Consumer Packaged Goods (CPG) companies have a variety of challenges they face on a daily basis, many of which are directly related to the transportation and logistics of their products. And while many of the issues CPGs face today aren’t new, it doesn’t mean they aren’t detrimental. Based on what we’re hearing and seeing from our customers and learning from the market, the primary challenges faced today are:
- Inventory availability
- Rising costs
- Customer expectations
- Sustainability concerns
And, as many of you have likely guessed, they are all interconnected, adding to the complexity of solving these issues as a whole. Let’s dig in.
#1 Inventory Issues
Inventory availability continues to be an issue, even though some of the bottlenecks from the last three years have eased up. Demanding consumers have high expectations, and in a time of uncertainty, demand can be fickle, uneven, and hard to predict. CPG brands deal with ever-fluctuating demand patterns dictated by consumers, seasonality, and even the political climate, which means planning to have the right inventory, in the right place, at the right time is a monumental undertaking. The most common inventory issues are:
- Lack of visibility into real-time inventory status
- Low product turnover
- Excess inventory
- Inaccurate stock tracking
- Inaccurate delivery times
As you can imagine, these issues all band together leading to poor service levels, impacting not only customer satisfaction but the bottom line. While brands are racing to move inventory fast and flexibly to meet demands, then comes the onslaught of rising costs.
#2 Pricing Problems
Cost is always a concern, and CPGs have many costs to consider, from raw materials to make their products, the labor needed for production, to what it costs to get the product out of the warehouse and onto shelves. Factor in the need to meet consumer demand in a timely fashion and you have a recipe for seemingly uncontrollable rising costs. In fact, shipping delays can be especially harmful. According to Shopify, they “cause inconvenient stockouts, which cost retailers $1 trillion every year.” Research has shown that when customers experience a stockout, they switch to a different retailer 70% of the time, which is a further loss in revenue.
And when CPGs need to get a shipment out on demand, they can turn to the spot market, but that almost always comes at a greater cost. While using the spot market helps companies meet demand on a case-by-case basis more flexibly, spot pricing is rarely ever fair as there is very little room for negotiating. And if there’s ever a capacity crunch in the market, which we all know is fairly common, the spot prices will spike without warning, sometimes to outrageous levels.
Stockouts, delayed shipments, and higher prices all lead to unhappy customers.
#3 Customer Complaints
In this day and age, when a customer is unhappy, everybody knows. And because of the sheer amount of competition out there, if one retailer fails to meet a customer’s needs, it’s easy for them to switch to another brand to see if they do any better. It’s tough, and it forces retailers to jump through more and more hoops just to keep a single customer engaged.
When it comes to customer service, retailers require shippers to provide 98% on-time-in-full (OTIF) delivery, and if they fail to meet those targets they’re hit with a 3% Cost of Goods Sold (COGS) fine - ouch! And as customer expectations increase, CPG brands need to work extra hard to ensure the customer service they provide is flawless, like providing visibility into where their shipments are at all times.
#4 Sustainability Shortfalls
Calls for more sustainable practices have been heard loud and clear, and they are increasingly factored into what is important for global companies. Investors are becoming increasingly focused on Environmental, Social, and Governance (ESG) issues, and factoring these non-financial elements into their decision-making process. For CPG companies, this means there’s growing pressure to do no harm. They are looking for ways to be socially and environmentally responsible while maintaining the bottom line.
It’s not only investors and stakeholders who are pressuring brands to change, but customers are also too, and they have the power to vote with their dollars for the companies that more closely reflect their morals and ideals. So CPGs need to find ways to scratch that itch, which includes a variety of tactics, not the least of which is reducing CO2 emissions, and reducing empty trucks on the road and unnecessary miles. In fact, these are goals most CPGs aspire to, but that often run counter to other primary goals.
Overall, these are symptoms of an underlying problem related to the way CPG brands plan and execute fulfillment. The current way deals with all of these issues in a linear and siloed environment that is prone to long lead times, static updates, and inefficient communication. As a result, challenges to be responsive and reliably meet customer demand while managing costs and budgetary goals abound. This is why we believe it’s time to get smarter - more strategic - about transportation.
A new approach is needed to move the industry forward to ensure customer delivery with confidence, promote inventory availability, provide speed to meet customer needs, and navigate the bullwhip effect to assure supply. That’s SemiCab, a platform designed to re-engineer transportation and fulfillment. The SemiCab platform orchestrates much-needed collaboration to set up shipments and loads in a more predictable manner, giving you the freedom to plan how and when you grow.
If you’re looking to become more strategic about transportation, let’s talk.