Manufacturing products is the easy step for consumer products manufacturers. The far greater challenge businesses face is efficiently connecting a company’s manufacturing operation with its supplier network and multiple retail outlets. That’s where things get tricky in a hurry.
Manufacturers have systematically improved operational efficiency over the past two decades, partially in the drive for greater profitability and partially in response to an increasingly competitive business environment.
Many consumer product manufacturers are pretty lean at this point as a result. So the next area for optimization and competitive differentiation is supply chain and retail outlet management.
Optimizing Relationships Starts with ERP for Consumer Products Manufacturers
For consumer products manufacturers, the starting point for optimizing supplier and retail outlet relationships is ERP.
ERP systems are essential for optimizing and coordinating this complex weave of relationships because they connect every aspect of a manufacturing operation and connect it directly with the business systems of suppliers and retail outlets. This creates the opportunity for real-time, automated coordination across the supply chain for more efficient procurement and distribution.
There are four key areas where ERP helps when it comes to optimizing these relationships.
- Demand Planning
ERP systems enable consumer products manufacturers to automatically create demand when orders come in from retail outlets. Manufacturers can schedule jobs automatically based on these orders, and better plan product delivery dates by having a complete picture of operations and raw material availability and needs.
With an ERP system, manufacturers also can ensure that their production policies match demand, replenishment rates and lean inventory needs.
- Procurement
Efficient procurement also flows through ERP.
A good ERP system handles allocation of manufacturing and warehouse resources, transportation logistics, and increases supplier visibility to improve coordination.
Many manual tasks involved in communicating with multiple suppliers can be automated with ERP, including routine vendor communication and supplier orders in response to demand. This reduces friction in the procurement process and cuts out inefficiently and human error.
- Production
Further, ERP systems help consumer products manufacturers manage multiple suppliers and varied retail outlets by automatically creating bill of material for each item, and logging all machine and labor resources used in the manufacturing process in real-time for better efficiency. All shipping documents get recorded in the ERP system and communicated to retail outlets, and due dates for retail outlets can be tracked and managed more accurately.
Modification of manufacturing orders and custom manufacturing are also improved by having an ERP system in place and connected with retail outlet systems. Retail partners can see manufacturing turnaround variables in real-time and make better ordering decisions.
- Shipping
Consumer products manufacturers also benefit from improved shipping, which helps with both juggling suppliers and working with multiple retail outlets.
ERP systems enable manufacturers to automatically send and receive shipping notifications and pull-real time, accurate shipping information so materials arrive when they are needed and retailers can better gauge reorder times. Further, ERP systems can help determine shipment packaging needs and any quality checks that are required before shipment.
The Competitive Importance of an Efficient Supply Chain
To some degree, none of this is new for consumer products firms; manufacturers have long used ERP for handling operations, and ERP grew out the material resource planning software used in the manufacturing industry.
What’s changed is the degree of functionality present in modern cloud-based ERP solutions, and the absolute necessity of connecting these systems with those of suppliers and retail partners. Before, ERP systems were more inward-facing and about production. But now, thanks in part to cloud ERP for small businesses, these solutions are comparatively easy to set up and can connect with other systems out of the box.
This has raised the bar for coordination with suppliers and retail outlets, and consumer products manufacturers that aren’t connecting with partners in real-time are losing business to those that do. Efficient, optimized supplier and retail outlet coordination is becoming table stakes for manufacturers. Fortune 500 companies are reinvesting in ERP solutions that natively offer this interconnection, and smaller manufacturers are using cloud ERP for small businesses that have been customized for their particular industry needs.
Manufacturers that are not optimizing around demand forecasting and lean inventory, and not giving and getting supply chain visibility, are slowly losing market share to those that have cut down on manufacturing bottlenecks and optimized their supply chain.
This is the new battle line. Manufacturing efficiency is there. The next step and the domain of competitive advantage for manufacturers is coordination and managing supplier and retail outlet relationships so the supply chain as a whole is as efficient as the manufacturing process itself.
This is tricky, naturally; it requires optimizing outside the walls of the business. But thanks to cloud-based ERP and the recent innovations around ecommerce and supply chain management, it is possible. Successful consumer products manufacturers have therefore accepted the challenge and raised the bar on supply chain efficiency.
