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Consumer goods companies used to build strong international brands that benefited from economies of scale and strong relationships with distributors, but the environment has changed. 

The current generation of consumers is less sensitive to or influenced by brands: there is an increasing trend for “self-care”, small brands grow quickly and it is increasingly important to be able to quickly interact with consumers directly through social media. 

Effective operations management in the consumer goods industry is dependent upon visibility and control of all aspects of the supply chain, from material suppliers through to the consumer.

Challenges

In this highly competitive and dynamic environment, companies must become more agile than ever to compete. Rapid response to the changing needs of consumers is the key to success. A number of evolving dynamics continue to add complexity and challenges to supply chains including increasing materials costs and constrained supply of critical inputs, driven by population growth, increasing wealth and consumerization and seismic legislation and taxation changes aimed at altering consumer behaviour and reducing environmental impact. Consumer demand is broadening with the growth of premium and fresh products at one end, and cost-conscious consumers driving the continued need for promotions and value products at the other. There is a gradual opening up of new markets that can dramatically alter global demand, whist also responding at home to channel pressures, including convenience retail and direct-to-consumer.

There is increasing market hunger for innovation due to health / environmental concerns and premiumisation / segmented portfolios are putting stress on NPD processes and product lifecycle management. In addition to this, increasing data availability offers opportunities to identify additional sales and faster consumer response to those who can analyse this data effectively.

How we can help

Our role is to help our clients cut through the complexity and attain operational simplicity. We work with them to develop a service response that addresses all operational pressures, allowing the strategy to be delivered efficiently.

We can help you with: 

  • Increasing sophistication of demand management processes to inform the best supply response
  • Tightening the control of range management and product lifecycles
  • Adopting production strategies that are efficient and flexible
  • Becoming smarter at materials management and supplier performance management
  • Establishing more effective management of key supply chain partners through more integrated and aligned ways of working
  • Optimising inventory deployment throughout the supply chain
  • Increasing visibility and traceability through our digital solutions
  • Ensuring systems support the processes of the target operating model
  • Identifying people capability gaps and developing training and education programmes
  • Reduction of heavily manual and error prone activities through Robotic Process Automation, i.e. mater data management and sales order processing
  • Deployment of leading-edge analytical tools to generate insights and inform better decision making

Consumer goods case studies

Cost to serve

global entertainment

Cost to serve

Sony Computer Entertainment, Inc. is a Japanese multinational company specialising in a variety of areas in the video game industry. Its global games console business has over 50% market share.

The company sells, merchandises, collects orders and distributes products differently in each European market. Getting clarity on the real cost of service, understanding which customers consumed the budget and which activities drive costs is a priority for the business.

Our role

  • Review the cost to serve model and its potential use for further improvements and efficiency gains
  • Develop insightful cross-European benchmarks based on meaningful customer segments
  • Create a process to develop a robust and consistent improvement path for each market, with a detailed review of a test market

Results

  • Created and tested segments in all cost areas to provide actionable benchmarks
  • Identified average savings of 30% of the current cost to serve in sales and warehousing and distribution
  • Established the benefits of systemising the metric process with improved frequency
  • In-depth analysis of the Italian market using segmented benchmarks
  • Identified improvement actions to deliver savings after the merchandising outsource

Cost to serve and network review

FMCG manufacturer

Cost to serve and network review

PZ Cussons is a global FMCG organisation with significant Australian market share in household and personal care, organic baby and dairy categories. PZ Cussons has strong sales through the retail, pharmacy and beauty (hair salons) channels.

As result of its transition from manufacturer to importer over the past five years, the company engaged Argon & Co to undertake a network review to ensure it had a fit-for-purpose network that minimised its supply chain cost. Supporting this project was an organisation-wide review of planning capability.

Our role

  • Assess supply chain cost to serve
  • Identify distribution network design changes to optimise the network
  • Provide analytical support for the network design request for tender (RFT) assumptions
  • Assess business risks and opportunities of the proposed multiport models and RFT responses

Results

  • Clear cost to serve data on the existing business to enable comparison of options
  • RFT submissions assessed across the defined network scenario
  • Clear insight into inventory growth risk as a result of multiple locations through extensive modelling
  • Network recommendations approved by the Australian business unit

Warehouse capacity model

greeting cards manufacturer

Warehouse capacity model

Hallmark Cards is the UK leader in greeting cards. The business designs, manufactures, and sells in leading high street stores and specialist card retailers. The US$3.7 billion global company is based in the USA and led by members of the founding family.

Hallmark UK had won large retail contracts, increasing product range and sales volume. The company had two warehouses in the UK with different storage and handling solutions, and wanted a decision support model to help decide where to place new business volume and product categories to give the most efficient route to market.

Our role

  • Create a model to help Hallmark to decide on the appropriate warehouse for new business volumes and relocate existing product categories using a defined set of warehouse scenarios, capacity constraints and costs
  • Refine likely scenarios as options to be included in the model design
  • Identify the operational cost drivers and variables needed in the model

Results

  • A model used by Hallmark to decide on the optimum location for new customers based on warehouse capacity and least cost to serve logistics costs
  • Simulation functionality to change the route to market for existing and new product categories
  • Ability to calculate the impact on capacity (storage, picking, equipment and personnel) and warehouse costs taking account of warehouse product handling constraints

Network design and transport

electronics and white goods

Network design and transport

Electrolux is one of the global leaders in home appliances and appliances for professional use, selling more than 40 million products to customers in 150 countries every year. Electrolux has a strong presence in Australia and New Zealand selling brands such as Electrolux, AEG, Simpson, Volta, Chef and Kelvinator.

Electrolux wished to reduce the cost of their Australian domestic transport operations.

Our role

  • Conduct an end-to-end review of Electrolux’s Australian transport function and identify opportunities to reduce costs
  • Recommend the integration approach for two separate business units
  • Determine the appropriate vendor strategy, improve efficiency and implement changes to the commercial structure, governance framework and overall price paid

Results

  • 22% reduction in outbound transport spend
  • 10% reduction in inter-state transport costs
  • Developed a new vendor strategy
  • Step-change in the performance management system and vendor processes
  • Consolidation of transport providers from 56 to 25

DC concept of the future

direct to consumer retailer

DC concept of the future

Avon is the world’s largest direct to consumer marketer of cosmetics and beauty products. The market in the US has changed significantly, which required a change in the North American network.

Addressing minimal investments in distribution operations over a 15 year period, we were challenged to organize a prototype design/project to support significant future international growth initiatives.

Our role

  • Design a new fulfilment approach to meet advanced quality, productivity and market response requirements
  • Identify major changes in process and technology to reach aggressive productivity goals
  • Utilise simulation and other analytics to validate design
  • Free-up cash for use in other areas of the business
  • Overcome internal biases for the status-quo
  • Fit the project into a dynamic organisation

Results

  • New facility design to support 50% of the US market
  • Viable business case for a $100MM+ program
  • Achieved 35% productivity improvements with automation
  • Reduced merchandise “touches” by 80%
  • Reduced line changeover activity by 80%
  • WMS selection, design and implementation planning through start-up