Top 5 Supply Chain Planning Challenges in the CPG industry
Let’s examine the top 5 challenges reported to us by the planning community in the Consumer Packaged Goods (CPG) industry.
1. Cracking the Amazon Code: Demand Forecasting
The exponential growth of e-commerce, particularly through Amazon, has introduced complex forecasting challenges. Traditional methods are proving less effective in the face of dynamic online sales, which are influenced by factors such as algorithmic pricing and consumer reviews.
2. Crystal Ball Needed: New Product Forecasting
Predicting demand for new products remains a significant hurdle due to the absence of historical data and uncertain market reception. This challenge is further intensified by the accelerating pace of product innovation, requiring more agile and adaptive forecasting methodologies.
3. Keeping Shelves Stocked: The Fill-rate Challenge
Ensuring high fill rates is crucial to prevent retailer penalties and mitigate lost sales opportunities. Recent supply chain disruptions and demand volatility have exacerbated this challenge, necessitating more robust inventory management strategies.
4. The Promotion Puzzle: Aligning Supply with Marketing Initiatives
Supply chain planning leaders face significant challenges when it comes to aligning inventory with promotional activities. While marketing departments invest substantially in promotional campaigns, accurately forecasting their impact on demand remains a complex task for supply chain teams. The unpredictable nature of promotional success creates a ripple effect throughout the supply chain. Overestimating demand can lead to excess inventory and increased holding costs, while underestimating can result in stockout and lost sales opportunities.
5. The Goldilocks Dilemma: Just-Right Inventory Levels
Striking the optimal balance between meeting demand and minimizing working capital tied up in inventory remains a persistent challenge. Planners are continually refining their inventory management practices to achieve this equilibrium.
To address these challenges comprehensively, CPG companies are implementing several strategic initiatives:
- Digital Transformation: Investing in advanced technologies for end-to-end visibility and real-time data analysis.
- Agile Planning Processes: Adopting more flexible planning methodologies to swiftly adapt to market changes and disruptions.
- Artificial Intelligence: Leveraging deep learning and sophisticated analytics to gain deeper insights into consumer behaviour, market trends, forecasting and supply chain optimization.
- Enhanced Supplier Collaboration: Strengthening supplier relationships and implementing collaborative planning processes to boost supply chain resilience.
In subsequent articles, we (TrueGradient AI team) will delve deeper into solution approaches from Planning and AI perspectives to tackle these pressing challenges.
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Jasneet Kohli
Co-Founder
I thrive at the intersection of business, technology, and data science to create value for CPG and Retail companies. Well-rounded experience in the entire spectrum of Supply Chain - Forecast to Ship.
Now part of an incredible journey at TrueGradient. Drawing from our experience with Amazon, Walmart, Mondelēz, and IBM, the team is committed to democratizing advanced modelling techniques. The platform drives end-to-end planning decisions (Demand, Inventory, Price, Promo, Assortment), helping companies improve service levels while minimizing costs.
In the past, i have served Fortune 500 clients. Held leadership roles in large organizations and start-up environments, such as Head of Operations, Solution Architect, Head of Customer Success, and Go-To-Market leader; worked in Asia (India and Singapore), Europe, and North America. Passionate about grooming talent and building high-performing teams.
I am an active sportsperson who plays both individual and team sports – soccer, golf, and cycling.
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