Consumer products, which are sold to end customers, rely on a large, widespread and complex supply chain. Consumer products are sold directly to customers through traditional, brick-and-mortar retail stores, through e-commerce websites or via an omni-channel approach. The wide range of consumer products inventories, different purchase channels and the need for quality, speed and reliability introduces some unique challenges for the consumer products supply chain.
In this article, we’ll explore some of the common challenges facing the consumer products supply chain, together with some steps you can take to streamline the process, increase visibility, control inventory and maximize revenue. Plus, you’ll learn how to optimize your retail supply chain for food, beverages, apparel, home care, consumer electronics and related products.
Why the Consumer Product Supply Chain Matters to Different Stakeholders
Getting this supply chain right is equally important to suppliers, retailers and consumers.
From a supplier’s perspective, they want to maximize efficiency through economies of scale. If they can mass produce a particular SKU with only minor variations, they can keep costs down and pass them onto retailers, making them a more attractive partner and attracting more business.
Retailers want a strong value proposition and compelling branding. They can use slightly customized versions of products, marketed through unique packaging to highlight benefits and make consumers more likely to purchase. This gives them a better value proposition and helps them to differentiate themselves from competitors offering broadly similar products.
Finally, consumers want a combination of availability, consistency and choice. They need items to be in stock when they want to buy. They want a consistent brand experience from their favorite retailer, combined with well-priced, high-quality items. They also seek out slightly different versions of SKUs to meet their specific needs.
The most efficient consumer product supply chains combine all of these areas to keep costs down, deliver choice and balance differentiation and mass production.
Challenge #1: Not Enough Inventory to Support Marketing and Consumer Buying Trends
Consumers are fickle. If they can’t get a product from you, they’ll buy from a competitor, and if they like that product more, you’ve just lost a consumer. That’s why strong, robust inventory management is so essential. Retail consumer products supply chains exacerbate this problem, due to the sheer number of SKUs, the need to have an integrated approach across the business and ever-shortening supply and demand cycles.
Consider all the areas a consumer products supply chain manager needs to deal with:
- Multiple SKUs, especially in the apparel and related industries — every size, style, color and option is a separate product that needs to be sourced, manufactured, shipped, tracked and stocked in store
- Marketing and promotional efforts as retailers use more sophisticated methods to advertise their products across multiple channels
- Consumer demand as customers expect the next big thing as soon as possible, and you need to shorten the time between manufacture and getting it onto the shelves
- Seasonal trends as the demand for products increases and decreases throughout the year
Solution #1: Implement Extremely Strong Inventory Management Practices to Optimize Orders and Stock Levels
Every retailer is different, so there are plenty of ways that will help you develop an optimal approach for managing inventory and stock levels. We recommend:
- Integrating supply chain managers into the new consumer product development process so they get early sight of likely requirements and can engage with suppliers and manufacturers early.
- Building a supply chain review process into all marketing and promotional experts so that consumer products order management is aligned with advertising and the likelihood of increased sales.
- AI and machine learning forecasting and modeling based on historic trends and external data that suggests likely consumer patterns and can predict realistic inventory levels. For example, long-term weather data can help forecast demands for outdoor clothing.
- Well-engineered consumer products reporting that quickly identifies possible future shortages and allows for fast tracking of orders to make up for likely shortfalls.
- Implementing a centralized supply chain platform that integrates all consumer product suppliers and manufacturers together and provides complete visibility and tracking of consumer products order management, supply, manufacture and distribution.
Challenge #2: Distribution and Logistics Networks Do Not Meet the Demands of Today’s Consumer Products Retailers and Consumers
Consumer products rely on fast, optimized distribution. All retailers need to optimize their logistics networks, especially the last-mile delivery between the warehouse and the store, or the customer’s home. The complex, global nature of consumer products supply chains makes this a significant issue, as international lead times and customs delays can impact speed to market and inventory levels. Whether a retailer is using internal fleet services or contracting out to a third-party logistics provider, streamlined distribution is key.
Solution #2: Streamline and Increase Visibility of Consumer Products Logistics and Distribution
There are several ways that retail supply chain managers can optimize their consumer products distribution networks:
- Carry out deep analysis of local, regional and nationwide sales of specific product lines and set area-specific inventory levels to ensure appropriate stock management and availability.
- Get robust contracts and service level agreements (SLAs) in place with any third-party distributors, logistics providers or warehouses. Regularly audit logistics provision to ensure they’re meeting SLAs.
- Install Internet of Things (IoT) devices for consumer products distribution. This will help to track individual shipments and trucks, trains or other modes of transport. This can optimize inventory throughput and identify potential delays and bottlenecks.
- Analyze fleet operations and routing using artificial intelligence to identify the fastest and most reliable way to transport consumer products.
- Integrate with last-mile distributors, especially if you’re shipping goods directly to the customer’s house.
Challenge #3: Revenue Is Locked Up in Old Stock That Needs to Be Sold
Every retailer has consumer products that don’t move as well as expected. Mistiming the market, issues with a product’s quality or just not predicting consumer desires can leave you with a warehouse full of unsold items.
Unfortunately, that results in expenses locked up in the products, and if you want to release some value from those items, they must be sold. That requires a careful balancing act between retail supply chain management and the sales department.
Solution #3: Provide Unsold Consumer Product Data to Sales for Discounting and Marketing
Getting rid of unsold stock isn’t just a responsibility of sales and marketing, retail supply chain managers also have a part to play:
- Set up reporting on unsold goods, so you can identify slow-moving items early and engage with marketing to discount and promote the products.
- If goods are not selling due to poor quality, conduct an audit through the supply chain to identify where flaws were introduced and follow up with the appropriate supplier or manufacturer to prevent recurrence.
- Build slow-moving product data into your forecasting models to identify future consumer products that might be similarly impacted, and adjust inventory levels.
Other Challenges in the Consumer Product Supply Chain
While the challenges above are common to the consumer products supply chain, there are several other problems faced by retail supply chain managers:
- The need to move perishable items quickly, due to them going out-of-date.
- Visibility of fixed and variable costs in the supply chain in what is a low-margin business.
- Efficient routing of consumer products parts through the supply chain to allow for efficient supply and manufacture.
- The increase in just-in-time manufacturing, resulting in greater need for speed, quality and order management.
- Introducing consumer products to new markets with unique local and regional challenges.
Suppliers, manufacturers and consumer products supply chain managers must have a deep understanding of risks and challenges in the supply chain and how they can be resolved. Strong inventory management combined with excellent distribution and alignment with sales and marketing will go a long way to driving up revenue and profits and creating happier customers.
Blume solutions for consumer products enable supply chain decision-makers to simplify their supply chains and get the right products to the right retailers at the right time.