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Coronavirus & The CPG World: What to do now and how to prepare for the future?
Coronavirus & CPG

At Solvoyo, we are also concerned about the COVID-19 pandemic. Our thoughts are with all human-kind and hope that the global community will come out of this period with the least damage and the most enlightenment. Nothing will be the same in our lives, so let us prepare for a different future together.

What does this mean for the CPG world?

We believe that the CPG commercial world is already taking several actions to adapt to the supply chain disruptions of the pandemic. As with many other companies, we at Solvoyo want to do our share to help our customers during this period of uncertainty. We also want to know your suggestions on how we might help. Please feel free to book a meeting with me to discuss the challenges you have faced.

Here are some observations and examples of support Solvoyo initiated: 

1) Digital infrastructure is critically important!

This pandemic clearly showed that the global digital infrastructure and global apps have been instrumental in instant communication, business continuity as well as reducing COVID-19 spread in such countries as South Korea and Singapore. Agility now and in the future requires a reliable digital infrastructure for the governments, the enterprises, and the individuals.

2) Real-time visibility is extremely valuable during times of crisis! 

In the supply chain, visibility involves status reporting from suppliers, through the production&distribution infrastructure and all the way down to the shelf level. This end-to-end view is critically important now and in the future to assess where to focus our limited resources to maximize the supply chain efficiency. End-to-end scenario analyses require this visibility data as input. 

Our e-commerce client had full visibility of its current and inbound inventory. Our AI/ML-driven platform immediately focused their attention on the demand increase in categories such as cleaning supplies, laptops, kitchenware, and books. This allowed them to place additional orders much earlier than their competitors.

3) There is value in the ability to estimate and plan for the worst possible scenario!

This pandemic is a “black swan” event and in fact has been predicted by many respectable institutions (e.g., Robert Koch Institute). The value of scenario planning now and in the future has increased. Asia-centric business practices and possible changes in trade policies should be the initial points of reconsideration. 

4) We should all value skilled people more!

We all praise and applaud the tremendously valuable efforts of every health worker. To do our part in the supply chain world, we should be prepared to run a production and distribution infrastructure with 30% fewer skilled technicians, professionals and truck drivers. People-centric businesses will thrive now and in the future, and planning should involve concurrent consideration of products, required skills, factory lines, trucks, etc.

5) We should all value automation more!

Clearly, this point does not create a conflict with the previous one. We see one of our innovative clients, a small-format grocery with 9000+ stores is handling a 50%+ sales increase (based on the seasonally-adjusted baseline) due to the pandemic. The enablers are physical and digital automation at their DCs as well as Solvoyo’s autonomous decision-making platform that manages their forecasting, inventory management, replenishment, and purchase orders. Business continuity at this grocery chain benefitted several CPG companies -some of which are our clients as well. The AI/ML-driven platform automatically made demand-driven adjustments and provided a realistic view of the future requirements based on the estimate of the pandemic duration coming from external sources such as WHO.

6) Collaboration across functions is key to stay viable and safe!

This one builds on the visibility level. We are at war to save our lives during this pandemic, so the military analogy should work: success at war whether it is preemptive or reactive- highly depends on the collaboration of command, people, equipment and the underlying communication infrastructure all serving to the same objective. The collaboration of functional areas, aligning key objectives and creating a single plan should be the norm for every CPG company now and in the future.

What can we do for you?

Our clients are currently busy looking at scenarios such as alternate sourcing of material, alternate inventory deployment strategies, shifting of production immediately and in the mid-term, timing of product introduction initiatives…just to name a few. While we know of many other clients and prospects who are trying to perform what-if simulations using Excel spreadsheets.

Immediate value for your current operations

In the midst of this crisis with no equivalent scope in our lifetime, most business leaders continue to make the necessary adjustments to operational plans based mostly on experience and judgment. We have observed from a few innovative clients that, indeed, visibility tools, quantitative bases to support immediate decisions and to track the results help. 

Below are some realistic examples of web-enabled visibility and analytics dashboard covering all functions to assess potential business issues and to allocate resources optimally:

  • Demand heat map – baseline (by product, location, channel, etc.) based on historical data from this time last year 
  • Demand heat map – current sales
  • Top n” “bottom n” comparison, alerts and exceptions for immediate action
  • Heat maps for the supply side: baseline, current, and analytics for immediate action.
  • Estimates of how long your on-hand inventory will last (days forward coverage) under many different demand and supply scenarios, (e.g., no supply, plant closures, 30% reduction in demand).
  • Inventory repositioning for optimal effect – commercial or health-driven.
  • AI-ML-driven totally autonomous DDMRP (demand-driven MRP with auto-adjusted buffers) solution implemented using CPG templates 
  • Web-based globally accessible platform that enables visibility to vendors and customers communicating status and service failure risks.
  • Excel-based truck routing and scheduling activities rapidly converted to operate optimally under driver capacity constraints and closure of delivery locations.
  • Excel-based scenario analyses rapidly converted to optimal-seeking prescriptive models.

In most cases, you can send/share data using Excel sheets and update the platform yourselves with daily Excel uploads.

Tactical and strategic steps you should consider taking

When this crisis is over, more companies will have to design a resilient and robust supply chain. The leaders must have capabilities to optimize their production&distribution networks for macro adjustments by evaluating many what-if scenarios on that network.

Solvoyo has been an advocate and a capable vendor for building a comprehensive digital twin of CPG and Retail supply chains, both to baseline operations now and to assess what-if scenarios for the future. The digital twin should enable both the horizontal alignment of functional decisions at the operational level and the vertical alignment of strategic and tactical decisions that set the bounds of your operations. Specifically, Solvoyo can support you with digital twin initiatives so that you can perform many what-if analyses:

  • Asia-centric business practices and possible changes in trade policies
  • Strategic sourcing options
  • Transportation mode selection and purchasing
  • Inventory deployment and reconsideration of buffer policies across the network
  • Inventory investment vs service contracts 
  • Total Cost to Serve models that include service failure costs, border crossings, risk, and insurance.

If you are a supply chain leader at a CPG company, I am happy to provide a free consultation session to discuss your specific challenges. Please use this link to set up a time.

 

Omer Bakkalbasi

Chief Innovation Officer at Solvoyo

Omer is a seasoned supply chain professional with more than 20 years experience in supply chain management, with an emphasis on business analytics and fact-based decision making as well as delivering high-quality software and consulting services. Omer is motivated to solve difficult business problems through innovation, information technology and automation while always focusing on the end result of delighting customers.

LinkedIn: Omer Bakkalbasi

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