
As thought leaders in supply chain management, we often point out the critical importance for firms to more quickly sense geographic or regional changes in product demand and respond to such changes with integrated supply and fulfillment capabilities. This week, The Wall Street Journal highlights (paid subscription) how certain high-profile consumer product goods companies were hampered in China by not having such capabilities.
The report notes that a sudden change among China’s consumer buying trends suddenly occurred as millions of consumers elected to shift their buying practices away from larger retail outlets in favor of online marketplaces. The WSJ indicates that an estimated 461 million Chinese consumers, nearly a third of the population, are now shopping online. Further cited is Nielsen data indicating that nearly half of Chinese consumers are buying groceries online, compared to a quarter of consumers on a worldwide basis. Global CPG firms such as Beiersdorf, Colgate-Palmolive, Nestle and Unilever were reportedly laggard in the sensing of this channel buying shift.
For Unilever alone, the shift toward online buying accounted for a 2.7 percent drop in global revenues. The CFO of Unilever is quoted as indicating that CPG firms in China were “too slow to react to the changes in the marketplace.” Another Unilever executive is quoted as indicating: “It’s very, very difficult for us to be absolutely sure (of inventory levels) because the visibility across the extended supply chain in China is not that great.”
Many CPG firms distributing products in China had targeted their merchandising and inventory strategies towards large retailers and thus were not able to sense the changed buying patterns until inventories grew.
Many of these firms are likely to have acquired important learning and are re-focusing supply chain strategies more towards online fulfillment channels including more direct presence. There will obviously be further learnings in the months to come.
Suffice to state that in today’s complex supply chain universe, generalized market support and distribution strategies will not suffice. Each major market requires its own set of product demand planning, sensing and supply chain response strategies.
Bob Ferrari