E-commerce grew at a rate of 35% during the pandemic, and for the first time, online sales of home goods exceeded in-store sales. Yet several brands remained unprepared for the drastic shift to digital sales.
As CPG companies begin to make the most of this unprecedented growth, many are dealing with supply chain limitations that can quickly hinder profitable growth. These restrictions highlight the competitive importance of supply chain management in the digital era.
This guide will walk you through the challenges CPG brands face in the rapidly developing e-commerce landscape and discuss the supply chain strategies crucial to meet those challenges.
Challenges CPG Brands are Facing
Considering the present omnichannel world, demand is much less predictable than before. A study related to supply chain benchmarking suggests that weekly demand volatility increased dramatically by approximately 70% from 2013 to 2019. And after the pandemic, it rose by another 50%.
With more retailers expanding their channels, such as drop shipping from the manufacturer, online shopping, and pick-up at the store, delivery and inventory costs are rising. This has resulted in supply chain complexity. Other challenges include mounting repercussions for stockouts, multiplying number of flows within the distribution network, and shrinking lead times.
The Right Product Mix
To leverage the e-commerce supply chain, a CPG company must provide a complete portfolio of its products for omnichannel retail customers. On the other hand, the direct-to-consumer (DTC) channel must supply high-demand products more.
Improving the Digital Shelf
CPG companies implement effective strategies to ensure their products are available in many channels. Besides keeping competitors at bay, this also indicates that the brand is well and alive. To attract young consumers, availability on various digital shelves is important because absence from these platforms will likely wipe a brand off its radar.
Aligning Supply Chain and Commercial Functions
Companies traditionally focusing on consumer demand expect the supply chain to keep up dutifully. However, that legacy relationship doesn’t serve CPG companies well. Managing the current complex requirements signals a more integrated and interactive association between the supply chain and commercial functions. So both short- and long-term capacity and network planning, projections, information flows, and assumptions must be transparent on each side.