Intense competitive forces drive proliferation as CPG companies work to capture the greatest market share. Enterprise business systems and the business processes companies put in place must be geared for continuous product introductions with all process streamlined to make this happen.
One only has to take a walk down a store aisle to see a snapshot of what is driving the CPG industry:
- Product proliferation
- Varieties galore
Challenges for CPG manufacturers:
- Competitive forces and the recent stagnant US economy have prevented many CPG manufacturers from raising prices although raw material prices have risen, shrinking margins.
- Extreme weather conditions frequently cause disruptions in crops causing raw material prices to rise for those whose finished goods originate from a farm.
- Competition for raw materials, such as corn being used for human or livestock consumption versus being used for ethanol production, causes prices to increase.
- Worldwide competition for petroleum has caused price increases which impacts petroleum-based end products.
When manufacturers cannot raise prices, one tactic is to market smaller sizes with the same price. As an example, the dry dog food one of our employees family purchases is the same price, yet when they first started buying this brand, the bag wouldn’t all fit in the container used to store it. Today, all of the dog food fits.
The bottom line for manufacturers - your business processes and business systems must be able to support continuous product introductions, changing market prices, increasing consumer demand, manufacturing changes, and more.PSGi’s experienced team has worked with many types of consumer products manufacturers, enabling us to provide business process implementation and optimization services that incorporate industry best practices for manufacturing. These services are targeted at maximizing the flow of critical information through the organization, minimizing redundancies and ensuring this information is used manually or automatically to make successful vital business decisions.
Complexities of the consumer products manufacturing industry include these characteristics requiring constant flow of information:
- Rampant product proliferation especially with variations in many parameters that define the product including flavor, package size, color, shape, etc.
- Every product variation begins with a recipe or formula variation or packaging variation. Some variations may be seasonal. Some new formulas or packaging variations may replace older formulas requiring formula phase-in and phase-out functionally.
- Most product variations require new ingredients, raw materials and packaging components. Inventory systems must cope with constant new additions. As with formulation systems, inventory systems must support phase-in and phase-out requirements so manufacturers aren’t left with costly obsolete materials.
- When serving consumers, manufacturers must have extensive product recall reporting capabilities. This includes bi-directional lot track and trace reporting necessitating extensive, comprehensive lot management systems.
- Adhering to periodically updated government regulations and evolving customer mandates that may necessitate formal document management processes
- Managing inventory levels, production schedules and yields, capacity loading and a variety of cost factors requiring activity based costing to better understand and allocate cost drivers
- Manage multiple sales channels and sales order processing that must take into account customer product specifications and complex pricing and promotions requirements
Managing this information well leads to:
Operational excellence, reducing waste, running more efficiently and maximizing utilization.
- Enhanced, market-aligned decision making especially regarding product introductions and product sunsetting
- Compliance with evolving food and chemical safety regulations
- Consistently producing the highest-quality products.
- Manufacturing agility enabling better reaction to opportunities and obstacles
- Managing profitability for greater business growth
- Competitive advantages