Every business is subject to demand volatility, supply shortages, extreme weather, tariffs, transportation roadblocks and other disruptive forces. But Consumer Packaged Goods (CPG) companies face special challenges today as they try to profitably, precisely match changing supply with shifting demand. In addition to the standard list of disruptions, CPG companies must also contend with the complexities of omni-channel sales and promotions, product seasonality, shelf life and perishability, new product launches and social media influences.
Despite these enormous challenges, retailers and consumers still depend on CPG companies to get the right product to the right place, at the right time, at the right price. Successfully accomplishing this generates revenue, boosts profit margins, and builds strong retailer and consumer relationships. Failure to have products in stock leads to lost sales and damaged loyalty that can have far-reaching effects. In today’s global, omni-channel marketplace, consumers and retailers can usually find another CPG brand or private-label alternative.
Think beyond the linear supply chain
More often than not, the disruptive forces that impact CPG companies originate outside the four walls of their enterprise. Disruptions frequently originate with suppliers, co-manufacturers, transportation carriers and retail customers. But too many CPG companies are focused on their own internal operations and managing data silos in linear supply chains.
What’s wrong with this approach? The linear supply chain is simply not equipped to deal with disruptions and establish true operational resilience. Most CPG companies struggle with siloed systems, scattered data and a lack of real-time connectivity. When an exception occurs at any point, not all stakeholders are aware of it at the same time—and there’s no collaborative process for addressing it. The results include delays, inefficient decision-making, increased costs, and dissatisfied retail customers and consumers.
The truth is that most disruptions can’t be solved optimally by a linear CPG supply chain that lacks network-wide connectivity and collaboration. If there’s a supply shortfall, new sources of supply must be found. If a third-party carrier fails to deliver, the answer also lies outside the four walls of the CPG company.
But end-to-end networks are rarely connected in real time. Individual partners have their own data siloes and systems. For most CPG companies, addressing exceptions at the network level today requires cumbersome manual analysis and hands-on communications that can’t keep pace with the incidence of disruptions. By the time a disconnected, siloed network arrives at a resolution, the disruption has probably already significantly impacted cost, service and revenue outcomes.
CPG companies aren’t alone in their disconnected supply chain approach. Research has shown that 71% of companies have limited or no visibility beyond Tier 2. This limits their ability to make proactive, real-time, data-driven decisions in a collaborative, connected way across all partners.