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May 20, 2020

Bolster Your CPG Supply Chain for the Next Generation of Consumers

Twenty years ago, the world was in a panic because society didn’t think computers were smart enough to count from 1999 to 2000. Seven years later, full fledged computers were small enough to fit in our pockets, and e-commerce shifted from a niche practice reserved for futurists to the mainstream. Then came online advertising, consumer reviews, unboxing videos, influencers, and the rumor that data could be the new oil.

 

Only twenty years after the Y2K crisis, we not only trust our devices to tell us the date and time, we use digital technology and data algorithms for everything from health monitoring to automated finance investing. Looking forward, it’s no surprise that technology and data are increasingly being integrated into every aspect of our globalized culture—including our supply chains.

 

Digitization and data analytics are increasingly being recognized as the next critical innovation step for CPG manufacturers. Digital data analytics has already proven itself through streamlining so many other aspects of society that consumers (and the rest of the world) are coming to expect the same level of increased efficiency when it comes to the consumer product supply. The only way to meet these increased demands is by implementing data analytics into supply chain management.

 

Here are three key, evolving consumer demands in CPG that supply chain management and analytics is poised to solve.

 

1. Transparency

 

Thanks to this generation’s easy spread of information, consumers are growing increasingly informed of global issues—keeping pace with the growing global sprawl of the CPG supply chain. According to the Harvard Business Review:

 

“The concept of supply chain transparency was virtually unknown 15 years ago, yet today it commands the attention of mid- and senior-level managers across a broad spectrum of companies and industries.

The reasons for this increased interest are clear: Companies are under pressure from governments, consumers, NGOs, and other stakeholders to divulge more information about their supply chains, and the reputational cost of failing to meet these demands can be high.”

 

When Harvard says that the cost of failing to meet transparency demands can be high, they are referring to the low switching cost that consumers enjoy if the business in question fails to meet their expectations. After all, the CPG industry is competitive and there are always other brands vying for the consumer’s attention.

 

Supply chain transparency means that a business can show the consumer every step of the supply chain, proving that ethical standards are being met with regard to safe ingredients, factory conditions, fair worker pay, and more. Consumers want to know where their dollar is going and that they are not supporting practices that violate their morals. However, in order for customers to have access to that information, the CPG supply chain manager and business leaders need to know it as well. After all, supply chains can get complicated and it is easy for key decision-makers to lose track of where their products are being sourced.

 

That is why good supply chain management that tracks every step of the process and provides key insights to stakeholders is a crucial first step to providing the ethical transparency that consumers desire.

 

2. Environmental Sustainability

 

Closely related to transparency is consumer awareness of the environmental impact that CPG supply chains cause. It takes an incredible amount of materials and resources from all over the globe to support CPG demand, and the consumers know it. For that reason, environmental sustainability is increasingly becoming a decision point for consumers when looking at which products to purchase. Consumers are increasingly asking questions such as:

 

Is the packaging biodegradable or recyclable?

 

How much waste does the company produce?

 

What does the company do with unsold product?

 

What is the company’s carbon footprint?

 

Because of this increased awareness, more and more companies are producing marketing that highlights environmental friendliness. However, if those words are not backed by sustainable practices, the backlash can be fierce. A research paper published in the Notre Dame Journal of Law, Ethics & Public Policy found that greenwashing (the practice of companies stretching the truth regarding their green practices) has huge negative impacts on the public perception of the brand.

 

For this reason it is important for CPG managers to take a close look at their supply chain to see where they can cut waste and carbon emissions—even if this means looking at new sourcing options for more environmentally friendly materials. When it comes to environmental sustainability, a brand’s supply chain actions should inform their words.

 

3. Options and Availability

 

Consumer demand in the 21st century can be summed up by the old saying, do more with less. This is because, while potential buyers want more environmental sustainability and supply chain transparency, they also expect more customization options, the ability to tailor products to their exact needs, and product availability that fits their shopping habits. Customers expect companies to meet them where they are, without compromise.

 

This means maximizing inventory spread and delivery options to suit the consumer’s lifestyle. If they want to shop at local brick and mortar stores, they expect the brand to be there. If they want to shop online, they expect the brand to provide quick at-home delivery with low shipping costs.

 

Additionally, when they do see the brand at their normal shopping location, they expect to see variations and options to choose from. In a consumer behavior study run by Deloitte, one in five consumers were willing to pay a 20% premium for a personalized product. To make personalization options even more lucrative for businesses, 22% of consumers also said that they would be willing to share personal data with a company if it meant receiving a more tailored customer experience or product. Voluntary consumer data is highly valuable for any business, let alone a CPG manufacturer that is competing with countless other brands. Voluntary data fed into a supply chain management tool can provide the insights a company needs to stay ahead.

 

Conclusion

 

The world is evolving and the CPG supply chain needs to evolve with it. Consumers have high expectations for the industry and are holding companies responsible for doing the most good with the least cost. The only way to keep up is though embracing the data and technology that has already transformed so many other markets. Good supply chain analytics can help your company stay successful into this next generation while making the world a better place at the same time. Contact us today to learn how or to get a demo.

 

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