With pressure coming from diverse sources, the limitations in existing CPG supply chains can lead to severe challenges that highlight certain fundamental areas for improvement. But those are not the only difficulties. CPG companies also face specific challenges inherent to the industry.
Decreasing profitability and market share
The one-strategy-fits-all approach within linear supply chains has not been adaptable enough to meet rapid operations that switch between requirements for low-cost/high-volume commodity products and low-volume/high-cost premium products. Typical asset- and cost-focused arrangements have diverted attention from anticipating and responding to unique and niche market requirements, leading to reduced growth and profitability. Also contributing to lost market shares is the intense competition from private label products. Furthermore, some low-growth local brands became targets for acquisition by stronger regional (as well as national) brands, leading to extended supply chains and hence added complexities and cost.
Effective management of promotions and new product introductions
Lack of communication or wider collaboration with retailers and distributors (as well as with internal teams) are significant factors in the less-than-stellar performance of CPG companies with respect to promotions and new product introductions. A number of CPG companies do not have formalized internal stage-gate processes to justify and effectively drive new product demand. Also, companies tend to focus more on initial new product sales (for example, for the first two quarters) and ignore subsequent demand, which then provides only partial insights into product failure or success factors.
Added costs due to regulatory compliance requirements
Regulatory bodies, including the United States Department of Agriculture (USDA), tightly regulate the packaged food and beverage sectors on the following mandates:
* Hazard Analysis of Critical Control Points (HAACP) regulations—quality control records and manufacturing data access
* Occupational Safety and Health (OSHA) requirements—material safety data sheets (MSDS) maintenance, good manufacturing practices (GMP), and safety programs
* country of origin labeling requirements
Decreasing profitability and market share
The one-strategy-fits-all approach within linear supply chains has not been adaptable enough to meet rapid operations that switch between requirements for low-cost/high-volume commodity products and low-volume/high-cost premium products. Typical asset- and cost-focused arrangements have diverted attention from anticipating and responding to unique and niche market requirements, leading to reduced growth and profitability. Also contributing to lost market shares is the intense competition from private label products. Furthermore, some low-growth local brands became targets for acquisition by stronger regional (as well as national) brands, leading to extended supply chains and hence added complexities and cost.
Effective management of promotions and new product introductions
Lack of communication or wider collaboration with retailers and distributors (as well as with internal teams) are significant factors in the less-than-stellar performance of CPG companies with respect to promotions and new product introductions. A number of CPG companies do not have formalized internal stage-gate processes to justify and effectively drive new product demand. Also, companies tend to focus more on initial new product sales (for example, for the first two quarters) and ignore subsequent demand, which then provides only partial insights into product failure or success factors.
Added costs due to regulatory compliance requirements
Regulatory bodies, including the United States Department of Agriculture (USDA), tightly regulate the packaged food and beverage sectors on the following mandates:
* Hazard Analysis of Critical Control Points (HAACP) regulations—quality control records and manufacturing data access
* Occupational Safety and Health (OSHA) requirements—material safety data sheets (MSDS) maintenance, good manufacturing practices (GMP), and safety programs
* country of origin labeling requirements
No comments:
Post a Comment