How Digital Solutions Can Create More Resilient Supply Chains

20 Jul 20

Only one-quarter of CPG companies have embraced at least one digital solution

The coronavirus crisis could be a tipping point in the transition to digital platforms and applications that help establish an interconnected network of supply chain components. In a digital supply chain, every activity is able to interact with one another in near real-time, allowing for greater connectivity between areas that previously did not exist.

While other sectors are further ahead in truly embracing digital, CPG is somewhat behind the curve. Despite all the talk about digital transformation, the penetration of key technologies throughout the CPG supply chain – from product development to manufacturing to consumer management – remains superficial.

Getting the most out of lean manufacturing

Many CPG companies have adopted the lean philosophy of efficient manufacturing that grew out of the Toyota Production System in the mid-20th century, but digital technologies can help unlock the full potential of lean programs in product development and supply chain management.

One of the principles of lean manufacturing is just-in-time production. This strict inventory management system eliminates the waste of excess inventory by ensuring that only the minimum amount of stock is warehoused and items are only ordered and received when necessary for a sales order.

Digital technologies can help

Research shows that digital technologies can help reduce inventories by up to 75%, while still allowing suppliers and customers to find the right product at the right time

Other benefits that can be achieved through a digital supply chain include:
● 50% to 75% reduction in lost sales
● 30% lower supply chain administrative costs
● 30% reduction in logistics costs
● 3% to 5% increment in annual earnings growth before interest and taxes