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CPG Supply Chains: Faster, More Accurate -- and More Expensive

Consumer products goods companies have squeezed more than three days out of their order-to-delivery cycles since 1999, according to the 2003 GMA Logistics Study, authored by leading strategy consultancy Roland Berger on behalf of the Grocery Manufacturers of America.

Order accuracy gradually improved as well. In 2002, companies reported that 64% of their orders were delivered "perfectly" -- complete, damage-free, on time, and with accurate invoices. That's up from 58% in 1999.

Those supply chain improvements didn't come for free, according to the GMA study. Overall logistics costs have increased from 6.6% to 7.4% of net sales in the same timeframe.

In the face of these cost increases, 30% of responding companies were still able to reduce logistics costs. GMA identified three successful cost-reduction strategies: the use of bigger shipping points, more direct plant-to-customer shipments, and larger order and shipment sizes.

Companies have made unexpectedly slow progress towards the Efficient Consumer Response (ECR) goal of reducing inventories to 27 days' sales. One reason, says GMA: 100,000 new products are introduced annually, making inventory management more complex every year.

What's next? The study identified five emerging issues: better on-shelf product availability, improved data synchronization, greater flexibility in ordering and delivery, improved forecasting accuracy, and better internal cross-functional collaboration.

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