Sourcing and product design work better together

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Amidst the turmoil of the pandemic and changes on multiple fronts, consumer goods manufacturers now face historic pressures to contain costs, cope with continued uncertainty in supply and demand, and meet their sustainability commitments, a primary mandate. All three challenges require urgent attention and come at a cost. Breaking away from traditional sequential processes, we would like to make the case for addressing all three challenges at once.

To achieve this, we recommend a high, agile and participatory approach – let’s call it ‘Design to Value’ – that offers tangible sustainability gains, increased financial impact and increased resilience in the face of supply and market uncertainty. Requirement.

Here’s the key concept: Traditionally, product design and sourcing have been pursued separately, as sequential activities. First, designers define product and material specifications, then sourcing sends them to suppliers for competitive quotes.

Breaking away from this conventional approach, we offer merge product design and procurement in one process. This actively engages the supplier ecosystem and helps unlock new value in terms of cost reduction, sustainability, security of supply and brand appeal, all of which are part of the design process itself. Let’s see how we got here.

Take a big leap

Until now, companies looking to keep pace with rapidly changing technologies or changing needs have taken incremental steps towards the approach we describe. they looked for point solutions to simple problems, such as redesigning a single element to eliminate unnecessary costs. This initiative was left to a project manager, and the success did not require any special collaboration with the suppliers. Although the impact on sustainability was not assessed, there was still a financial gain to the business – here we will call it a 1x financial impact.

The second step, say a company is looking to overhaul a complete line of products in response to emerging competitive threats, has been traditional processing. Again, functional management would take leadership on this type of project, and limited collaboration with vendors would be required for success. This would generally not involve an assessment of sustainability and supply chain impacts; however, the financial impact would potentially be double that of the point solution.

Design to Value is the next step for companies looking to take a big step forward across their entire global value chain, simultaneously addressing cost reductions, sustainability gains and chain vulnerabilities. supply. As the following figure shows, the potential financial gain is five times that of the point solution, and more than double that of a traditional transformation.

A collaborative effort

We describe the model’s goals as high, as this new approach is believed to have a lasting and measurable effect on business performance, sustainability, brand reputation and operational resilience.

Sustainability efforts must be matched by supply chain resilience and financial gains. This can only be done with a concerted and collaborative effort of all stakeholders, starting with leadership. The initiative would be sponsored by a company’s head of customer experience and jointly led by the director of marketing and the director of supply chain, who all want a positive outcome. A chief sustainability officer should also help shape the program, provide design information, and validate monitoring methodologies from the sustainability base to the benefits. These senior leaders, rather than middle managers, need to communicate personally within the company and with strategic suppliers, ensuring that all program participants feel fully motivated and accountable for success.

This integrative approach should take the form of an agile process in which innovative and imperfect ideas are quickly tested with suppliers and consumers, for example, frequent and quickly repeated scrums to iterate final designs.

Crowd-sourcing

Unlike the usual siled approach to product and packaging design typically held by new product development and marketing, we recommend that, from day one, sustainability considerations are integrated in a company’s thinking on supply chain resilience. This involves sourcing, supply chain managers, external product and packaging design experts, technical departments, and customer sentiment analysts. From the outset, the role of new suppliers as well as incumbents is essential, because the approach gives them a prominent place in the product design process.

Product disassembly

One way to put this approach to the test is to start by deconstructing a competitor’s product. This can happen on-site or at the facilities of trusted vendors. Expert product and packaging designers should be involved in these sessions to combine their in-depth understanding of design choices with the team’s expertise in production and logistics.

In an effort to better understand competitor’s products and packaging, a teardown reveals a wide range of potential design changes, from minor tweaks to more aggressive redesigns. For example, if a competitor uses less glass in their packaging, this indicates an opportunity to reduce costs and operate more sustainably.

Teams can be creative and expansive in their search for new opportunities, for example, paying attention to alternative manufacturing approaches and product platforms, both of which can make the business much more agile in responding to challenges. changes in consumer demand while reducing costs and / or reducing its carbon footprint. Some ideas may seem impractical at first, but keep track of them all – experience has shown that these cores can be of great value later.

In a recent case study For a global food company, advanced packaging design capabilities have been incorporated into the company’s traditional business strategies to reduce packaging costs. The company’s European and North American packaging groups have identified global best practices and developed more than 125 applicable packaging design ideas. The new concepts have made it possible to reduce costs by 10 to 25% and significantly improve the durability of the packaging. The exercise added significant visibility to supplier costs, sparked collaborative ideation with the company’s key packaging partners, and empowered the team during negotiations with suppliers. A tangible result of innovation in their product and customer delivery mechanisms has been the prototyping of an IoT-enabled flavor dispenser to replace bulky, expensive and material-intensive syrup bottles in coffee shops.

A macro perspective on sustainability

The most promising ideas embody the optimal blend of design, enduring value, consumer sentiment, materials, manufacturing and logistics expertise, as well as a macro-marketing and operational perspective.

A simultaneous approach to sourcing and this collaborative redesign approach enables the sourcing function and the supplier ecosystem to serve as active partners with marketing to evaluate each product and packaging idea. In addition to asking for cost estimates, suppliers are encouraged to actively suggest design improvements, from their perspective, and highlight any opportunities they see to maximize the benefits of sustainability.

Durability, long an afterthought in product design, is a central consideration when reviewing design changes. It will become increasingly important to provide measurements of the impact of each proposed design change on water use, energy consumption and CO2 emissions.

Conducting consumer surveys can also add value by providing more objectivity as to whether proposed design changes would have a positive or negative impact on a product’s consumer appeal and sustainability. These scans can reveal what consumers are finding UNsatisfying even when it offers five-star product reviews, as well as the anonymous satisfactions that can be found in one- and two-star reviews – valuable and often overlooked information.

This array of cross-functional and multi-organizational interactions will lock in design changes, priority shapes and scenarios, and quantify projected costs and sustainability benefits.

Implementation

With large potential benefits and relatively easy realization, this “Design to Value” approach prioritizes implementation and captured value. Financial and sustainability benefits should be tracked with equal rigor, reported in corporate sustainability reports and, where appropriate, included in communications with consumers.

Another benefit of this approach is a fundamental redefinition of the working relationship between sales and marketing, the supply chain organization and the supplier ecosystem. These new combined strengths in participatory agile design ideation, consumer sentiment analysis, and multi-functional engagement can become a source of competitive differentiation for years to come.

Establish the climate change agenda

Taking a more holistic approach and combining various internal and external expertise into a single shared pursuit means you are doing all the things necessary to win in your market today must include sustained and conscientious action as a business imperative. Companies grasping this reality and decisively moving beyond thinking about trade-offs to new intermodal approaches are rolling the gauntlet on all other companies to respond not only to business performance and consumer appeal, but also to l immediate emergency of climate change.

Arun kochar is a Strategic Operations Practice Partner at Kearney, a global strategy and management consulting firm, and Greg Portell leads the firm’s global consumer practice. The authors wish to thank Jesse Chafin and Janus Cataluna for their contributions to this article.

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