Never Ending Journey of a Private Label Manufacturer
I Love You, You’re Perfect, Now Change
A few years ago I saw the Off-Broadway musical, I Love You, You’re Perfect, Now Change. This simple but hilarious musical follows couples through stages of their relationship from dating, to marriage, to raising children and into the twilight years. The final scene highlights that an underlying feature of successful relationships is change. I recommend this funny yet thought-provoking play to any of my fellow supply chain practitioners to get a new perspective on relationships, both personal and professional.
Often, private label manufacturers can experience every stage of a customer relationship at any given time, placing tremendous stress on their supply chain operations. Private label manufacturers generally produce more total SKUs with lower production volumes per SKU than a typical manufacturer. This requires more frequent line changes, more total safety stock and potentially higher product obsolescence. They also tend to have more frequent new product introductions with shorter life-cycles. All of the ingredients for a highly complex supply chain. To combat this and provide high service levels on brands that directly shape their customer’s core reputation requires expertise in the crucial disciplines of demand planning, inventory optimization and manufacturing planning. Supply chain agility is crucial.
Customer-level forecasting represents a significant improvement opportunity for private label manufacturers, whose goals must include reducing forecast error by focusing relentlessly on customer-specific needs. This requires delivering highly accurate data to drive optimal decisions, but without spending precious supply planner time gathering and tabulating that data. Some private label manufacturers leverage point-of-sale (POS) data provided by a customer. This early access to the demand signal helps tune plans and, over time, build a better model to drive forecast accuracy. Collaborative demand planning supported by a powerful planning solution gives everyone weekly visibility to the demand signal and reveals when actual demand exceeds or drops below forecast on an ongoing basis.
Inventory buffers are a reaction to limited demand visibility, inefficiency and lack of production flexibility. When private label manufacturers face the fact that excessive inventory is building up for each specific customer supply chain, they realize a significant amount of vital working capital is trapped and, depending upon how differentiated the product is, often cannot be repurposed for another customer. While supply chain splintering and product differentiation may make it difficult, Multi-Echelon Inventory Optimization (MEIO) can uncover many opportunities to reposition inventory, postpone customization, pool WIP and finished goods, aggregate demand streams and mitigate the challenges of demand and supply variability.
Aggressive make-to-stock manufacturing, needed to meet private label product demands, requires an agile response to changing market needs. Private label manufacturers must be able to model the capacity, capability and throughput of each process stage within each facility in order to optimize production planning and sequencing while minimizing manufacturing costs. Planning a private label product portfolio quickly surpasses the capabilities of typical ERP systems. State-of-the-art Advanced Planning and Scheduling (APS) is needed to generate the actual schedule down to the minute to efficiently consume materials, minimize constraints and produce products. Advanced Planning and Scheduling ensures the highest-possible performance for all manufacturing runs, as it helps free up extra production capacity and creates more flexibility to respond to real-time events.
The private label world has become all about differentiated products that produce a unique value and brand equity for each of their customers. Private label manufacturers can be at all stages of a customer partnership–from dating to a formal partnership, from adjusting to opportunities and challenges to ending the relationship. Every stage of a partnership places significant stress on the private label manufacturer’s supply chain operations. Leaders have turned their supply chain challenges into opportunities by concentrating on three critical and integrated supply chain capabilities: Demand Planning, Inventory Optimization and Manufacturing Planning.