The consumer-packaged goods (CPG) sector is broad and complex, with many enterprises focusing increasingly on their ability to adapt to volatile cost pressures and looking at how an advanced CPG solution provider can augment efficiencies, controls, and accurate forecasting to control supply chains.
Some of the most distinct challenges relate to uncertainty around inflation risks, changes to logistics and available transport routes, evolving consumer behaviors and preferences, and reliance on global supply networks exposed to myriad uncertainties.
Today, we’ll analyze some of the prevalent challenges embedded in the consumer goods manufacturing process and explore the potential solutions.
For the CPG industry, supply chain management is a crucial element around which production processes, inventory controls, and deadlines revolve. If demand spikes or buying patterns change, businesses need to be able to sustain supplies while avoiding overstocks that can cause lost revenues.
Visibility ensures that a company can access on-demand data, extract metrics, trends, and projections that deliver reliable insights, and assist with budgeting, planning, and manufacturing scheduling. Common problems include delays in packaging processes due to shipping delays, stalled productivity when supply chains are uncoordinated, and unnecessary costs in transferring components or processes to facilities with less strategic locations to cope with supply chain bottlenecks.
Conventional planning parameters predicted volumes and demand by referring to input data such as:
The issue is not that any of these elements are irrelevant to planning but that they have limited value and do not consider contextual aspects of a CPG business, such as seasonality, changing cost profiles, and the net profitability of certain processes within the organization. Advanced planning tools and software solutions use more holistic data points, consolidating data from every corner of a supply chain and production operation.
This strategic approach delivers a well-rounded picture against which managers and leadership teams can make decisions. Supply chain management software might, for instance, incorporate the latest metrics showing changes in consumer trends, automatically adjust lead times or inventory levels based on projected ordering volumes, or anticipate how manufacturing outputs must adapt to expected reductions in order volumes when new products are launched.
Any company within the CPG sector needs to handle inventory controls, where too much or too little stock can drive costs higher–especially where some inventory has a limited shelf life or a maximum usage period beyond which it cannot be sold. Large CPG organizations with multiple branches, outlets, and B2B clients have a similarly complex challenge: keeping inventory at the perfect level to always satisfy buyer demand while operating on models such as just-in-time stock control to reduce upfront expenditure on inventory before it is required.
Tech equally applies to inventory planning, helping businesses coordinate their procurement and production systems while achieving optimal cost efficiencies by consolidating orders where possible. Well-managed inventory leads to higher service levels with reduced costs and is often a balancing act to avoid running out of an inventory item or becoming overstocked.
A final challenge, which affects every company across the CPG industry, is cost controls–something that has become more difficult to manage in an inflationary economy and where elevated living costs have impacted consumer demand for higher-priced or premium CPG products.
Depending on the goods manufactured or sold by the organization, there are several tactical approaches, from optimizing working capital to avoid unnecessary commodity price rises from reaching consumers to identifying opportunities to boost productivity to increase revenue. This is particularly prevalent where margins have become tighter.
Each of the issues we have discussed is best resolved with innovation, using data-backed analyses, forecasting, and internal controls to eliminate inefficiencies, ensure organization-wide oversight of risks and performance, and establish predictability, even while the CPG sector is experiencing uncertainty.
The most appropriate resolutions may depend on the business size and structure. Still, scalable enterprise-level software with integration capabilities and the potential to introduce sweeping modernization can affect swift improvements and risk protection.
For further insights into the most prevalent challenges within the CPG industry and to identify the solutions that will help your organization meet them head-on, contact Navigator Business Solutions for tailored guidance relevant to your business objectives.