Top 5 Challenges in the CPG Industry
CPG Industry

Top 5 Challenges in the CPG Industry

By: Greg Rasp

Publish Date: August 23, 2023

Many industries have struggled during the pandemic over the past 2 years, however, the CPG industry has done well due to factors such as boosted unemployment benefits, stimulus checks, and increases in hourly wages. While other industries have struggled with managing the rising cost of materials throughout the supply chain the CPG industry has been able to neutralize those cost challenges better. As we have seen, the demand consumer-packaged goods has increased drastically while consumers hoarded goods as soon as they were made, even when the price for those goods has increased.

However, CPG companies still face numerous challenges in today’s market, with increase in mobility and inflation anticipated to peak in the first of the new year, uncertain demand, shifting tastes, changing standards and regulations, and having to rely on the global supplier network.

Inflation is here

There has been much speculation about inflation in the Covid economy, and the reality is it’s here and it’s finally catching up to consumers. The United States inflation rate has grown throughout much of 2021, hitting a milestone of 4.2% in April of and staying at 5% or higher from May through August. That same period, wage growth decelerated. In June of 2021, inflation surpassed the average wage growth, meaning the rise of the cost of goods outpaced the growth of an average worker’s raise. The result, consumers are feeling the inflation pinch, especially when making major purchases such as for a car or home.

Lack of end-to-end visibility 

One significant challenge faced within the CPG industry is not having the ability to redefine consumer expectations and buying behavior patterns. With rapidly changing demographics, companies need to reach out to their consumers to address their needs to help reduce chargebacks.

By having real-time visibility in the supply chain flow, along with the help of real-time data, it will be easy for a company to understand what is going on with their business. This visibility will also offer a detailed roadmap that might need to take place to your business processes, such as improving your packaging process and shipping products to a more strategically located warehouse.

Constant upkeep of inventory levels

CPG companies need to maintain their inventory levels to address the increasing demands of their customers, which can be quite difficult for a company to do that has several store outlets. A demand forecasting capability-enabled system will simplify the inventory planning process in this type of scenario, and an inventory optimization solution can help as well. It will help the company collaborate with both vendors and customers and optimize the cost and quality of products. Also, it helps forecast the demand for products, which will help increase the service levels at a minimum cost.

Maintenance of planning parameters 

Planning parameters is the process of updating and reviewing a business plan. Most companies follow a traditional planning system. Traditional planning systems develop deterministic input parameters such as lead times, forecast, inventory targets, and customer service levels to determine a specific output. This method has several loopholes that companies may find difficult to fix.

However, companies are slowly adopting cognitive planning, a well-designed intelligent planning execution platform. Cognitive computing identifies parameter changes and becomes more context-aware, it understands implications (time, cost, and customer service), alerts the planner of the changes, provides alternative parameters, and quickly updates them in the planning systems. The planning solutions not only self-learns but also deals with patterns to help better plan promotions and campaigns, which will add to your sales numbers.

Autonomous supply-chain

For a long time, the CPG industry has been dependent on traditional process like inventory management, cost-saving tactics, and others to manage its supply chains and operations, which has changed market dynamics significantly. These traditional processes have compelled CPG companies to plan better when it comes to supply chain and procurement. All of these processes have given birth to the autonomous supply chain. Which is a continuous, closed-loop, planning approach using a fully-automated technology platform.

An autonomous supply chain platform helps optimize S&OP processes in real-time. It also enables CPG companies to work efficiently in volatile environments with less direct human oversight and decisions. It combines enormous data and advanced analytics in every supply chain planning process.

CPG executives must now embrace new technologies, shift their mindsets and perceptions about what can be done, and readily test and learn over time. With this, companies can not only implement autonomous solutions but also compete, address the challenges, and thrive no matter what the future holds.

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