According to retail fair, the ever-changing consumer demand, gradually rising supply chain risks, macro-environmental evolutions, multiple pressures for retail FMCG enterprises has brought unprecedented challenges. However, we also see that some of the first to know, first FMCG enterprises to overcome the "thousands of difficulties and dangers", has been in the end-to-end value chain design, deployment, promotion of a series of digital intelligence applications, the initial formation of both flexible and tough supply chain system, synergistic upstream and downstream to deal with the impact of the market to retain a foothold in the market.
Tripartite Challenges, Heavy Burden
On the demand side, the rise of new consumption patterns has brought many new issues to the FMCG supply chain. First, the competition for new FMCG products continues to intensify, and consumer expectations for new products have also risen. According to retail fair, the number of FMCG new SKUs on the Tmall platform increased by 137% year-on-year in 2022[1], and the time to reach a deal for ten million new products was shortened by 9 days[2]; secondly, new retail channels continue to emerge, and nearly 50% of consumers are enthusiastically trying to try out new retailers or new channels; thirdly, the consumer's requirements for product quality and delivery speed have become increasingly stringent, which has brought enormous pressure on the logistic deployment and transportation route planning. Thirdly, consumers' demands for product quality and delivery speed are becoming increasingly stringent, bringing great pressure on logistics deployment and transportation route planning, and the average distance of express delivery will increase to 931 kilometers during the "Double Eleven" in 2022 alone [3]. In order to cope with the above changes in consumer trends, the supply chain of FMCG enterprises needs to improve the response speed and flexibility, do a good job of channel sinking, and quickly meet the new requirements of consumers on product quality, price, service and other aspects.
On the supply side, supply chain stability and security challenges are still intensifying. First, internal staff turnover is serious, bringing many risks to the smooth operation of the supply chain; second, external raw material costs fluctuate sharply, the trend of commodity prices are still facing a lot of uncertainty, epidemics, geopolitics and other factors affecting the supply of commodities is difficult to achieve stability. Thirdly, with the continuous advancement of consumer goods innovation, product diversity and component complexity are increasing day by day, bringing huge inventory pressure and delivery risk to the supply side. To meet the above challenges, retail FMCG companies need to focus on building supply chain sustainability and transparency, enhancing supply chain security and stability, and improving supply chain fine-tuning management, with efficiency and reliability as the core indicators.
At the macro level, a number of uncertainties are also placing high demands on the supply chains of FMCG retailers. First, in the process of building a global supply network, Chinese enterprises will inevitably be challenged by geopolitics, legal compliance, and local policies; second, consumers are increasingly valuing product safety and traceability, and "tracing the root cause" of the supply chain is becoming a necessity; and third, the supply chain is green and sustainable, "Carbon neutrality" has become the focus of regulations and social responsibility, and most enterprises are striving to improve their green ratings. In the face of a macro-environment full of variables, enterprises also need to continuously improve their adaptation and response capabilities.
Transformation and upgrading to break through
In order to cope with multiple challenges, most retail FMCG enterprises are actively seeking supply chain transformation and upgrading, mainly focusing on three major trends: 1) transformation from traditional sloppy management to refined, digitalized and intelligent management; 2) transformation from cost-oriented to customer-oriented, which requires precision, speed and variety; 3) transformation from "landlord" to "chain master"; 4) transformation from "landlord" to "chain master"; 5) transformation from "landlord" to "chain master"; and 6) transformation from "landlord" to "chain master". "Chain master", abandoning the single manufacturing center in the past, and instead realizing the synergy within the enterprise and upstream and downstream. On the basis of perfecting internal refinement management, the pursuit of supply chain flexibility enhancement, the enterprise will be transformed from a "thick and honest man" into a "flexible and agile martial arts master".
In stages, based on the "traditional basic supply chain" of the 1.0 mode, most enterprises have now built the "internal collaborative supply chain" of the 2.0 mode through internal cross-functional cooperation and refined management from the traditional sloppy management, and continue to move towards the "3.0 mode" of the "internal collaborative supply chain" of the "3.0 mode" of the "3.0 mode" of the "3.0 mode" of the "3.0 mode". Most enterprises have built a 2.0 mode "internal collaborative supply chain" through internal cross-functional cooperation and refined management, and are continuously exploring the 3.0 mode "precision supply chain" in pursuit of digitalized and intelligent management of supply chain. A few leading enterprises have already developed the 4.0 mode of "channel cooperative supply chain", realizing demand transparency and upstream and downstream interconnection. The ultimate mode of supply chain development is the 5.0 version of "end-to-end supply chain", which can provide a whole chain, end-to-end radiating intelligent supply.
Case landing, successful upgrade
In the exploration of supply chain upgrading empowered by digital intelligence technology, retail FMCG enterprises have accumulated some excellent use cases to quickly realize business value enhancement and build flexible supply chains.
In order to accelerate the transformation and upgrading of the supply chain and realize the leap from 2.0 to 3.0 or even 5.0, digital intelligence has become an important choice for retail FMCG enterprises. Through digital intelligence empowerment, enterprises can realize supply chain 1) networking, build value ecosystem, interconnectivity, efficient collaboration; 2) transparency, the whole chain data can be controlled, real-time early warning, victory; 3) intelligence, big data model empowerment, accurate prediction, scientific layout; 4) flexible automation, the whole process of intelligent manufacturing, three heads and six arms, rapid response. Through the empowerment, the enterprise supply chain can be changed from short-term cost-oriented to "flexible, comprehensive decision-making", completing the qualitative transformation.
(source:https://www.mckinsey.com.cn/)