Retail, CPG and Logistics
Navigating supply chain disruptions: Lessons from the CPG sector
The recent pandemic brought global supply chain networks to their knees, exposing their key vulnerabilities while leaving businesses struggling to meet their customers’ expectations. A recent study shows that supply chain disruption is still one of the biggest fears among CPG executives. The majority are still struggling to cope with and overcome the pandemic-fuelled disruptions. However, there is a silver lining, as many are transforming their CPG supply chain management to better meet customer expectations.
But what are some of the major challenges in supply chain management for CPG, and how can you overcome them?
Top CPG supply chain management challenges in 2023
The nature of the sector means that supply chains for CPG have to be agile in responding to rapidly evolving customer expectations and market trends. Although changing customer expectations are reshaping business models for many CPG companies, the supply chain challenges are ever-evolving. Ranging from material shortages to geopolitical conflicts, CPG supply chains are vulnerable to many factors.
Here are six of the top challenges that can disrupt the supply chain management for CPG companies in 2023:
Exponential growth in e-commerce
The rise of e-commerce exploded during the pandemic as customers had to shelter at home, and more people than ever had to start buying online. Most CGP companies did not have the resources or supply chain networks to switch from large wholesale orders to the D2C model. They had to transition away from monolithic supply chains and devise a strategy to serve retail partners and online customers.
Ever-evolving customer expectations
In early e-commerce days, it was not uncommon for customers to be curious about online shopping and wait weeks to get their products. However, with rapidly evolving e-commerce platforms and marketplaces, customers have become accustomed to free shipping and same-day deliveries. Although customers were more understanding of shipping delays during the pandemic, fast and free shipping still plays a great role in improving the online shopping experience. But catching up with these expectations is expensive and strenuous on CPG supply chains.
Everything from labour shortages and shipping delays to rising inflation contributes to the rising costs of wholesale materials for CPG companies. With customers tightening their budgets in response to inflation, accommodating these costs without passing them on to the customers has become a huge challenge.
Supply chains in CPG are undergoing cloud transformation. However, failing to invest in new technologies and automate CPG supply chain management can mean reliance on outdated technologies. Many CPG companies are struggling with the issues of miscommunication or lack of coordination across the supply chain as a result.
Overseas supplier disruptions
CPG companies have been leveraging cheap labour costs by moving their manufacturing and supply chain operations overseas. The 2020 lockdowns highlighted the key flaws in this strategy to rely on a single overseas supplier and have forced CPG companies to look at making their supply chains more diverse, flexible, and durable.
Climate change has also hit CPG supply chain management hard, with severe weather events and natural disasters disrupting global supply chain networks. The average annual number of billion-dollar natural disasters has increased from 3 (in the 1980s) to 13 (in the 2010s). So, CPG companies must focus on contingency strategies – identifying the most vulnerable regions, relocating facilities, or having backup plans in place – to survive.
Overcoming supply chain challenges in CPG
Although the challenges above seem huge and difficult to overcome, leveraging technology and CPG outsourcing solutions can help you navigate supply chain disruptions and build a robust supply chain. Here are some tips that can help you with supply chain challenges in the CPG industry:
- Segment and diversify your supply chain to create a flexible system that can help you serve a wider range of customers while optimising your costs.
- Invest in demand forecast and planning tools to anticipate dynamic demands and plan your inventory for better supply chain efficiency.
- Have contingency plans for any unexpected challenges and build a backup supplier network to fall on. A diversified supply chain can help you in this case.
- Understand the limits of your supply chain network and stray away from overpromising or overselling strategies.
- Anticipate manufacturing or supplier delays due to global events and plan your inventory accordingly.
These are just some of the tips that can help you stay nimble as you try to navigate the CPG supply chain management challenges and recover from the pandemic-related supply chain disruptions. CPG outsourcing solutions can help you leverage next-gen technology to make this journey smoother.
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How can Infosys BPM help?
Infosys BPM CPG outsourcing services has a comprehensive suite of solutions for CPG companies to help improve business performance through reduced costs and robust supply chain networks. With CPG BPM services, Infosys BPM can give you the best chance at navigating top CPG supply chain management challenges.