This is the first post in a 4-part series, highlighting the trends outlined in Clarkston’s 2013 Consumer Products Trends Report and discussed in our 2013 Consumer Products Trends Webcast. The report drills down into the key stakeholders for Consumer Products companies – Suppliers, Consumer, Retailers and Stockholders. Today, we’ll start with Suppliers.
“Our focus was on the supply problem. That led to us focusing on a solution. We got it totally wrong.”, Rob Samuels, Chief Operating Officer, Maker’s Mark
There are many lessons to be learned from Maker’s Mark and the decisions they made over the past week in response to their supply shortage..protecting the integrity of your brand, understanding the passions of your consumers and managing communications in a social media world. However, perhaps the greatest learning should be the continual challenge of managing the delicate balance of supply and demand. While they admittedly did not handle the problem correctly, one could argue that the situation should have been avoided. Maker’s Mark’s biggest mistake was their inability to properly forecast the rising demand for their products and work with their suppliers to ensure that they would be able to meet the demand of their consumers.
It is with this backdrop that I would like to offer a few thoughts on the challenges Consumer Products executives need to consider in managing a network of global partners and the associated risks of an increasingly complex supply chain. Today’s global economy makes it critical to select the right supplier partners and to develop proper risk mitigation and contingency planning strategies. Specifically, there are a few unique trends to consider:
Supply Chain Volatility
While companies have realized tremendous value from the sourcing of raw materials through global markets, this growing dependence creates the potential for increased volatility throughout the supply chain. With even greater pressure due to Wal-Mart’s newly adapted ‘zero tolerance policy’ for violations of its global sourcing standards, companies will need to think strategically as to how to best manage risk in light of issues such as global water shortages, weather catastrophes and political crisis.
The drought of this past year caused a surge in feeding costs and hit the pork and dairy industries particularly hard. With forecasters calling for a dry winter ahead, expect continued impacts on commodity costs and related downstream pressures on margins and product pricing.
From the Farm to the Table
Recent legislation, along with growing consumer sentiment, is mandating manufacturers to better monitor their suppliers throughout the entire supply chain. Consumer Product companies will invest in the ability to view and interact with their supply chain operations all the way from contract procurement to the retail customer. To combat these challenges, I would ask you to consider the following:
- Does your supply chain have the agility to manage volatility and efficiencies to manage increased commodity costs?
- Do you have the right technology to support full product traceability and product quality claims, as well as how to support suppliers in providing them this information?
- Do you have the right pricing structures and strategies in place to maintain margins in lieu of increasing commodity prices?