What are the greatest challenges and opportunities facing consumer packaged goods (CPG) companies today, and how can they maximize their chances for success? Blue Yonder and Microsoft recently commissioned IDC to create an infographic* addressing those questions. The answers may surprise you.

Read on to learn more, but also plan to watch this on-demand webinar where Blue Yonder was joined by guest speakers Simon Ellis, IDC Group Vice President, U.S. Manufacturing and Supply Chain; Dinesh Vyas, Director of Supply Chain Solutions at Dole; and Felice Miller, Business Strategy Leader of Retail and Consumer Goods at Microsoft.

Disruption Hits CPG Companies Especially Hard

Today just about every company is feeling the effects of supply chain disruption, whether caused by port congestion, labor shortages, inflation, extreme weather, or demand uncertainty. But, as demonstrated in the IDC infographic, CPG companies often feel the effects of disruption to a greater extent than other manufacturers.

Nearly two-thirds (58%) of CPG companies report that their business has been significantly impacted by supplier cost increases, while 57% cite transportation cost increases as a significant obstacle. Other sources of disruption include demand volatility (named by 41%), transportation and delivery delays (39%), and a lack of supplier reliability (26%).

The encouraging news from the IDC research is that CPG companies are recognizing and addressing the problem of supply chain disruption. They’re actively identifying gaps in their capabilities that allow disruptions to interfere with their execution plans and performance targets. The CPG companies studied by IDC are focusing on improving their resilience by addressing these shortfalls.

Seventy percent of CPG companies believe their lack of sufficient collaboration with external partners — including suppliers and customers — poses a significant problem for their supply chain’s future if not addressed within the next 12 months. A lack of supply chain visibility, which hinders agility, was named as a pressing gap by 59% of respondents. And a lack of robust data analytics and intelligence was cited as an urgent concern by 56% of CPG companies.

The Solution Is Clear: Supply Chain Digitalization

How will CPG companies close these gaps, build resilience and agility, and mitigate their risk of disruption? It’s clear that supply chain digitalization — including process automation, along with the application of advanced artificial intelligence (AI) — provides the answer.

“Technology, particularly automation generally and AI more specifically, is now inexorably intertwined with business performance progress,” writes Ellis of IDC in this analyst brief. “Given the volumes of data, or the vast variety of data sources, people are overwhelmed without technology. Organizations should focus on business problems or opportunities of course but also accept that technology is now a critical driver of change and transformation for the consumer products supply chain.”

Supply chain digitalization provides the capabilities needed at address CPG companies’ top three capabilities gaps, as identified by the IDC research:

  • Real-time connectivity with external partners. Nearly three-quarters of CPG companies are concerned about their ability to collaborate effectively with trading partners. Not only does digitalization align the internal organization across functional boundaries, but it also ensures that the end-to-end supply chain — from multiple supplier tiers through customers — is connected in real time. When a disruption occurs, the entire supply chain can respond in a rapid, orchestrated way, informed by the same real-time data and focused on shared priorities. This level of collaboration is essential to creating supply chain resilience and mitigating the effects of disruptions.
  • End-to-end supply chain visibility. Of course, one of the keys to mastering disruptions is recognizing them at the earliest opportunity, no matter where they occur in the end-to-end supply chain. Digitalization also enables this by creating broad real-time awareness and visibility across all nodes. No matter where an exception occurs, advanced digital capabilities enable all partners to see and respond to it as quickly, strategically and profitably as possible.In IDC’s research, 59% of CPG companies named supply chain visibility as an urgent challenge. Fortunately, advanced technology makes it easier than ever to achieve.
  • Robust data analytics and intelligence. Today CPG companies are inundated with enormous volumes of data — about operations, suppliers, products, sales, retail customers, consumers, market trends and other topics. But 56% of companies see their inability to apply this data, and transform it into intelligence, as a serious concern that must be addressed quickly. While large data volumes, today’s supply chain size and scale, and the fast-moving nature of the omni-channel retail landscape exceed human cognition, digitalization easily manages that complexity. Advanced digital solutions bring the power of AI, analytics, data science and decision automation to bear on even the most sophisticated problem. Enabled by proprietary algorithms, predictive analytics and optimization engines, today’s digital solutions can ingest a range of real-time data streams and autonomously arrive at optimal decisions, usually in microseconds.

Process Innovation Is the New Critical Competency

Successful CPG companies are known for their product innovations, but today’s disrupted, unpredictable business environment demands that they focus equally on process innovation. In Blue Yonder’s experience, CPG companies seem to be painfully aware that they need to embrace supply chain digitalization, but often aren’t sure where or how to begin.

In IDC’s 2023 Worldwide Supply Chain Survey, technology investments like AI were identified as being significant drivers for cost optimization, productivity, visibility and agility for CPG companies. The benefits cited by respondents included cost reductions, improved planning, increased productivity and improved visibility.

As the IDC research demonstrates, CPG companies clearly see the dangers of disruption — and they also recognize the proven ability of advanced technology to create supply chain connectivity, resilience and agility. At Blue Yonder, we’re committed to helping our CPG customers minimize disruption risk and maximize their chances for success, no matter their specific capability gaps, challenges and objectives for the future. Learn more about how Blue Yonder can help CPG companies quickly realize the benefits of process automation, AI and other digital capabilities.

*IDC Infographic, sponsored by Blue Yonder and Microsoft, Managing Disruption Risk in Consumer Packaged Goods, doc #US51824424, March 2024.