April 10, 2023

Navigating CPG Supply Chain Challenges in 2023

Vividly Team
CPG Education

When the world shut down in 2020, the effects on the global supply chain affected nearly every sector, from real estate development to the auto industry. For many consumer packaged goods brands, the disruptions were catastrophic as households stocked up and the demand for food —and toilet paper! — quickly outpaced the supply.

Although things are better today, CPG companies still face continuing and evolving supply chain challenges, including material shortages and disruptions due to geopolitical conflicts. Add inflation into the mix, and these issues are compounded by rising costs and the tendency of consumers to tighten their belts and stick to the essentials. Consumer goods brands that take a proactive, multi-pronged approach to addressing current issues and getting ahead of potential future disruptions are the ones most likely to weather the storm and emerge unscathed.

Here, we take a look at six supply chain challenges that CPG companies are likely to face in 2023—and how to get through them stronger than ever.

1. Huge growth in eCommerce vs. brick and mortar

During the pandemic, the rise of eCommerce was swift as consumers sheltered at home and more people than ever started buying online. Many CPG companies didn’t have the resources to navigate this transition—their supply chain was optimized for large wholesale orders from brick-and-mortar retailers.

Lesson learned: Consumer goods brands can no longer take a monolithic approach to the supply chain—you’ve got to be able to serve your retail partners and get products to customers who buy online.

A great way to go about this is to segment your supply chain. By customizing the way you source products and ship them to different customers (both consumers and wholesalers), you’ll create flexible systems that you can shape to meet whatever CGP supply chain challenges you face in the future.

2. Consumer expectations for fast, free shipping

In the early days of eCommerce, it wasn’t uncommon for consumers to wait a week or longer to receive the products they ordered online. But that changed when Amazon entered the scene and made free, lightning-fast shipping the standard, raising the expectations of online consumers. A 2019 study found that 52% of consumers were more likely to purchase online if they could get fast shipping.

During the pandemic, supply chains became strained and delivery times grew longer—even on Amazon.

While consumers are a little more receptive to slower shipping today than they were pre-pandemic, free shipping has become more important than ever, with 59% of consumers saying that it improves their online shopping experience, and nearly one-quarter saying they feel frustrated when they have to pay extra for shipping.

Fast shipping and free shipping are both expensive and can strain your supply chain operation. These tips can help you plan and execute fast, free shipping more effectively—and more cost-effectively:

  • Improve forecasting accuracy to better understand and manage your inventory requirements.
  • Work with third-party logistics (3PL) to get help from experts.
  • Regularly audit your supply chain to identify shipping inefficiencies.

3. Rising material costs

From labor shortages to extended shipping times to rising inflation, CPG brands have faced a range of issues when trying to source materials for their products. Since 2019, the cost of wholesale materials for consumer goods businesses has risen by 35%—an increase in price that gets passed on to consumers.

While you can’t control some rising costs, you can make changes to your supply chain to reduce your operating costs and trade spend — and pass those savings on to your customers.

  • Remove inventory purchases and time spent on products not in demand.
  • Find suppliers willing to work with you to reduce material costs.
  • Gain higher visibility into your supply chain to identify and mitigate issues that you can control to lower your costs.

4. Reliance on outdated technologies

Cloud transformations are changing the way many businesses operate. Investing in new technologies that streamline and automate certain processes not only gives you more data to make informed decisions, but also reduces unnecessary administrative work and improves accuracy across operations.

Companies that use cloud tools and other newer technologies are better equipped to evaluate and redesign each part of the supply chain process to increase flexibility and decrease costs. And since trade spend is the second-highest cost of doing business for CPG brands, managing it more strategically can help offset losses associated with supply chain snafus—and the costs associated with shoring it up.

5. Continued overseas supplier disruptions

For many years, CPG companies that had moved their supply chain and manufacturing overseas enjoyed the benefits of affordable labor without sacrificing the timeliness of shipments. But that all changed in 2020, when the pandemic led to massive, global supply chain disruptions that continue to reverberate throughout the CPG industry. As a result, many consumer goods companies are working to make their supply chains more flexible and durable.

Instead of relying on a single supplier overseas, consider expanding your roster of vendors so that instead of playing catch-up when one vendor can’t deliver, you’ve got backup suppliers to keep things moving—or to get back up and running quickly.

Some CPG brands are even bringing manufacturing home, investing in local talent and facilities to reduce the distance from “farm to table” and keep a tighter rein on operations.

6. The effects of climate change

Global climate shifts are playing a growing role in major supply chain issues. Severe weather events and other natural disasters are becoming more frequent and can hold up product transportation, damage or destroy crops and facilities, impact the workforce, and reduce energy production and manufacturing speed and output.

Around 43% of all billion-dollar natural disasters recorded between 1980 and 2022 occurred in the last decade—and more than a quarter of these occurred between 2017 and 2021. In the 1980s, the National Oceanic and Atmospheric Administration recorded 31 billion-dollar disasters, compared with 128 such events in the 2010s.  

Although there’s no controlling Mother Nature, there are a few things CPG companies can do to prepare for disastrous weather events, including identifying regions that are most vulnerable, taking action to shore up (or relocate) facilities, and putting emergency backup plans in place. This is especially important if you’re in the food and beverage industry, since weather events can devastate crops and lead to massive spoilage of products on hand.

Vividly offers the insights you need

Setting up your supply chain for success in 2023 means investing in tools that help you gain elevation, collect and manage data, and create accurate forecasts.

Vividly changes the game for CPG companies by offering trade management and forecasting tools that help you analyze promotions, gather sales data, manage costs, and predict future demand—all information you need to create and maintain a reliable supply chain. Ready to take action? Request a demo, and see first-hand what Vividly can do for you.

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