By Jason Tham, CEO of Nulogy
- Most CPGs have built their technology infrastructure atop a monolithic ERP system that was never designed for external collaboration.
- More and more information is being generated outside of a company’s internal network, which means the future of the supply chain lies within multi-enterprise supply chain business networks (MESCBNs).
The COVID-19 pandemic has continually upended supply chains, and consumer packaged goods (CPGs) supply chains were no exception. Changes in consumer habits, as well as global shortages and delays, necessitated shifts in packaging strategies, material needs, and order schedules. Packaging has changed to accommodate shifts within supply chains and around the world – moving from SKU proliferation, with many packaging variations, to SKU rationalization, where brands consolidate packaging options for faster product delivery.
As the world continues to navigate the pandemic, packaging trends are changing again as e-commerce and direct-to-consumer shopping continue to grow in popularity. In order to respond quickly and collaborate effectively enough to manage these sudden market shifts, CPGs need to improve communications with their external partners, such as outsourced packagers and manufacturers.
Here are three ways that CPGs can establish better partner communications and ensure they are ready to meet the challenges of today.
Embrace Digital Transformation
The time for consumer goods brands to embrace digital solutions was yesterday. Those that have not are at risk of falling behind. Today’s market is moving much too quickly for traditional, analog methods of supply chain management: they simply cannot keep up. Digital solutions are essential as they allow CPGs to eliminate errors, delays, and waste within their supply chains — making them more agile.
Digitizing production floors enables a brand’s contract suppliers to capture shop floor data, gain deeper, real-time visibility of inventory and provide real-time status updates, which enables both CPGs and their suppliers to respond more quickly to changes by creating more informed operations. For consumer brands, gaining more visibility into internal operations also enhances overall collaboration with external partners. For example, by automating data capture, CPGs can connect and collaborate seamlessly with their external partners – saving time on non-value-added activities.
However, most CPGs have built their technology infrastructure atop a monolithic ERP system that was never designed for external collaboration. Attempting to retool such solutions is extremely cumbersome and costly – not to mention these solutions can be difficult to scale so they don’t enable growth.
For those looking to establish a scalable business model that provides real-time visibility, the holy grail of software solutions is an end-to-end platform that runs more efficient, reliable, and profitable operations. Once a CPG has gained full visibility into its own operations, it can extend communicative and collaborative capabilities to its external networks.
Establish Multi-Enterprise Collaboration Across the Supply Chain Network
More and more information is being generated outside of a company’s internal network, which means the future of the supply chain lies within multi-enterprise supply chain business networks (MESCBNs). Companies can’t go to market alone anymore, so they need multi-enterprise visibility and collaboration to ensure that each piece of the supply chain puzzle is accounted for, from product concept to consumer purchase.
According to The Association for Contract Packagers and Manufacturers’ 2021 State of the Industry Report, the contract packaging/contract manufacturing (CP/CM) industry is forecasted to grow 10.2% compound annual growth rate (CAGR) through 2025. This trend proves that suppliers will continue to be a strategic component of CPG go-to-market strategies in the coming years.
By establishing a multi-enterprise view of their supply chains, CPGs can work smarter with more informed, data-driven operations. This view will allow CPGs and their external partners to work together more seamlessly, opening the door for even more product innovation.
Lean on External Networks for Innovation
As consumer habits continue to evolve, brands must likewise continue to innovate in order to remain competitive and appeal to consumers. Their external CP/CM networks can play a pivotal, strategic role in the CPG landscape as an agile arm of innovation, ultimately enhancing market responsiveness as a competitive advantage.
However, if the traditional model of hands-off outsourcing continues, where the external supply chain remains an impenetrable black box, CPGs will be unable to fully leverage their external supply chain. Success will depend on transforming the ways in which brands and external partners work together. The new model supply chain relationships need to be collaborative, performance-oriented, innovation-centric and connected through two-way network visibility.
Once achieved, CPGs will be well-positioned to proactively drive product innovation and supply chain responsiveness: enabling them to try and fail fast through experimentation with minimal investment, collaborate more clearly with partners, and respond quickly to volatile market demand.
If we’ve learned one thing from the COVID-19 pandemic, it’s that the key to success is through agility – and true agility can only be achieved through the efficiencies created from supply chain visibility. As CPGs, brands, and their external partners embrace digital solutions and enable transparent operations they’re building more agile, innovative businesses – which is essential to continue to navigate consumer trends that are constantly changing, and supply chains plagued with disruption.