The objective of every consumer packaged goods (CPG) company is to ensure that the right product is available at the right place at the right time, in the right quality and at the lowest possible cost. The nature of consumer goods is such that sales are usually low value, high volume- therefore, stock availability at all times is important. CPG companies face immense internal and external drivers to succeed. Some of the internal drivers include the relentless pressure to increase revenue, reducing supply chain management costs and improving operational efficiency and employee productivity. External forces on consumer goods companies include satisfying changing customer demands and requirements, meeting regulatory compliances and shorten time-to-market with more and varied products.

The CPG value chain extends from product planning and procurement, development, manufacturing, distribution, sales and marketing all the way to the Point of Sale (POS). Information needs to be extracted, sorted, analyzed and reported from different points along a products lifecycle, to identify critical events and isolate problem areas and issues. This requires the ability to monitor business trends, to respond agilely to changing situations, and make informed decisions in the face of available information.

Fragile supply chains of ever-increasing complexity, both in terms of product lines and global footprint, coupled with shorter cycle times are creating a network that does not allow consumer goods companies to adapt and respond quickly to disparate information.

According to a recent study by Aberdeen, challenges of CPG industry include:

Some of the other challenges facing the CPG industry are:

1. Seasonal and Unpredictable Demand: since sales in CPG industry are not order based, these are Made-to-Stock (MTS). Stock is stored at distribution centers and warehouses, often based on nebulous forecasts.

2. Complex Distribution network: the widely varying nature of products requires special distribution channels in place. Product ownership extends all the way into store shelves, with responsibility for replenishment. Real time inventory data is required for timely replenishment and avoiding stockouts.

3. Products with low value and high volume: a large number of products are usually low value, high volume. This has implications on inventory, stock freshness, and stock availability. Sales frequency drops as products age, and inventory needs to be moved quickly as shelf life increases.

4. High transportation costs:since most CPG products are low value, the cost of transportation is very high as compared to the total product cost. Transportation costs need to be optimized to fulfill demand at customer locations while saving on cost. This implies increased collaboration with suppliers and 3PL providers. However, this rigid optimization schedule often leaves no room for flexibility should an urgent requirement arise elsewhere.

5. Collaboration: is needed across the extended chain. Suppliers, brokers, auctioneers, 3PLs, co-packers, manufacturing plants, distribution centers, retail chains and warehouses. Visibility and effective collaboration is required to optimize inventory in stocking locations, trucks and store shelves.

In this information age of immediate and vast data (RFID and POS data), CPG manufacturers can no longer wait for monthly/weekly inventory report and replenishment schedules. Instant data implies that producers need the agility to respond to depleting stock levels immediately. They need real time access to this information to be able to reoptimize their supply demand plans. Demand Driven Supply Network (DDSN) practices are being adopted by CPG companies to keep ahead of the fast pace of goods movement.