Author: Srinivas R
Procurement intelligence is showing the way for embattled CPGs
The consumer packaged goods (CPGs) market in the US is worth more than $600 billion, and is growing, albeit modestly, at a CAGR of 1.03%. Among the factors moderating the sector’s growth are a growing consumer preference for cost-friendly brands and oversupply. The latter results from industry consolidation. Lifting product quality while growing margins continues to be a juggling act for R&D and product management teams at CPG businesses. Inflationary impact, supply chain disruptions, and skilled workforce shortages, in that order, are the top three challenges the sector is staring at. Inflation has pushed up the cost of inputs, logistics and transportation, besides wages, in the CPG space.
The sector has been hit hard by supply disruptions and this is having a deleterious effect on everything from sales, customer satisfaction, and cost management to routine tasks and processes. Of course, disruption to the flow of goods does have widespread effects on the national economy. But that’s a story worth a separate blog post. Meanwhile, CPGs face yet another challenge. The thinning ranks of skilled workers is resulting in high labor costs, training expenses, staff turnover rates. The industry is in the midst of what is described as a “manufacturing labor crisis.” If there is any one thing that can provide the healing touch for a CPG in these crisis-filled times, it is accurate, timely, and actionable market data on procurement market shifts, supplier performance, and price dynamics. That is market intelligence in CPG.
CPG sector can do more with the right market intelligence
With market intelligence in CPG on their side, here are certain proven ways CPGs can battle inflationary pressures, supply-side disruptions, and labor shortage and come out on top.
Tame inflationary impacts
There are enough and more predictive analytics tools (apart from spend analyticsplatforms) in the market, and procurement professionals just have to look for the ones that match their specific business context. These AI/ML-powered tools are capable of intersecting real-time market intelligence in CPGwith historical supplier pricing data as well as past sales data to predict customer demand with remarkable accuracy. Such clear-cut customer demand numbers and consistent order quantities, besides category updates, enable suppliers to map out their production better, so as to reduce “waste” in the production process (e.g., defects, overproduction, downtime, delays, excess inventory) to the smallest possible level. Leaner manufacturing of this kind will allow suppliers to offer CPGs better pricing and terms. In these inflationary times, customers are naturally attracted to offers that are light on their wallet. CPGs, for their part, can pass on some of the cost reduction (orchestrated through reduced supplier costs) to customers and still see their margins expanding.
Preempt supply disruptions
Procurement market intelligence on suppliers covers bases such as vendors’ quality, cost, order fulfilment history, and delivery standards. Furthermore, measuring the commitment of supply chain participants to reducing costs (including long-term costs and expenses), driving quality, spurring innovation, and embracing sustainable practices is a big part of present-day market intelligence in CPG. Based on these data points and data analysis, businesses can actively seek out alternatives to their primary suppliers. Supply base diversification gives businesses more bargaining power vis-à-vis suppliers and inoculates the enterprise against potential supply chain disruptions to a great extent.
Navigate talent crunch
Labor market trends represent another area of increasing interest for practitioners of market intelligence in CPG. On the company side, managersin labor procurement realize the only sure-shot way to navigate shallow talent pools is the metrics-based way. Labor market data, such as on AI pervasiveness in the workplace, critical skill sets, flexible work arrangements, and employee retention approaches, is making the going easy for CPGs. Based on these metrics, they can tailor more effective mid-to-long-term plans to address skilled labor shortages.
How SpendEdge can help you
At SpendEdge, our specialists help CPG sector participants to more efficiently audit their supply chain segments to identify and rein in specific risks and keep a close tab on suboptimal production, if any. Our efforts also help minimize production overruns. As a result, our clients in F&B and other markets have been able to not only enrich product quality on a continuous basis but also reduce waste to the barest minimum possible. Quality control in F&B and other industries as well as category analysis are paying off in right earnest. Not surprisingly, our market intelligence in CPG is much sought after by industry.
Our success story is also developing at another level. Leveraging our time-tested supplier management frameworks, F&Bs and CPGs are busy fostering ever-deeper relationships with suppliers for the longer term. These clients are carrying out supplier quality audits without fail and the results are there to see.
CPG business gets detailed views of supply networks with market intelligence
From beverage cans to laminate packaging, our client generates an entire line of packaging products for businesses. The client’s addressable markets include soaps, noodles, ketchups, tea, and shampoo, and over the last decade, the business has gained a significant foothold in the Middle East and Africa (MEA) market. The client was considering leveraging this region as a beachhead to further expand operations to adjacent locations.
There is growing competition in the landscape, and this is not going away anytime soon. Consumers’ increasing predisposition for recyclable, biodegradable, and reusable packaging is too substantial for sector participants to disregard. Most important of all, in our client’s specific context, limited visibility into supply-side activities was starting to hurt effective tracking of goods and materials. Worsening of the condition could lead to stockouts, which is not a good sign for any business. The possibility of losing out millions in sales revenue was another worrying prospect. Reduced supply chain visibility was again the culprit here, and the client struggled to ensure product availability amid a supply squeeze. The packaging business was referred to us by one of our existing clients, and our experts in market intelligence in CPG began to work on the project right away.
Our experts with years of experience in market intelligence in CPG leveraged real-time data on sales and supplier lead times to stabilize the client’s inventory levels. Other critical parameters such as vendors’ quality, cost-effectiveness, reliability, and a demonstrated history of meeting contractual obligations were meticulously considered. Our team tracked supplier performance on an ongoing basis and tools like supplier audits, scorecards, and customer/employee feedback proved very handy here. The client’s sales lead details and lead times, as reflected in the CRM systems, were carefully dissected using AI tools. By overlaying this data with metrics on supply chain inventory and supplier performance, our experts enabled the client to predict demand more accurately and stave off supply disruptions and stockout scenarios.
Author
Srinivas R
Associate Vice President, Sourcing and Procurement Intelligence
Srinivas is a solution design specialist at Infiniti Research and provides advisory services to clients across the medical devices, pharmaceutical, CPG & FMCG, energy, and ICT sectors. He specializes in the procurement areas of industry benchmarking, cost modeling, rate card benchmarking, negotiation advisory, and supplier intelligence.
