The shifting retail supply chain structure in the CPG industry

The growing demand for consumer packaged goods worldwide has meant that organizations are streamlining their CPG supply chains. Supply chains today are evolving with the changing business and have become much more than mere logistic supply channels for both raw materials and final products. A common denominator between all successful business enterprises dealing in consumer packed goods is the fact that their CPG and retail supply chain are an independent channel with its own supply chain management team capable of taking innovative decisions to ensure supply chain functionality retains the x-factor compared to peers and rivals.

Agile business requires agile supply chain management

The growing competition in the consumer packed goods industry has meant that enterprises are today adopted new growth strategies. Innovation leading to the newer product line is one channel that is correlated with expanding sales. Enterprises are adopting an agile working environment as a result where both production and testing of newer product lines are done simultaneously to ensure faster and cost-effective product line for consumers. An agile working environment works best only when it is complimented by an equally agile supply chain solution. Enterprises realize that agile business setup and traditional linear supply chain networks are a mismatch. As a result, focus is on making the supply chain more responsive, agile, accurate, and cost-effective by bypassing short term and long term challenges.

Creative business models give CPG brands stiff competition

Enterprises, especially those dealing in various consumer packaged goods, focused their attention on massive brand building exercise. Stronger brands were able to attract more consumers and as a result, extract high volume of trade with their linear supply chains not being tested. Consumers were willing to wait an extra day to receive delivery all because of the love for the brand.

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Things have, however, changed today with brands facing stiff competition from non brands in the consumer packaged goods segment. The onset of the financial recession in the past was one of the prime drivers making consumers change their preferences to attractive price points rather than one brand. CPG and retail supply chains today have the challenge to ensure the balance and maintain their brand exclusivity without escalating costs. Opting for agile retail supply chains may cost the enterprise investments upfront, but the long-term sales perspectives offer a definite advantage to keep the nation branded-low costs competition at bay.

Cross-channel sales complexity and CPG supply chains

Increasing number of cross sales channels has put pressure on CPG and retail supply chains. Ever changing prices like intraday pricing in some online marketplaces or the use of geographic tagging by others to ensure reduced supply chain costs by choosing closest warehouse for each order allows for dynamic supply chains. Enterprises having linear supply chains are unable to sustain cross-channel and cross sales complexity of multiple sales channels.

Supply chain dynamics of consumer packaged goods industry also have a direct impact on the manufacturing process. With SKU complexity manufacturing and production, changeovers must be in tune with the supply chain dynamics. Unless an enterprise offers an agile supply chain mechanism, the overall equipment effectiveness or OEE for an enterprise may be severely under pressure leading to overworking production lines and clogged supply chains.

Subscription sales models need fine-tuned supply chains

One big change in the consumer packaged goods industry in recent times has been the offering of subscription-based sales models. CPG and retail supply chains need to be agile in order to serve much subscription-based sales. Enterprises opting subscription-based sales can then leverage their supply chain logistics in tune with the actual consumption making their production and operations more balanced.

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Modern CPG supply chains and significance of environment sustainability

Another essential core aspect of CPG and retail supply chain is the use of effective packaging. An effective eco-friendly and biodegradable packaging can not only increase the brand awareness of the enterprise, but it can also help with reduced carbon footprints. With global consumers taking environmental cause much more seriously than ever before, focus on environment friendly packaging can be truly adoptive by enterprises by making use of dynamic supply chain logistics. Packaging can be changed as per the delivery timeline estimation for the consumer to ensure each consumer gets the fresh packaged goods with packaging that is both cost-effective and enhances the overall brand value by offering increased environment sustainability.

Conclusion

Consumer packaged goods industry as a whole is shifting its focus on making supply chains more responsive, agile, accurate, and cost-effective.

Photo by Walmart Corporate

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