optimize value creation structures – in both vertical supplier-customer relationships and horizontal cooperation between consumer goods businesses. At the same time, digital tools can help improve end-to-end supply chain processes.
This approach has a practical relevance – which became clear at 4flow Logistics Day in Düsseldorf, Germany, in mid-March. Representatives from Aryzta, Beiersdorf, Lidl, Mars, Metro and more gathered at the event to discuss the value of collaboration. The results of a survey of all attendees clearly show the discrepancy between the importance of supply chain collaboration and the current degree to which supply chain collaboration happens.
Authors
Lennart Brueggemann-von Ackern,
Partner, 4flow
Dr. Marc Schleyer,
Partner, 4flow
Close vertical collaboration between retail and consumer goods businesses makes an integrated optimization of the value chain possible. This way, all stakeholders gain transparency over shifting demands and the impact of these changes on their value chains. Sales and demand planning can be designed together with the optimal utilization of capacities in the supply chain network.
Digital planning platforms such as digital twins of the supply chain offer valuable support by letting users simulate and evaluate solution scenarios across businesses. Digital twins that represent the end-to-end supply chain with all relevant information, including cooperation partners, enable the simulation of effects on customer orders, inventory, capacities, purchase orders and more in the case of fluctuations in sales or defective product lines. This way, businesses can make alternative plans to achieve an optimal solution in terms of sales, costs, EBIT or service level. These plans can then be shared and aligned with all cooperation partners.
Compared to vertical cooperation, horizontal cooperation among competitors is less common. Direct collaboration between consumer goods businesses, however, offers a key lever for the sustainable reduction of both costs and carbon footprint along the value chain. In this case, collaboration is focused on certain areas of logistics to bundle volumes and take advantage of compatibilities in cross-business networks. For example, volumes can be bundled for transportation if goods are going to the same shopping center. This approach improves the utilization of trucks and in some areas makes it possible to switch to rail transportation for joint shipments. For retail businesses, this means leaner operations in goods receiving, as separate shipments from different manufacturers can be delivered together. Though this kind of collaboration is still in its infancy, there is much active discussion about the joint use of transportation capacities.
To ensure this kind of horizontal collaboration is not limited to small pilot projects and logistics processing, new business models must be implemented. Joint venture structures between collaborating businesses or with 4PLs that work with multiple service providers will become necessary to consolidate the capacity of various logistics service providers and make available capacity visible to multiple businesses.
In the current market, the consumer goods industry is faced with challenges that can only be overcome by collaborating. By implementing new digital solutions like digital twins and strengthening collaboration across the value chain, businesses can achieve significant improvements. Ultimately, all stakeholders profit from stronger collaboration and an improved value creation structure that can meet economic and environmental requirements.
This article originally appeared in German with the title “Kooperation verbessert die Supply Chains” on page 34 of the industry publication Lebensmittelzeitung on June 9, 2023.