Innovative Transactions Key for Supply Chain Leaders: Gartner

Manufacturers and retailers alike are placing focus on direct-to-consumer initiatives as a means to find revenue growth.

Revenue growth for the consumer products (CP) industry continues to be challenging as CP supply chain leaders saw a decline in revenue growth over the last two years, according to a report from IT research firm Gartner.

As CP organizations rethink how they deliver value within their trading networks, manufacturers and retailers alike are placing focus on direct-to-consumer initiatives as a means to find revenue growth.

For manufacturers, this means designing supply networks to fulfill direct-to consumer demand, reaching the digital-mobile consumer and making transactions seamless, while personalizing the experience for the consumer.

The report said in order to support these initiatives, CP manufacturers will need to improve their demand management capabilities, their ability to respond to variable demand, and their order management and route-to-market capabilities in a cost structure that does not erode margins.

"Consumer products companies continue to face an uncertain global economy, with an expectation that demand volatility will continue to increase and revenue growth will continue to be challenging," Steve Steutermann, research vice president at Gartner, said in a statement. "In this scenario, increasing revenue growth means finding new markets, increasing market share and improving on-shelf availability (OSA) of products sold. Supply chain leaders that can measure OSA and collaborate with retailers to improve shelf availability and manage inventories have an advantage versus those CP manufacturers that cannot use customer data to improve OSA."

In addition, effectively using customer data requires making an investment in a demand signal repository (DSR) to harmonize and cleanse retailer data so that it is usable for data analytics.

The report noted data analytics using retailer consumption and inventory data today are examples of using "structured" data.

While the term "downstream data" is most often connected to consumption and inventory data, unstructured data, like loyalty data, social sentiment, consumer perception attitudinal data, is starting to be used for targeting consumers, shaping demand and improving new product launch effectiveness.

"Critical to a consumer product company's future success is the ability to use customer data to improve the demand forecast, lower inventories, reduce cost and improve service," Steutermann continued. "Collaborative platforms are initiatives that manufacturers and retailers work on together to achieve joint outcomes, including on-shelf availability improvements, shrink and waste reduction programs, inventory management and cost reduction initiatives."

In Gartner's 2014 Trends in Manufacturing survey of 258 companies, 87 percent of respondents cited demand volatility as a medium to very large impediment to supply chain planning (SCP), outranking all other leading impediments cited, including demand and supply visibility, systems to convert data into insights and lack of talent.

According to the report, continued demand volatility is increasing pressure to fulfill demand and causing companies to leverage integrated end-to-end network approaches.

"Achieving top-tier status across every measure may simply mean adding unnecessary cost and complexity. What's important is to invest in people, process and technology improvements that are valued by customers," Steutermann said. "Leaders make conscious trade-offs, with an understanding that it may be appropriate to have benchmarks that are at par with industry averages while, at the same time, having other measures that reflect best-in-class outcomes."