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Exel White Paper Examines Consumer Goods Supply Chains 
In Mature And Emerging Markets

Monday, November 8, 2010

WESTERVILLE, OH — Exel, the North American leader in supply chain management, in collaboration with Latin America sister organization, DHL Supply Chain, today released the white paper "Consumer Goods Manufacturers Seek Greater Supply Chain Flexibility." The paper reviews shifting market dynamics and corresponding strategies fast moving consumer goods (FMCG) manufacturers can implement to capitalize on packaging and distribution opportunities that enable them to meet new demands created by changes in retailer and consumer behavior in mature and emerging markets.

“In the face of dramatic global change, retailers are developing new strategies to differentiate their brands and achieve competitive advantage,” said Joe Puleo, Exel’s senior vice president, business development, for the Consumer industry. “Retailers’ actions in turn have market share and profit implications for FMCG companies, creating a need for more flexible supply chain solutions. While consumer goods supply chains have evolved over the past decade, opportunities remain — particularly on the production side — to meet new market demands.”

Including insights from global FMCG manufacturers, the new white paper looks at four strategies available to manufacturers to help meet retailer and consumer needs in mature and emerging markets, while also satisfying their own requirements to operate efficiently and support growth. The four strategies and some of their advantages are described below:
Outsourcing Primary Packaging – Outsourcing primary packaging, also referred to as contract manufacturing, can increase asset utilization, reduce new capital investments, help facilitate product packaging based on regionalized demand, and provide greater flexibility in responding to the changing marketplace. Leveraging contract manufacturing resources and postponing primary packaging to the distribution center (DC) network also saves the cost of changing manufacturing to accommodate product launches and shorter product life cycles and saves on transportation.

Consolidating Secondary Packaging Locations – Consolidating secondary packaging, or co-pack, operations into an existing facility allows companies to postpone customization closer to consumption. This helps reduce order lead times, avoid carrying unnecessary inventory, enables just-in-time shipment of floor-ready displays and products for advertised promotions, and can result in less SKU and material obsolescence. Co-locating secondary packaging in an existing distribution or primary packaging location also eliminates transportation to and from the co-packer, reducing carbon emissions and eliminating potential product damage.

Continued Regionalization of DCs – This strategy enables shorter order lead times, which allows retail customers to respond quicker to fluctuating consumer demand. It also reduces retail store inventory, product obsolescence and security burdens that come with managing large volumes of product in some regions. Manufacturers can reduce both inbound and outbound transportation costs by locating DCs near the plant or in multi-facility campus operations that provide access to intermodal facilities.

Horizontal Collaboration – Manufacturers across the world are now looking seriously at collaboration as a way to drive supply chain efficiencies, share costs to offset continued sluggish growth and reduce carbon emissions in support of sustainability strategies. Sharing warehouse space and/or consolidating smaller shipments going to the same customer is a particularly effective strategy in emerging markets where insufficient infrastructure and lack of consistency among providers inflates the cost of entry and operations.

Integrating these strategies into a comprehensive FMCG supply chain solution creates synergies that provide benefits beyond the sum of each component’s individual benefits.

“When integrated, these strategies can help deliver greater flexibility and cost efficiency, and create the foundation for improvements in quality and service that lead to a more sustainable competitive position,” said Eduardo Mariath, DHL Supply Chain’s vice president, business development, for Latin America. “Third-party supply chain partners with global expertise and local resources — including an existing and necessary infrastructure in emerging markets — can implement these strategies and help consumer product manufacturers achieve the supply chain efficiency and control required to achieve market share and sales goals.”

More information can be found in the white paper, which is available now and can be downloaded at www.exel.com/consumersolutions. To learn more about Exel’s consumer supply chain services, visit www.exel.com/consumer.

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