Revamping Consumer Products Supply Chains
Consumer products companies have achieved success by capitalizing on growing global demand for consumer products, innovating to keep up with consumer preferences, building iconic brands through marketing and advertising, and generating operational and the supply chain efficiencies.
This business model has now come under some stress, according to a report from Alix Partners. “CP companies have faced weak demand growth in North America and Europe,” the report noted. “Demand has also been cooling in emerging markets because China’ growth has slowed and because a decline in commodity prices has adversely affected economies in Brazil and Russia.”
CP companies have had difficulty in growing their top lines during the past four years. Industry revenue peaked in 2013.
Among other measures, which include increased mergers and acquisitions activity, companies have embarked on programs aimed at supercharging efficiency. Procter & Gamble announced two $10-billion cost-reduction programs.
“Industry players’ focus on enhancing their operational efficiency has drawn their attention away from making the investments in product and marketing innovation needed to fund future revenue growth,” said the report. “To free up resources they can channel toward meeting that need, companies will have to attain next-generation efficiency gains.”
Reconfiguring their business models will include direct-to-consumer distribution and making better use of digital channels in marketing and product distribution. “And they’ll have to make their supply chains more efficient than ever,” the report noted, “while also becoming nimble enough to satisfy consumers more swiftly and effectively than ever.”