Prepping Up for a Cost Push Inflation

US food makers have been warning about impending price increases over the last few months and since we are all consumers at heart, we can see the evidence at the grocery store. According to NielsenIQ, 50 of the 52 food categories it surveys are reporting higher prices when compared to last year.

This cost push inflation effect can be attributed to a few things: rising commodity prices with the cost of raw materials at its highest in almost a decade, increasing transportation costs, supply chain disruptions, and changing consumer demands.  Acosta’s study on eating habits shows 55% of Americans are eating more at home since the start of the pandemic.

Balancing the Green New Deal with the closure of the Keystone XL pipeline as well as COVID vs consumption are all contributing to a cost push inflation.  The subsequent attack on the Colonial Pipeline directly impacted consumers right at the beginning of the summer travel season. The big question is how businesses can prepare for such unforeseen circumstances, circumstances with real consequences.

Dealing with Cost and Performance Pressures: A Case for a Digital Supply Chain

Disrupted supplies, fluctuating demands, and changing consumer behavior all signal a period of major change for CPG, while events such as an impending cost push inflation will push organizations further towards optimizing costs and reassessing their entire business processes.

While e-commerce continues to gain momentum and smaller and more agile competitors challenge the titans of grocery, the increase in competition has reignited cost and performance pressures like never before. Scale is no longer enough to drive a competitive advantage. More participants plus more channels means more complexity in moving packaged goods from the factory floor to the ‘Bull’s-Eye Zone’ on store shelves.

Modern organizations have worked on ‘lean’ philosophies for decades, but The Economist’s Intelligence Unit reports that almost 60% of its surveyed respondents are looking at changing these strategies and dramatically so. Market participants are more eager to maintain redundancies.  Redundancies in excess capacity and supply chain resilience proved to be more beneficial in 2020 than speed and efficiency.

As a result, the supply chain is no longer being viewed through the lens of being a cost center – rather, supply chain planning has become a strategic imperative and a capability to be invested in.

The Economist’s Intelligence Unit is also reporting that 90% of retail and CPG executives now plan to change their supply chain networks, with more than 40% expecting to increase CPG supply chain investments with a focus on digital agility, supply chain visibility, and resilience.

In short, the very concept of gathering a 360° view of customer information has been unseated by an expanding plan to gather a 360° view of supply chain entities and assets well beyond the classic sense.  What we are talking about stretches the limits of what was once considered practical – we are talking about assets, accounts, items, locations, and legal entities; materials, products, and reference data; suppliers, partners and customers.  The question now is how and where to begin.

Powering Agility through a Digital Supply Chain

Core ideas around alternative factories, multi-sourcing, and maintaining generous amounts of buffer stock are gaining traction, along with the need for cutting-edge technology to enhance omnichannel presence. Big retailers and CPG companies have begun constructing more agile and flexible networks of partners and intermediaries, sources and supply chains, augmenting their pool of primary suppliers with a complete secondary network and tertiary markets that can fill in when needed.

More and more grocers are returning to or developing their own private label brands to supplement their current supplies in an attempt to keep shelves full and counter cost push inflation effects. They are encouraging existing suppliers to build frameworks that allow them to produce in multiple locations, while also returning to inventory policies that have all but reversed cross-dock operations.

Such alternative sourcing strategies are being complemented by intelligent and autonomous systems, powered by digital innovations like Internet of Things (IoT), Artificial Intelligence (AI), and Machine Learning (ML) – all targeting further cost optimization and digital agility across the value chain.

Connected CPG supply chain software can efficiently communicate with each other to enable decision-making without human intervention. Making the most of Industry 4.0 tools will also provide supply chain visibility across all nodes in the partner network and facilitate on-the-fly remediation in case of disruptions.

Countering Cost Push Inflation Effects: Digital Agility and Insights as Business Imperatives

Agility, supply chain visibility, and insights thus become vital for the survival and success of a modern CPG enterprise. More and more supply chain managers are playing a key role across board rooms and contributing to critical and strategic decisions like cost optimization, product and vendor selection, merchandising, and operations.

According to Bain andMicrosoft’s combined study of supply chain leaders, digital agility and resilience top the list of priorities in their choice of supply chain software. The same study identified two key areas for future-resistant investment:

• In-depth analytics for predictive planning: CPG organizations need end-to-end and in-depth supply chain visibility to generate granular data sets, which can then be leveraged to provide actionable insights. These insights lead to better anticipation of supply-side changes and enable agile and real-time decision-making in the face of emerging opportunities and challenges.
• Omnichannel strategy: An omnichannel strategy ensures consistent customer experiences across websites, mobile apps, social media accounts, and brick-and mortar stores and enables customers to shop through all of these available touchpoints. In addition to increasing potential sales avenues and successfully addressing cost pressures, businesses with an omnichannel presence report 90% higher customer retention over those that do not.

Partnering for Crisis-Resistant Growth:  Survival and Success in Changing Times

A very fine line lies between survival and success; after a year of turbulence, CPG is making its way into this new era, the new normal.

The most successful brands are using intelligent technologies to adapt to faster-evolving consumer demands and market challenges like cost push inflation and regulatory constraints. While many still lack in resources to invest, supply chain planning has to take into account preexisting conditions, business plans, and other obstacles that impede progress towards resilience.

Striking a balance between efficiency and resilience is not easy. Increased resilience implies an increase in operational costs, but such costs can be offset by an integrated approach and a technology redeployment. Organizations need a CPG supply chain solution that brings together operational scale and flexibility, analytics and predictive planning, and an omnichannel capability – such digital agility provides the much needed degree of supply chain visibility, flexibility, and resilience that modern organizations need.

What CPG companies (as well as others, including Transportation, MRO, and electronics) need are committed and experienced technology partners who can provide network connectivity, partner communication, and supplier and customer insights and can set them on a path towards crisis-resilient growth.

PartnerLinQ by Visionet: Digital Agility at the Speed of Business

PartnerLinQ is a hosted integration platform for EDI, B2B, and API integration; it is the result of Visionet’s industry expertise and technology leadership. The PartnerLinQ team at Visionet has 25 years of experience in providing industry-focused technology, consulting, and innovative solutions that drive global supply chain transformation from the factory to the end-consumer. Hosted on Microsoft Azure, PartnerLinQ is an innovative, process-centric, easy-to-use EDI solution that enables API-led, cloud native integrations.  It includes a simplified B2B communication engine that combines EDI, AS2, SFTP, and real-time APIs and easily handles proprietary file-based formats and custom integrations. PartnerLinQ is well suited for retail, e-commerce, wholesale, transportation, 3PL, distribution, and digital and analog partner extensible platform, helping your team achieve operational efficiency and gain real-time visibility.

Visionet, a long-standing Microsoft gold partner, leverages Azure to build, test, deploy, and manage large-scale enterprise solutions for its clients; so when we set out to build PartnerLinQ, it made perfect sense to build, test, deploy, and manage the integration platform from within Azure.

In football, a good team chemistry is key to gaining a winning advantage over the opposition. Your opponents, on the other hand, will pull out all the stops to stand in between your team and victory. In such a fast-paced game with continuous movement, the players are in a constant struggle to maintain balance between defence and attack. Communication and collaboration are critical, and separate the champions from mere contenders.

Similarly, the fast-paced business environment demands a lot of movement on and off the field. Just like a champion team, businesses rely on key players and a healthy supply chain. Across procurement, production, distribution, and sales, strong collaboration and clear communication help tackle changing market conditions, thus playing a key role in surpassing customer expectations.

As market complexities increase and customer needs and expectations change, so too does the frequency and severity of supply chain disruptions.

Causes Leading to Supply Chain Disruptions

Here are some causes of supply chain disruptions:

• Unexpected business interruptions
• Raw material and labor shortages
• Transportation network disruptions
• Natural or environmental disasters
• Geopolitical instability
• Telecommunication or electric infrastructure failures
• Cyber-attacks and other disruptions to IT infrastructure and services

The differences between local and global supply chain disruptions can no longer be measured in mere degrees. As your business, like thousands of others, is more interconnected and dependent on trading partners than ever before, global disruptions affect a wide range of business functions and require innovative solutions.

Disruptions Due to the Pandemic

The COVID-19 pandemic wreaked havoc across world economies and the impact was felt by every business, both on the supply and demand side. Factory output slowed or stopped entirely, warehouses and transportation companies operated far below capacity or closed down, and productivity dipped, mirroring a shallow drop in consumer demand.

Some estimates indicated a 20% decline in consumer demand and recovery is expected to take months.

Below, we highlight a few examples of how different business teams were affected by the most recent global supply chain disruptions.

• Suppliers – You need carriers and trucks to get your products to the market. These carriers need to be integrated with your enterprise systems to receive messages such as load tenders. Suddenly your connection is disrupted and getting them re-connected takes time with your present EDI solution – time that you don’t have.
• Retailers – Your stores have been closed and you need 3PL providers to ship your products directly to customers. You have no experience with direct-to-consumer shipments and have no idea where to begin integrating. Everyone you talk to is an expert with their own solution.  But you need to sort this out and integrate several shipments with the factor of time working against you.
• Logistic Services – Your services are in high demand and customers are interested in doing business with you. Your team has been integrating customers one at a time for years without a problem. Now you face an onslaught of new customers. Your team is currently working from home and is unable to integrate them quickly enough.
• Food Service – Restaurants are closed for dine-in and your sales have been impaired. You know that orders are being distributed directly to customers through telephonic ordering and 3PLs. Going direct-to-consumer will work, but you need to get there first.

Consequences of Supply Chain Disruptions

Decrease in Profitability

Supply chain disruptions are more likely than ever to adversely affect the short- and long-term profitability of your business with losses in market share and sales. Are you prepared to capitalize on market demand outside of your normal business operations?

Loss of Productivity

Supply chain disruptions also negatively impact the productivity and utilization of assets. The firm may end up with excess inventory for some products and experience stock-outs and backorders for others. Equipment over-utilization and under-utilization is likely, which could lead to poor asset and inventory performance.

Retailers are taking the brunt of it. With numerous big retail companies closing down their stores, they are struggling to sell out overstocked inventories.  Are you ready to trade quickly with new partners?

Diminishing Customer Loyalty

When customers are unable to get what they want and when they want it, they will go elsewhere. This is exactly what you did when you changed shops to get the goods that you needed for your family. As an outcome, your loyalties may have changed. Different brands, different stores, and different locations have all become part of your normal routine.

Much the same can be said of your customers. Have you been able to provide them with the same level of products and services? Could you scale up to provide new goods and services and gain new customers? If not, what stopped you?

Increase in Costs

Disruptions can increase the costs associated with expediting, premium freight, obsolete inventory, additional transactions, storage and moving, selling, and penalties paid to the customer. Also, the loss of reputation and credibility associated with disruptions may require firms to increase their marketing expenses to reinstate their credibility and reputation. Additionally, raising capital can be more expensive as investors ask for a higher premium to lend to firms whose credibility and reputation is questionable.

Factors Exacerbating the Effects of Global Supply Chain Disruptions

Inefficient Communication

Supply chains change and so do trading partners. So as a product moves from origin to destination, it is increasingly important for all stakeholders to have a digital supply chain connectivity solution that knows where the product is and who has interacted with it.

It becomes increasingly difficult to stay on the same page without a well-planned communication channel. How else would businesses know that best practices and important policies are being followed?

Poor communication leads to untimely deliveries, or worse, deliveries that cannot be made. This leads to a slowdown in other activities, further impacting your customers and your business. The associated costs run far beyond poor customer experience and negative brand recognition and reputation.

Electronic communication through EDI is particularly efficient. Sending load tenders to your carriers faster than your competitor ensures getting your products to market and attending to tomorrow’s pickup. EDI processes automatically create, transform, and transmit transactions as they occur – this is far more efficient than old manual processes involving phone calls and emails, and a walk next door to accommodate.

Slow Response to Technology

In an age where you can order from Amazon, receive an instant response, and get a package the same day, are your processes taking all day? E2E visibility, transparency, and agility all add up to drive a lean and responsive supply stream.

Technological innovations like Big Data and Internet of Things are reported to be crucial to a company’s success story. Do you still rely on error-prone manual processes and is your business slow to respond to rapid technological advancements? Are you facing rising labor costs, retiring workers, older technologies, inefficient service delivery, and reduced transparency?

Consider the case of the frozen food industry in the US. Restocking of frozen food requires refrigerated transport containers called REFERs. When frozen food were flying off the shelves, retailers sought to restock them and in short order. The result was a shortage of refrigerated containers, which impacted the supply chains of other refrigerated products like milk, cheese, and meat. When there are no refrigerated containers available to bring the produce to markets, the supply chain is impacted and so are customers.

EDI is the Answer

Supply chain disruption means (1) you cannot operate at peak efficiency when you interact with your trading partners, and (2) you are unable to act quickly to seize an opportunity or overcome an obstacle when that time comes.

So how can EDI help your supply chain and boost recovery?

Think of it in terms of an off-season transfer by recruiting a new player for your team. A unified supply chain solution helps you address local disruptions as well as widespread ones like that following the COVID-19 outbreak. EDI provides visibility into what your customers want, what your suppliers have to offer, and where your goods are in the middle of uncertainty.

Exchanging business data with trading partners and organizations does not have to be expensive or technically challenging. Many EDI solutions charge by transaction, discouraging smaller partners from establishing critical lines of communication. But it doesn’t have to be that way.

If your current EDI solution fails to scale, has trouble with high volumes, or is becoming sluggish under peak loads, there is another way.

PartnerLinQ: A Unified Supply Chain Solution

PartnerLinQ’s digital supply chain connectivity solution helps you overcome all your challenges related to supply chain disruptions. With the following key features, it is the perfect tool for B2B communication for your EDI and non-EDI trading partners alike:

• Pre-installed and easy to use and maintain
• Simplifies onboarding process with easy configuration and business rules
• Supports robust, multi-user, ‘log in anywhere’ access
• Maintains a wide variety of standards and formats
• Increases throughput by scaling to thousands of transactions per hour
• Supports real-time error detection and ‘fix on the fly‘ remediation
• Provides built-in access to leverage various transport protocols
• Keeps users informed with a real-time dashboard and detailed reports
• Includes an AS2 solution

With PartnerLinQ, it’s all included; there’s nothing else to buy.

Conclusion

When your supply chain runs at peak efficiency, your business operates better and is more likely to overcome supply chain disruptions. An easy-to-use, easy-to-deploy, reliable, secure, and unified supply chain solution will help your supply chain prepare for the next disruption and make sure that you come out on top.

Discover PartnerLinQ and PartnerLinQ will help you discover the value of frictionless EDI. Talk with our experts and see it for yourself.

Why is EDI integration important to your business?

Electronic data interchange (EDI) enables the smooth, rapid, and structured exchange of important data between businesses. However, businesses have come to realize that manually entering data to be sent via a third-party EDI solution is still fairly time and labor-intensive. To further enhance business growth, companies that use EDI solutions can automatically synchronize all inbound and outbound partner data with their ERP system.

This blog post will shed light on some of the core advantages that EDI integration brings to your business.

Accuracy

Inaccurate information and failure to comply with EDI standards or individual trading partners’ internal policies can result in chargebacks or expensive errors. You might accidentally instruct a supplier to ship products to the wrong warehouse or even lose business by incorrectly processing a major customer’s order.

Sending business information directly from your ERP via integrated EDI technology greatly reduces the chance of making these mistakes. ERP platforms use various methods to validate information against a set of business rules to ensure compliance. Minimizing manual actions during inter-organization data exchange also prevents most errors, which helps your business avoid unexpected costs, reduce customer attrition, and preserve healthy margins.

Increased Efficiency

Compared to stand-alone EDI systems, ERP-integrated EDI solutions don’t require you to dedicate hours or days to manual input. Inbound and outbound partner communication can also be automated by initiating an EDI transaction on a fixed schedule (like sending an end-of-week report) or when a specific set of conditions arises in your ERP system (like requesting replenishment when you’re out of stock). This results in faster order processing and delivery, increased operational agility in response to changes in your supply chain, and improved relationships with suppliers, vendors, distributors, and other trading partners.

Reduced Costs

Automatic, paperless partner communication drastically saves costs by at least 35%. Savings can be as high as 90% with the use of electronic invoices. Rapid EDI communication also helps you control costs by allowing you to reduce inventory levels and shorten order processing and delivery times. However, manually keying business information into a separate EDI system introduces errors, delays communication, and increases labor costs.

Integrating your EDI and ERP systems allows you to send verified, standards-compliant information to suppliers and trading partners without needing to pay a worker to manually key in that information. You can avoid costs associated with SLA violations, performance gaps, and delays by using ERP integration to virtually eliminate manual error and ensure that your documentation process conforms to EDI standards.

Data Security

If an unauthorized person gains access to your business secrets, that’s bad enough, but someone manages to transmit that data, that’s far, far worse. EDI system integration helps keep your valuable business information safe by only granting EDI access to authorized ERP users. Each ERP user can be granted or denied access to EDI capabilities based on their specific role. Since most ERP platforms offer sophisticated auditing capabilities, you can also keep track of who sent or requested a specific document, and when.

Conclusion

Seamless EDI-to-ERP integration makes partner communication paperless, which results in reduced operational latency and errors, reduced costs, and better relationships with business partners. It also enables authorized users to exchange business information safely and securely. To learn more about how EDI integration maximizes the effectiveness of B2B communication, please contact PartnerLinQ.

ECommerce is on the rise. Buyers want access to everything from the comfort of their laptop or phone, and customer journeys that span multiple channels have become the new norm. Because of these and other complexities, success in digital commerce depends heavily on a smoothly functioning supply chain.

Successful online retailers are adopting electronic data interchange (EDI) solutions so they can efficiently exchange purchase orders, delivery notes, invoices, and other documents with manufacturers and suppliers in their global supply chain using a single digital platform. EDI systems can enhance your eCommerce experience in several different ways:

Fewer stockouts

Few things annoy your shoppers more than their desired product being out of stock. Even if your suppliers are completely reliable, you might forget to place replenishment orders in time.

Modern EDI solutions that integrate with your ERP and WMS software let you simplify or even automate your replenishment cycle by either notifying you or immediately placing orders with your suppliers whenever stock levels fall below a specified threshold. As a result, your customers are far less likely to experience stock-outs, which helps you maintain high customer satisfaction.

Fewer order fulfillment errors

Incorrectly keyed information can lead to your customers receiving the wrong product. They might be shipped the correct product in the wrong quantity, or if you’ve made a mistake in their delivery information, they won’t receive their order at all! Any of these errors will almost certainly lead to very irate customers and maybe even negative publicity.

EDI minimizes manual entry. You (and your supplier) won’t have to decipher someone’s messy handwriting, hunt down an email that contains order information, or risk making a mistake while rekeying an order from one program into another. More accurate order information reduces the risk of fulfillment delays, angry customers, and loss of business.

Personalization and direct shipping

More and more businesses are harnessing digital supply chain technology and consumer analytics to offer their customers made-to-order products. With real-time vendor communication solutions, retailers can keep their supply chain agile and minimize logistics and inventory costs by sending customized product orders to manufacturers so they can produce and send items directly to your customers.

You don’t need to offer product personalization services to take advantage of EDI in this way. Even if your products are mass-produced, the ability to instantly send delivery information to suppliers is a great way to drastically shorten order fulfillment times, minimize warehousing and inventory spend, and keep your customers happy.

Real-time special order availability

Some online retailers allow their customers to place special orders for items they don’t usually keep in inventory. However, most of these retailers don’t have an up-to-the-minute record of their suppliers’ stock levels or delivery times, which means their online store doesn’t tell their customers how soon they’ll receive these items. More often than not, customers decide to look elsewhere for the item they wanted, and the retailer misses out on a sale.

EDI integration can give your customers real-time information about special order availability and wait times. Even if you don’t keep a particular item in stock, your online store can use EDI to instantly consult your supplier’s records, determine the item’s estimated delivery time, and place an order.

Conclusion

Your customers value timely replenishment, quick and accurate fulfillment, and end-to-end visibility, and digital technologies like EDI that allow you to effortlessly deliver this value represent a real competitive advantage. To learn more about how digital B2B communication drives growth and reduces customer churn, please register for our December 13 webinar, Live Demo of PartnerLinQ for Dynamics 365 FO in Retail.