The magnitude of disruption that supply chains have had to surmount in 2020 is unlike anything we’ve seen before. COVID-19 has altered perspectives across all industries, with health care organizations perhaps experiencing the most critical, ongoing vulnerabilities. For those in consumer packaged goods (CPG), supply chain optimization continues to be a priority, as more people eat at home and producers struggle to keep goods on grocery store shelves.
For one, General Mills is working to meet the heightened demand by relying on 20% more third-party providers. The CPG giant has expanded existing partnerships and initiated numerous new ones with both contract manufacturers and raw materials suppliers. Chief Finance Officer Kofi Bruce told The Wall Street Journal that the decision was made back in March, when “demand started to soar.” He also noted that General Mills’ existing relationships made it easier to find partners that could quickly ramp up production.
The article explains that vetting a potential partner begins with assessing its financial viability and the quality of its facility and products. Each contractor should have capabilities to put food into a box or process products so that they can run a soup or cereal packaging line, for example. The evaluation also involves General Mills asking the prospective partner to make samples of its products and conducting a laboratory analysis of each. Once selected, General Mills integrates the new partner into its supply chain by setting it up as a supply location and making sure it receives materials automatically.
Although the strategy to engage third parties means lower profit margins for General Mills, the company believes it will be well worth it in order to preserve precious grocery shelf real estate: “It will cost us more to operate in this environment,” Bruce said. “But these are the things that are necessary for us to be agile and nimble and prepared to deal with a longer period of sustained higher demand.”
So far, the plan is working: According to the article, “The company reported a 16% increase in comparable sales for the most recent quarter ended May 31. Its U.S. cereal sales, which were on the rebound even before the pandemic, climbed 26%.”
As the General Mills story illustrates, the ability to recognize and resolve supply chain gaps while mitigating risk is a key competitive differentiator. This and other lessons from these difficult past few months underpin the ASCM tenets of strong collaboration and teamwork among businesses, the people who work for them and those in the extended enterprise. This objective has everything to do with successful risk mitigation, reliable performance and sustainable business.
Only when we work together can we create a common strategy and truly align resources for the greater good. As the supply chain landscape continues to present challenges, ASCM is dedicated to addressing market needs with industry-leading education and training, products, partnerships, and information designed to help us all rebuild a better world through supply chain.