For large consumer packaged goods (CPG) and food and beverage (F&B) businesses, supply chain management has always been complex. But a series of global disruptions over the last few years have combined to complicate supply chains more than ever.
It’s not only global factors that are challenging old ways of working. Recent trends are significantly impacting the CPG and F&B industries, especially when it comes to mitigating risk.
For instance, CPG and F&B supply chains are currently in a period of contraction and regionalization. This comes after years of expansion and globalization, and the impacts are only beginning to be felt and understood. Increased raw material prices have cut profit margins. Established global supply chains have proven less dependable and resilient than they need to be.
To add further uncertainty to the situation, consumer expectations in F&B and CPG are also changing. Consumers want greater transparency into the ingredients and production processes behind the things they buy. They’re demanding better sustainability practices, too. Companies that meet these expectations are growing faster than those that don’t.
To navigate today’s ever-changing business landscape, companies must build supply chains that are resilient and efficient. Adaptability is key, and getting there requires a new way of working with suppliers, one that’s more transparent and more collaborative than in the past. A recent McKinsey report found that companies that regularly collaborate with their suppliers grow faster, operate at lower costs, and are more profitable than industry peers that don’t. However, given the complexity of supply chain management in the modern world, adapting to this emerging era of collaboration is a serious challenge.
The growing need for change
The challenges to supplier collaboration are both logistical and informational. They arise mainly from doing business in countries spread across the globe. Sourcing from and selling to dozens of different suppliers worldwide requires keeping up with a wide array of regulatory requirements that differ from country to country. Managing all these details consumes time and resources. Fortunately, innovative technological solutions can minimize friction for documents, data, and processes, making the logistical processes more efficient.
It’s fair to say that, in general, organizational change isn’t easy. It’s especially difficult for large, enterprise-level businesses. And when it comes to shifting away from old, siloed operating standards toward a more connected, collaborative environment, your business may be ready to embrace the change, but your suppliers may not be.
The buyer-supplier relationship has historically been transactional, sometimes even adversarial. But collaboration builds value for both sides. This idea leads to two important concepts for businesses to grasp. First, changing the nature of the business relationship between buyers and suppliers requires a shift in mindset. And second, the technological solutions that accompany this change and expand collaboration need to align with the value of collaboration. Without that buy-in, implementing new technology or processes can result in a low adoption rate.
Collaboration is difficult to measure. Without specific targets and metrics to point to, convincing suppliers and other partners to invest in collaboration sets up further challenges. Some organizations might hesitate to collaborate out of fear that sensitive data could be exposed. Collaborative approaches that rely on manual data entry methods are particularly risk-prone. This is why collaboration enhanced by contemporary technology is the right way forward.
A new era of supplier collaboration
As F&B and CPG companies digitally transform, technology opens opportunities to rethink how they approach collaboration. Today, cloud-based technologies allow buyers to collaborate with partners through every step of the supply chain. Digitization also opens opportunities for companies and suppliers to use data more effectively to adapt to market changes and evolving consumer trends.
As consumers demand more transparency into sustainable manufacturing practices, technology enables buyers and suppliers to share more data on how they source materials and manufacture products. For example, personal care and beauty company L’Occitane is intent on improving the overall sustainability of its products. By unifying its approach to sustainability under one data management platform, the company is now tracking its sustainability measures so effectively that it’s encouraging its suppliers to adopt the platform as well. The ultimate goal is to establish greater efficiencies across its entire supply chain.
Another example is a global top 20 quick service restaurant (QSR) chain that aims to grow to become one of the top five. For that growth to occur, this organization has to be impeccable in terms of sustainability, food quality, and assurance that its claims in processes and ingredients are real. The company recently enlisted Veeva to support its claims and regulatory management across its supply chain ecosystem.
“With proper digitization through Veeva, we can make communication between our organization and all outside parties much more efficient and effective,” said a quality management leader at this company. “With the use of technology to digitize data, we can track, link, monitor, and report faster for better visibility and control. We see the future with lesser need for on-site audits as we increase our real-time data sharing, exchange of information, and management collaborations through digital platforms.”
Technology solutions can balance information sharing with maintaining security and oversharing sensitive data. By limiting what can be shared and with whom, best-in-class solutions can enable fruitful collaboration within predefined boundaries. They provide a single platform from which to track supplier data and communications, not only streamlining collaboration but also making it possible to track and measure the effectiveness of your processes.
Some of the world’s largest companies have embraced supplier collaboration. A global top five CPG company, for example, recently streamlined its process around inbound certificates of analysis (CoAs). It compares supplier CoAs with its internal documentation to ensure accuracy, as is standard operating procedure. Historically, this process was done by hand using on-site software within the company’s local network and usually took at least 15 minutes per shipment. With thousands of shipments received at each factory location yearly, CoA assessment required a lot of time and effort.
Over the last two years, though, this company digitized the CoA process with Veeva’s QualityOne solution. Now supply partners enter their sourcing information into the same system as the company’s receiving partners. Machine learning expedites the comparison process on a massive scale while also improving accuracy and saving time and money. What’s more, the new approach has brought this organization closer to its suppliers, as they all communicated, collaborated, and bought into the system together.
The bottom line
Companies that modernize their approach to supplier collaboration adapt more quickly to changing market conditions and are more resilient. They can avoid potential disruptions by building better communication and information exchange with suppliers.
They can also better meet consumer and regulatory demands for transparency through more readily available data. At the same time, they can ensure that data sharing is handled securely and within the boundaries defined by an organization to keep confidential data safe.
Veeva is a trusted technology partner for realizing your supplier collaboration vision. Our solutions can help your company manage the people, processes, and data involved in managing your supply chain. Reach out today to learn more about how we’re helping CPG and F&B market leaders.