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E-Commerce Cockpit for Your CPG Supply Chain Fighter Pilots

By Matt Tichon  April 29, 2020

A Fundamental Shift in the Retail Supply Chain

There has been a fundamental shift in the retail supply chain as commercial leverage has moved downstream from vendors to the retailers. Not too long-ago manufacturers had leverage to establish attributes like package size, case packs, replenishment lot sizes and, to a large extent, the locations of replenishment. For most manufacturers, controlling those attributes is referred to by industry veterans simply as the “good old days”. Now manufacturers are facing a new host of challenges, responding to more erratic demands of the retailer, as the signals from the market are passed more quickly upstream in the supply chain.

From Main Street to the Information Superhighway

The operating environment has changed significantly as consumers have prioritized convenience of home delivery and have moved their shopping preference from main street to the information superhighway. Amazon.com capitalized on their first-mover advantage in the e-commerce model and has grown to be the preeminent face of many brands to the consumer. The critical aspect that has made this transformation successful is that Amazon has been able to create a radically efficient supply chain with the application of advanced data analytics, machine learning algorithms and automation at scale. This mass application of emerging technologies has created a “consumer utopia”, where prices have fallen as convenience has skyrocketed. In order to run this hyper-efficient supply chain, inventories need to be kept to a minimum by increasing their speed and velocity while simultaneously assuring in-stock availability for the consumer. Since the downstream inventory buffer has been significantly reduced, suppliers are now faced with the challenge of meeting ever-changing order sizes from Amazon as they pass the consumer demand signals upstream at a record pace.

Internally Focused Systems

While Amazon created their business model on emerging technologies, that has not been the case upstream in the supply chain for their vendors. Most key vendors have well-established product lines and consumer-facing brands that are supported by monolithic ERP systems. Vendors invested in supply chain planning systems to create efficiencies and to adhere to customer service levels. More recently those systems have been augmented by data lakes and analytics to house and contextualize the ever-expanding data streams that are being generated by these systems. While this approach does provide a certain level of step-change regarding assuring availability, it is still lacking in two main areas in that these systems are internally focused and backward facing.

Sharing Data Upstream

Amazon created Vendor Central with the aim of assisting their vendors in maintaining the service level agreements that have been agreed upon. Key inventory and sales data is made available that can assist vendors in making optimal decisions on production and allocation of inventory to Amazon’s upcoming replenishment orders. The common challenge is that supply chain planning and forecasting systems were not designed to incorporate external data for decision making. This has created a systems gap where a translation must occur between a vendor’s system that is leveraging internal data and the reems of external data that is being provided by the Amazon. The classic approach to closing this gap is to leverage Excel spreadsheets and teams of fulfillment experts that are aligned to the Amazon account. The problem is that this approach is costly, does not scale, and is limited in processing power. This approach also lacks the ability to detect rapidly shifting consumer patterns and assess a myriad of financial trade-offs across a multitude of potential responses that the fulfillment planners may decide to initiate. Given this situation, we must find inspiration for a modern solution for our fulfillment planners, and for that all we have to do is look up to the sky.

A Cockpit for Today’s CPG Supply Chain Fighter Pilot

Fighter pilots depend on a highly specialized cockpit outfitted with an array of sensors and intelligent systems that are backed by powerful algorithms. Those flight systems monitor and respond to external data while simultaneously considering the state of the aircraft to assure mission success. As the battlefield evolves and technology advances, it’s commonplace to upgrade avionics and battle systems to effectively extend the service life of airframes by up to 20-30 years.

The good news is that artificial intelligence makes it possible for CPG companies to quickly and easily upgrade the avionics for their planners in much the same manner. Planners can now have a modern cockpit built for the needs of their current e-commerce mission that incorporates external data feeds from Amazon’s Vendor Central while considering the current state of their supply chain. Planners can rely on algorithms that are continually working to power predictive and prescriptive analytics generating critical insights on how to maneuver their supply chain assets to assure success, no matter how much the mission field changes.

If you are interested in learning more about the innovation fueling these e-commerce cockpits for the CPG fighter pilots of your supply chain check it out here.