In today’s competitive environment, Australian consumer goods organisations must transform their supply chain management to ensure they exceed customer expectations, are integrated with their supplier network, and use data and analytics capabilities to gain deep insights into their business.
Core to the success of any consumer goods company is the effectiveness of its supply chain.
However, for many businesses, legacy technology and processes mean a great deal of manual intervention is needed. This, combined with low visibility over stock levels, product location and movement, can impact profitability.
With the impending launch of Amazon into Australia – which is renowned for its vast product range, delivery efficiency and speed – customer expectations of service are set to further increase.
Henry Brunekreef, Director, Supply Chain and Operations Management, KPMG, says consumer goods companies must step up their agility to remain competitive.
“Meeting expectations and keeping customers informed should be at the forefront of any consumer goods company strategy,” he says. “The emphasis must be on doing things smarter, better and more efficiently.”
The time is ripe for Australian retailers to review their supply chain management (SCM) to ensure they are equipped for this new environment. Thanks to advances in supply chain process design and information systems, the scope to improve is vast.
Australian consumer goods companies have complex supply chains, and improvement measures are not always simple if legacy technology is involved.
Margie Richards, Associate Director, Technology Enablement, KPMG, says many SCM challenges stem from inadequate, outdated and unintegrated technology systems.
“Modern SCM is a matter of the customer having the right product at the right time to satisfy demand,” Richards says. “To achieve this, you need efficient warehouse processing, goods shipping, stock picking accuracy and dispatch.”
Legacy systems may not integrate well with suppliers’ and customers’ systems, Richards explains.
“A lot of companies won’t deal with you unless you are using electronic data interchange (EDI). And it’s not much good having sales reps on the road if they can’t access the information necessary to answer customer queries with their mobile device.”
An advanced supply chain system can enable greater collaboration between suppliers, customers and other relevant entities, Richards explains.
“When you have your supply chain integrated into your vendor’s system, with visibility of stock and orders to give you timely updates on delivery and pricing changes, this streamlines the process and takes away manual intervention,” she says.
Richards says KPMG worked with vitamins company Swisse to help integrate their SCM system with suppliers and customers, using Microsoft Dynamics 365. This technology not only improved efficiency of SCM, it also replaced their disintegrated legacy systems and enabled integration, delivering efficiencies through timely and accurate business insights.
“There is always an opportunity for improvement in demand forecasting, planning and procurement. For companies like Swisse, modern SCM can execute global procurement strategies – an area many Australian companies haven’t really embraced yet.”
As Australian consumer goods companies increase their multi-country engagements, Brunekreef says that the integration of financial systems is also vital.
“At the base of any supply chain is financials. SCM can help improve services levels and lower the cost of doing business,” he says.
He says Microsoft Dynamics 365 helps organisations to seamlessly integrate their supply chain information with their financial information, and facilitate multi-company and multi-country statutory reporting. With better insights into how finances and supply chains work together, organisations can determine a ‘cost to serve’, which analyses product, supplier and customer profitability.
“This information used to take months to generate, but today’s technology enables data to be refreshed on a rapid basis. Knowing the cost to serve means you can segment customers, determine the most important ones and offer them the most profitable products,” he says.
Stepping up SCM to connect to financial information is one benefit, but there are many other areas of a business where effective SCM can assist.
Adi Vijayashankar, Lead AX Application Consultant, Technology Enablement, KPMG, says: “There needs to be sufficient emphasis on data and analytics, otherwise you will have a system with data, but you’re not using it to its full potential.”
Brunekreef gives an example of how big data can help organisations be predictive and proactive to get better outcomes: “When sourcing product from Asia, by using big data we know exactly what the weather will be like on the journey, and the status of the receiving port. We can ask, what actions are available to prevent delays? Should the ship be re-routed, or the delivery expedited via air freight?”
New technology is steadily making its way into the world’s supply chains, from driverless trucks to drone technology and the Internet of Things (IoT). However, Brunekreef says these will take time to develop and be used in daily operations.
“In 15 to 20 years we will see self-driving vehicles used in certain applications. Even today, automated, guided vehicles can be used to deliver linen to wards in hospitals.”
While autonomous drones as a reliable delivery method are still in the future, they can currently be used to inspect supply chain equipment, such as a conveyer belt, to assist with problem solving and maintenance.
Brunekreef says the supply chain industry was early to adopt a form of IoT – radio frequency identification (RFID) – but the cost was prohibitive for most organisations.
“IoT is almost a leap forward, where commonly accessible data can be used to make decisions or report information on, or with, the product,” he says.
For now, Brunekreef says companies will use a combination of RFID, barcodes and IoT.
“In food distribution where fresh produce is being transported over long distances, RFID can monitor the shipment temperature during the journey.”
Australian consumer goods organisations can modernise their supply chain systems with cloud-based technology such as Microsoft Dynamics 365. Vijayashankar advises that to get the most successful transformation, it should be backed by a breadth of expertise.
“You need to implement it with consumer goods industry expertise, so you can work on the processes, not just the product,” he says.
Brunekreef adds that expertise in change management strategy is also crucial, to ensure the process change comes first, and the technology complements the approach.
“Changing an organisation is a combination of process, technology and metrics. Most organisations can be optimised before implementing a technology.”
KPMG’s partnership with Microsoft enables clients to have access to Microsoft Dynamics 365 technology and the deep expertise of our teams, who can help to build a transformation strategy and implement the technology.