CPGs Get Failing Grade on Digitizing Supply Chains, Say RELEX Co-Founder

Like all chains, supply chains are only as strong as their weakest link.

Only, unlike most physical chains, identifying the weakest link in a complicated supply chain be, well, complicated.

“Many businesses, for example in retail, that are vertically integrated are facing exactly the same challenges,” Michael Falck, co-founder of RELEX Solutions, tells PYMNTS.

What firms need, Falck explains, is a comprehensive end-to-end solution for the entire consumer goods supply chain, one that can seamlessly link downstream demand with upstream planning, so companies can more accurately predict consumer demand, optimize production plans and schedules, adjust inventory levels, and adjust quickly to market changes or unexpected disruptions.

Falck highlights the challenges faced by firms in industries like meat and dairy, where uncertainties in both supply and demand require effective supply-demand balancing.

“Fresh goods demand requires forecasting and optimization because you have uncertainties regarding both the material supply and the demand, which leads to different opportunities in terms of how to use the raw material to meet the customer needs,” he explains, adding that this leads to “less shrink and waste” across the whole supply chain.

Optimizing Supply-Demand Balancing Act

The future of the consumer goods supply chain lies in leveraging technology to optimize end-to-end processes, reducing waste, and enhancing sustainability.

While RELEX had been focusing on demand planning and forecasting for retailers for the firm’s entire history, it lacked a comprehensive offering for consumer brands. That’s why, as Falck explained, RELEX acquired Optimity  on Jan. 3 to add new capabilities to its retail and supply chain platform and provide a more comprehensive solution for consumer brands.

“We talked a lot to [Optimity’s] existing customers during the process and what stood out was how satisfied and happy they were,” he says.

When discussing the role of technology in reshaping the consumer goods value chain, Falck acknowledges that while there are advancements, there is still much work to be done.

“There’s a lot of technology that is still working fine, and the main problem isn’t to come up with new ideas — it’s to start actually getting what already works implemented into workflows. … The last few years have emphasized the need to have good, adaptable IT solutions in order to cope with sudden changes in demand and identify bottlenecks in the whole supply chain while being able to react to those in a cost-efficient manner,” Falck explains.

“Traditionally how you look at supply chains was that you needed to either have an adaptive supply chain and process, or you needed to be efficient. Now, it is basically that you need to be do both: You need to be optimized and efficient, and you need to be adaptable; and this applies across the value chain end-to-end,” he adds.

Complicating matters is the fact that many retailers and consumer brands still operate in a siloed manner, with limited visibility into demand, inventory and planning.

“To be really blunt, I would rate the level of digital modernization within the consumer goods value chain as a three or four out of ten,” says Falck. “There’s a lot of technology and innovative solutions just waiting to be implemented.”

Shaping Supply Chain Dynamics

Falck emphasizes the need for better implementation of existing technology and the utilization of more granular and accurate information to optimize the value chain, explaining that innovation in data analytics, artificial intelligence (AI), and supply chain optimization tools will play a pivotal role in shaping the industry.

“You don’t need to go all sci-fi to do something that provides huge gains in efficiency, but as the price of computing power goes down, being able to optimize the end-to-end value chain is already possible today,” he says.

By leveraging cheaper computing power, companies can optimize the value chain, identify bottlenecks, and react efficiently.

Regarding the impact of generative AI, Falck mentions that while it is an exciting technology, its application in the supply chain may not be a complete step change from what is already being done, explaining that firms like RELEX were founded to apply machine learning models that can enable customers to be more efficient.

However, he says the potential for AI to democratize solutions and make them more accessible to users with varying levels of expertise, noting that RELEX is launching its own “RELEX GPT that will have all the information about our products and manuals and wiki to help our own employees, our customers, our partners, to utilize our solutions and better integrate that with their own data.”

Looking ahead, Falck expresses a desire to see more efficiency and sustainability within the industry. He believes that there is a significant opportunity to reduce waste and improve sustainability in the grocery chain and food manufacturing sector, and sees the future of supply chain and retail planning process being even further advanced by the ability to access more accurate and granular data from the entire supply chain.

“There’s so much you can do now without having to wait several years for any new technology,” he says.