Why CPG and Retail Companies Must Transform their IT And Start Minimizing Costs
CPG or Consumer Packaged Goods
Consumer Packaged Goods, or CPG, are consumable goods that include food products, beverages, footwear and clothing items. Tobacco is also a CPG and so are cleaning products. All CPGs are finally consumed and used up. Therefore, they have to be replaced from time to time. They are different from articles such as cars or furniture that people retain for a fairly long period of time. The CPG industry has not seen much investment in new technology over the years. However, there is a positive move towards computerization and web-based applications in the industry for —
- Improved CRM or customer relationship management
- ERP or enterprise resource planning
- Marketing automation
Vendors, including SAP and Oracle, are offering a range of products for the CPG sector.
The Challenges that the CPG Industry is Facing
The CPG industry is facing several challenges. The biggest, of course, is the fact that shops today are filled with consumer goods of hundreds of brands selling almost the same product. In the face of such stiff competition, one needs to find the most cost-effective ways to manage operations while ensuring high-quality products.
The other challenge is uncertain market demands as customers today have fickle tastes. Meeting such customer expectations is getting difficult for manufacturers, who must operate at a level that is profitable while constantly adapting to changing regulations and standards.
Globalizing does have its own advantages. Today, one can leverage the network of global suppliers and thus reduce costs. As great as that is, a large network makes keeping a tab on compliance and product safety that much more difficult. To complicate matters further, oil prices often fluctuate which adversely affects the cost of transportation as well as the price of packaging materials.
The problem of counterfeiting and the need to initiate a recall demands better standard in tractability than was available in the past. There is a need for a better standard of data granularity to improve the response to any adverse events like recalls besides providing better quality products.
The Viable Solution
The viable solution involves an agile supply chain. It should be able to both sense and at once respond to
- the behaviors of dynamic purchase
- fluctuations in demand and supply and product life cycles, and bring about a reduction in costs
Today, there are professional companies across the world that offer the above solutions by providing advanced tools. These tools have the ability to
- Sense changes in demand
- Identify the spend categories, and
- Provide improved visibility of the supply chain
Such tools bring about a quantum improvement in inventory management. The approach of these professionals goes beyond mere improvements in the standard of customer service or the management of the inventory. Ultimately, these tools help to balance demand with supply on a robust platform of sales and operations planning.