Household and Beauty Products brands dominate our daily lives. For the Household Products industry, this includes items like diapers, laundry detergent, paper towels, while Personal Products brands include Beauty (cosmetic) items, vitamins, shampoo, toothpaste and over-the-counter drugs. These two segments have similar manufacturing processes, but very different supply chain metrics considerations. As will be seen in this report, the flows of cash and inventory are significantly slower in the Beauty Products companies than Household Products.
Progress is tough. Companies in both industries are stuck. Traditional supply chain thinking is not equal to the challenge of driving a step change in performance. Companies struggle to drive improvement in the face of growing complexity. Digital disruption offers promise to move these industries to the next level of supply chain excellence, but few are ready to drive the step change in thinking. Most operate in functional silos. The building of outside-in processes to sense and adapt is new. Organizations are busy on traditional software deployments, and the adoption of new technologies like cognitive computing and the Internet of Things (IOT) lacks sponsorship.
Figure 1. Commodity Volatility
There are three primary shifts:
1) Rising Commodity Costs. In the 1990s, supply chain leaders experienced the shift from regional to global supply chains. In the last decade, the key to driving a competitive advantage was aligning and synchronizing the supply chain to manage material spend, and the network response in the face of ever-changing demand. Few do this well. Most companies are stuck in functional metrics and inside-out processes. They are unable to manage the rising commodity costs and volatility shown in Figure 1. To combat volatile commodity prices, supply chain flows need to be built market-to-market (from consumer to supplier). This capability is beyond the traditional ERP-centric view of an integrated supply chain. The flows are outside-in, while traditional processes are inside-out.
2) Shift in Consumer Expectations. In parallel, the rules of engagement with the consumer are changing. Consumers want brands they can trust. This includes eco-friendly products, safe for their family, with minimal environmental impact. The evolution of brands like “Honest” is changing the landscape of competition. The new shopper wants to scan the shelf and see the source of origin. This level of visibility is not possible in today’s supply chains.
3) Rise in Complexity. The variance of products offered in this industry has been a real problem for companies. This complexity adds cost, increases demand volatility, and creates uncertainty. The average Household Products company added 38% more items to the item master over the past five years .
As a result, it was difficult to maintain performance in either industry segment.