5 supply chain management success factors every CPG company needs to know for increased profitability

April 27, 2023 | 6 minute read
Erin Sun
Director of SCM Product Marketing, Oracle
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Optimizing a vast and complex supply chain is a growing challenge for Consumer Packaged Goods (CPG) firms. Today, a business footprint touches everything from growers and materials suppliers to manufacturers, distributors, logistics providers, and consumers.

The ability to gain broad and deep insights—including into environmental, social, and governance (ESG) requirements—is nothing short of mission critical. Minor variations in data quality and performance can have a profound effect on business outcomes—and revenues. This applies whether an enterprise operates in agribusiness, food and beverage, household goods, or personal care.

As a result, there’s a growing need for end-to-end visibility and for rich data that points the business compass toward the right outcomes. Organizations that get the equation right are able to get products to market faster, build a more resilient supply chain, boost partner and customer confidence, improve brand loyalty, enhance operational efficiency, lower costs, and improve recruitment and talent retention.

At the center of everything is the need to select the right supply chain management (SCM) platform. Amid growing global competition, eroding brand loyalty, and rapid and radical change, a CPG firm can’t get trapped in the mindset that’s its acceptable to simply respond to change; it must instead forge a path to greater innovation.

Following a path to progress

A digital supply chain management platform allows CPG companies to unleash innovation and boost customer acquisition and retention. These businesses get products to market faster and more efficiently. They also address critical sustainability issues and improve regulatory compliance.

The result? Customer satisfaction levels rise, brand equity grows, and organizations roll out higher-margin business models faster than ever.

Here are the five critical factors business leaders must focus on:

1. Faster time to market

Today, CPG companies are competing for consumers like never before. According to McKinsey & Company, CPG companies must deliver a great consumer experience across sales channels and shape their supply chains accordingly. Unfortunately, most supply chains predate omnichannel, and layering the newly required capabilities on top of legacy systems is difficult—and it frequently delivers subpar results.

As a result, CPG companies must streamline operations and adopt modern technology that drives growth and innovation. This points to a need to replace legacy solutions with an automated and integrated solution that helps organizations gain the visibility and scalability necessary to launch higher-margin business models, improve customer acquisition and retention, and enable faster time to market.

One company that embraced this thinking is Grupo Bimbo, global bakery company that sells 13,000 varieties of products in 33 countries. After moving from on-premises solutions to Oracle Cloud, the connected enterprise resource planning (ERP), human capital management (HCM), supply chain management (SCM), and customer experience (CX) solutions enabled the company to lower costs, improve sustainability, and accelerate innovation.

Oracle Fusion Cloud Order Management connects the front- and back-office processes to manage complex new business models such as omnichannel, direct-to-consumer, and subscriptions—in turn helping to accelerate a product’s time to market, which is so critical for CPG companies.

2. Improved business performance through connected planning

McKinsey & Company reports that 77% of companies consider supply chain visibility critical. Yet, getting to this higher plane requires a focus both on better data and intelligent insights. The former translates into a need for high quality data at the decisionmaker’s fingertips, while the latter incorporates a need for analytics tools and machine learning systems that can provide broad and deep insights into factors as diverse as supply chain, financial planning, human capital, and sustainability.

Kraft Heinz, with a presence in more than 40 countries, recognizes that planning is at the center of everything. For example, it’s critical to identify where to focus advertising and how to allocate it for specific products across countries. Getting past disparate systems and centralizing data was critical. So, Kraft Heinz turned to Oracle Cloud to deliver global insight while democratizing data. Equally important: it didn’t have to change underlying systems to accomplish this task. Forecasting, monthly close, and decision-making have all improved. The company has P&L visibility down to the SKU level.

3. Increased operational efficiency and reduced costs

CPG companies frequently struggle with outdated systems that are operationally focused. While most business leaders recognize the benefits of streamlined, automated business processes along with the need to replace legacy systems to combat rising costs, the end result often falls short. The reason? The industry’s laser-like focus on costs stifles growth.

The challenges don’t stop there. CPG companies must maintain tight control over inventory to conserve cash while ensuring there’s sufficient stock to meet production schedules or forecasted customer demand. Process manufacturing ultimately touches cost control, quality, and food safety. Lacking automation and monitoring capabilities for harvesting, grading, sorting, kitting, and financial billing can drive up costs.

A need for an end-to-end supply chain solution was apparent to LiDestri Food and Drink, a Rochester, New York firm that supplies sauces, beverages, spirits, and other items to major consumer brands, including Newman’s Own and Wegman’s supermarkets. The company, which has more than 1,000 products rolling out of 24 production lines, turned to Oracle Cloud SCM to evolve from spreadsheets to advanced automation. The result was a 5% to 10% reduction in inventory costs along with numerous other efficiency gains.

4. Enhanced customer expectations

Logistics is at the center of every CPG company. A coordinated supply chain is essential. This requires logistics network modeling and integrated warehouse management, transportations management, fleet management, global trade management, and intelligent technologies.

Land O’ Lakes, a popular producer of dairy products, had faced problems coordinating product demand and inventory in the past. It also had to deal with constrained facilities during the COVID pandemic along with a lack of truck drivers to deliver products to market. After turning to Oracle Transportation Management Cloud, it gained insights that have eliminated past imbalances and allow the company to operate faster and better than ever.

Oracle Logistics network modeling capability is designed to deliver agile and highly flexible logistics networks, with support for strategic and tactical analysis, sophisticated modeling features, and deep metrics.

5. Improved sustainability reporting and efforts

Consumers are savvier than ever when it comes to ingredients, materials, sourcing, manufacturing, and packaging. The Internet and availability of data has completely changed the equation. To be sure, consumers demand sustainable solutions. McKinsey & Company found that 66% of the public weighs sustainability when making a purchase.

Yet sustainability can also benefit a company’s bottom line. According to Accenture, sustainability practices lead to 11% higher innovation levels, 10% higher incremental revenue growth, 13% higher cost-reduction gains, and 17% better performance on balance sheets.

Unilever, one of the world’s largest suppliers of consumer goods, turned to Oracle to coordinate its business sustainability efforts in 190 countries and with 2 billion customers. Oracle Transportation Management Cloud’s automated transport planning algorithms yielded real-time insights that have catapulted the company to best practices in the sustainability space.

Moving beyond data silos with the right supply chain management platform 

In order to achieve maximum performance, a CPG company must orchestrate and automate a diverse array of tasks and processes within a supply chain. A single-source-of-truth is critical. CPG companies that embrace a more advanced cloud framework are better equipped to:

  • Stay ahead of consumer demand through improved data and forecasting.
  • Control costs across the supply chain and improve partner relationships.
  • Scale a business through improved visibility.
  • Simplify processes and witness immediate results.
  • Strategically deploy labor.
  • Optimize billing, inventory, and the utilization of materials.
  • Improve security and compliance.
  • Have the agility to change plans as needed.

By connecting and integrating enterprise resource planning (ERP), supply chain management (SCM), human capital management (HCM), and customer experience (CX), Oracle Fusion Cloud Applications streamlines business processes to help organizations solve complex problems in the challenging business environment. CPG companies that embrace modern cloud technologies have the advantage to achieve business innovation and enterprise transformation.

Learn more about how CPG companies exceed consumer expectations.

Erin Sun

Director of SCM Product Marketing, Oracle

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