It’s a tough time to be the CFO in the consumer goods space. First, it was the unprecedented pandemic of 2020; now the supply-constrained present. CFOs are being forced to navigate inflation, rising supply costs, logistics challenges, and wild shifts in consumer demand. Woe to the finance executive who is trying to plan multiple quarters ahead in this environment.
These forces are converging to create a supply-constrained landscape for almost every consumer goods brand. In other words, most brands are struggling to get enough supply to meet the demand for their products. This isn’t the usual state of the world, if anything, companies have been able to overproduce. Until now.
That’s why, “finance executives are widening the lens to target additional savings,” according to a recent article in the Wall Street Journal. Here are a few of the new strategies we see Alloy customers exploring to preserve and grow market share in today’s environment:
Can’t get enough products to the shelf to meet consumer demand? How you allocate your supply is even more important.
Though this isn’t the usual state of the world, there is no reason to believe it will change anytime soon. Part shortages, port congestion, labor shortages — these are the new normal for the short or medium term.
If you’re struggling to ship product to the US — or even to get it produced — your Sales and Supply Chain teams need to be working with your retail partners to ensure that you are getting product where it is needed. Be diligent about reducing unproductive inventory. In supply-constrained environments, retailers are incentivized to hoard products. So you need to be very thoughtful and data-driven about where you’re allocating inventory.
Having the right data, and knowing how to use it, is key to building a collaborative relationship with your retail partners.
The amount of waste in the supply chain is staggering. In some industries such as food, supply chain issues account for 40% of waste and spoilage. But even if you’re not selling a perishable product, you can still deal with “spoils” in the form of having to mark-down unsold inventory from last season to make room for new items on the shelf.
To begin to tackle waste in their supply chains, CFOs need to begin by thinking about how different teams across their organizations are incentivized. One Alloy customer we spoke with noticed that their sales team, who was incentivized on sell-in to their retail channel, was “stuffing the channel” to hit their number. The Sales team met their quota, but millions of dollars worth of the company’s product spoiled, unsold, on the shelf.
Sales teams have an incentive to push their Supply Chain counterparts to overproduce because if you’re in Sales the worst thing that could happen is that you can’t fill an order and deliver for your retail partners. A great CFO will understand these dynamics playing out in different departments across the company, and will be able to push for efficiency and eliminate waste.
Global chocolate producer Ferrero uses a data-driven approach in Alloy to reduce waste across their supply chain. If Ferrero sees early enough that product isn’t moving well, they can talk to the retailer about how they can improve it – while the opportunity still exists. For example, can they offer a markdown in the last week or two? Some profit may be sacrificed, but it saves them from destroying product at the end.
"Watching not only after the event has happened, but on the way into the event... Real-time inventory and turn information to connect the dots about where it is that I'm likely to have spoils. And can I do something? Can I work with that retailer earlier to move the product faster?"
Supply chain issues, weather patterns, changes in consumer demand — these have likely caused reality to deviate from your plan. Bringing these two into closer alignment can be a harrowing task — and a time-consuming one.
A major pain point is the amount of time it takes to adjust plans in a more agile fashion. The world today looks like this, according to CJ Prober, CEO of Tile: “Either a change in supply, or a change in sell-through, throws everything up in the air, and you have to rework your plan. The sales team will come up with the sell-through forecast, then that sell-through forecast by channel and region, will translate into a sell-in forecast. And then, that sell-in forecast will get loaded into the financials. And, each of those steps is a few days. In the end, it takes 10 days to get something like this sorted through.”
Today, CFOs can best adapt to shifting demand with “outside-in forecasting.” A demand planning solution that brings in POS data can help CFOs sense and adjust to shifts in demand as they happen, allowing them to track forecasts and plans against sell-through, sell-in and channel inventory in real-time, creating a feedback loop between planning and execution.
Want to learn more? Contact us for a demo today!
The global confectioner mitigates waste, improves service levels and controls costs by connecting digital supply chain visibility with POS analytics.
Keep readingRead our most popular articles on strategies consumer goods brands can use to successfully launch into new retailers.
Keep readingLearn seven tips for never missing out on a sale due to out-of-stocks.
Keep reading
