Demanding consumers, agile competitors, proliferating sales channels, and changing business models are just a few of the forces conspiring to cause market disruption in the consumer packaged goods (CPG) industry. In this new age, a challenging regulatory environment is raising the bar on product quality, while the pressure on the final price has never been more intense.
Between 2013 and 2017, some $17 billion in sales shifted from big consumer brands to small brands — and that was before many of the latest start-ups began getting traction (*1). This trend is likely to strengthen, thanks in large part to the increased use of mobile devices and continued growth of online sales. Established brands cannot rely on their reputation alone to compete while new brands see opportunities to take market share.
The CPG industry evolves rapidly and manufacturers must adapt to serving an ever-increasing number of channels and meeting changing customer demands. There is an increased need for agility and flexibility to be competitive.
A recent IndustryWeek survey (*2) indicates that leading manufacturers in the CPG industry are changing their manufacturing practices and strategies to be responsive, flexible, and efficient and to achieve high levels of performance while assuring the quality, speed, and responsiveness that customers expect. Specifically the survey indicates three trends:
Increasing operational flexibility and agility with mixed-mode manufacturing
Many consumer packaged goods are produced through a mix-and pack operation. As an example, think of a food and beverage manufacturer. They need to use both process manufacturing for the bulk processing of the beverage and discrete manufacturing for final packaging. In addition, constant changes in consumer demands lead many manufacturers – which were either discrete or process only – to take on the role of both a discrete and process manufacturer, as they look to provide customers with new competitive offerings. The problem is, manufacturers using traditional ERP systems are forced to choose between either a discrete or a process manufacturing system to execute both of these modes in the same plant.
According to the IndustryWeek survey, 41% of respondents indicated that this compromise would lead to lost efficiency, 38% noted that it would make them inflexible or slow to change, and 37% felt it would limit their control on their operations. The survey results show that CPG manufacturers seek a different system: 51% of survey respondents indicate that they are moving into mixed-mode manufacturing. This approach offers the flexibility and agility modern manufacturers require, and allows them to:
- Use one system to manage all production types and determine the best manufacturing method for each stage of production
- Integrate manufacturing strategies to improve competitiveness
- Enable quick switches to different modes as they add or chance product lines
- Seamlessly integrate all of their facilities regardless of which mode they use
- Efficiently complete and cost multiple co-products and by-products
Seamlessly connecting the entire supply chain with cloud
CPG manufacturers operate in a complex environment, which includes suppliers, distributors, third-party logistics companies, retailers, wholesalers, and consumers. Due to so many points of contact with various organizations, gaps in information are very common – which may lead to lost sales, dissatisfied customers or partners, and delays in product launches. In order to manage the complexities of the modern supply chain, CPG manufacturers need real-time data and visibility across operations and their value chain. With cloud-based technology, manufacturers can build end-to-end visibility and deliver access to real-time, actionable data across all value-chain functions.
The IndustryWeek survey (*2) reveals that those manufacturers using cloud-based solutions are positioned to outpace on-premise users in integrating contract manufacturers into their extended value chain. In addition, 80% of respondents identified leveraging real-time data as either “very important” or “critical” to their decision-making process.
CPG manufacturers with a comprehensive suite of applications that connects the entire supply chain are better equipped to sense, analyze, and respond to changing customer demand – leaving no opportunity for competitors to exploit.
Meeting changing customer demand with transformative technologies
Anticipating and meeting customer demands is now central to steady growth in the CPG industry. In a world of a minute-to-minute news cycle, people are less loyal to brands than ever before. To effectively handle this, CPG companies need to be able to find smarter ways to detect problems and opportunities, and act quickly to changing market trends. Data – and the ability to collect it, translate it, and act upon it – is driving the future of manufacturing.
“Using artificial intelligence and machine learning to study how consumers are buying and responding to any trending demand will increasingly be a differentiator that sets the winners apart from losers in the CPG industry.” (*3)
Oracle helps CPG companies to collect digital signals from a variety of sources, including connected equipment and assets, social feeds, syndicated market data, trading partners’ eCommerce transactions, and product updates from the broader business ecosystem. Oracle then enables CPG companies to integrate those signals into a data lake that can manage the huge volume of structured, unstructured, and time series data originating from these external sources, and contextualize it with enterprise data from business applications. This capability enables companies to detect issues and opportunities in real-time, use advanced analytics to make smart decisions, and execute rapidly to outperform the competition and exceed customer expectations.
*1: The New York Times “They Changed the Way You Buy Your Basics” Jan 2020
*2: Industry Week “How the Right Mix of Technology and Strategy Puts CPG Manufacturers on Top” Jan 2020
*3: IRI Research cited by Forbes “Small CPG Brands Are Gaining Upper Hand On Giants – And Now The Big Want To Get Even Bigger” Oct 2018