The impact of supply chain disruptions on CPGs

4 minute read

The complex interdependence of supply chains that globalization has created makes them vulnerable to disruptions because they are so intricate and often span so many different regions.

CPG manufacturers–as well as consumers–are experiencing the effects of those disruptions right now. This article briefly examines the issue and offers suggestions for CPGs.

Table of Contents

Why are CPGs experiencing supply chain disruptions?

There are significant logjams at major ports the world over–especially in China where they are the worst ever recorded–yet they don’t affect all CPGs. The supply chains of CPG products tend to be more regionalized and less global than that of other industries. However, the ongoing and probable future lockdowns and restrictions around the world do have far-reaching implications that tend to be felt everywhere.

The geographically concentrated production that CPGs rely on can also be prone to bottlenecks though. Regionalization relies on single source inputs which carry risks.

A study by McKinsey in 2021 found that 93% of the surveyed companies planned to diversify their supply chains geographically to avoid disruptions at that time. A later survey in 2022 found that less than 10% of those companies had actually fulfilled those plans. So it is an issue that persists.

Global interconnectedness of supply chains

In a domino effect, blocked sea-going container vessels affect trucking schedules and costs, and slowdowns at one port affect traffic at others. The invasion of Ukraine is also a factor now as sanctions are preventing trains from travelling through Russia. Key supply lines for commodities like wheat and sunflowers have also been severed in that region, causing prices to mount.

Many of the consequences of the Russian invasion won’t be felt for months to come. Russia is one of the biggest importers of fertilizer in the world and fertilizer prices are now 40% higher than before the invasion. This means that as the global food supply chain encounters ongoing disruption, food production will become more expensive almost everywhere.

With these multiplying pressures, manufacturers need to get ahead of these disruptions as best they can.

Supply chain monitoring

The basic principles of supply chain management have not changed, but the technology regulating them has. Continual monitoring has become necessary because it is the most effective way of gathering relevant data. 

The current crisis has accelerated the digitization of supply chain processes. As the benefit of analytics becomes more evident, many CPGs have begun to invest heavily in supply chain tech.

 

The goal of most of the current technologies is increased visibility. CPGs want to see where their products are in real time. The most complete picture possible is desirable, with reliable predictions for when an item will arrive at each step of its journey.

 

Manufacturers that prioritize their supply chains have taken actions to respond to pandemic conditions such as boosting inventories and upgrading their digital capabilities. However, recent events have demonstrated that supply-side shortages and logistic blockages can affect even the best-managed supply chain.

Supply chains and the digital shelf

Supply slowdowns can be dangerous for CPGs in particular because some of their products have a short shelf life and others undergo demand variability. When some of these products are out of stock companies run the risk of shoppers switching to other brands. This can have lasting negative effects if the trial of the new product is favorable because CPGs can lose a longstanding customer and the future sales they represent. Hence, closely monitoring the digital shelf, especially OOS rates, is crucial for CPGs in times of supply chain pressure.

The constellation of effects the pandemic has created has made shoppers more price sensitive. This, of course, has a knock on effect on the digital shelf. CPG products are under cost pressure due to inflation (which is linked in some way to supply chain issues) and most products can’t be priced lower to accommodate consumer’s reduced buying power. This has resulted in some smaller, budget and private label brands enjoying increased sales on the digital shelf.

 

Some CPGs have managed to work closely with suppliers to reduce the size of their portfolios and focus only on high volume products. Adding an element of flexibility into a supply chain is not an easy thing to do, but some manufacturers have found workarounds in creating alternative recipes or sourcing cheaper suppliers. 

digital shelf platform mockup data impact by nielseniq

Tactics for responding to supply chain pressures

McKinsey offers five suggestions for CPGs to counter supply chain issues:

1/ Create end-to-end transparency

Visibility of the entire supply chain is the only way to see where blockages are occurring. Without it, companies may not be able to pinpoint suppliers or issues where they are. Detailed subtier mapping can provide the necessary transparency.

2/ Digitization

If you haven’t already invested in updating the technology around your supply chain, there are real benefits to be had in terms of accountability and reactivity. This investment usually pays off.

3/ Fortified communication

The current challenging period has put strain on some relationships with retailers and suppliers. Clear and consistent communication remains essential for resolving issues as quickly as possible

4/ Embracing ecommerce:

The accelerated shift into omnichannel the pandemic triggered has pushed CPGs to change the way they work. Breaking down silos, acquiring new tech, altering product design, adapting to new distribution methods and regularity are all aspects of this new reality. The more CPGs can lean into these changes the more effective they’ll be.

5/ Assembling talent:

CPG supply chains were not conceived to function in the omnichannel environment, which means that the teams managing them are faced with new challenges. Training existing teams or hiring new data scientists or engineers should be a priority.

As manufacturers embark on the journey of updating their supply chain capabilities it’s always useful to remember that people–local, regional and global teams–are a company’s most important resource and perhaps the most critical part of this typically complex equation.

Privacy policy

Data collection - Use of cookies - Consent

DataImpact undertakes to ensure that the collection and processing of your data, carried out from the www.dataimpact.io site, comply with the Data Protection Act and the RGPD. This processing is necessary for the execution of our services and the internal functioning of our company. For any information on the protection of personal data, you can also consult the site of the Commission Informatique et Liberté www.cnil.fr.

Identity of the data owner:

Personal data are collected by : Société par actions simplifiée DataImpact whose registered office is at 39 Rue Lucien Sampaix, 75010 Paris, RCS PARIS 799 367 222 T: +33 (0)1 42 51 87 08

Purpose - use of your data:

DataImpact is likely to collect personal data about you for the purposes necessary for its activity, whether in terms of recruitment, responding to your requests for information, execution and monitoring of service contracts. Types of data collected: DataImpact only collects data that is strictly necessary for the purposes of its activity. The personal data collected can be the following:

-In the context of a request for information (name, first name, email, telephone, company name).

-As part of a recruitment process: (surname, first name, email, telephone, company name), information on the curriculum vitae (marital status, surname, first name, date and place of birth, nationality, professional background, academic background, hobbies)

-If necessary, connection data including your IP address may be collected for purely statistical purposes.

Origin of the data:

The personal data collected by DataImpact are those directly given by the person concerned when using the contact form or surfing on the site www.dataimpact.io.

Intended transfers of personal data to a non-EU Member State:

To date, DataImpact does not transfer, nor envisage any transfer of your personal data to a non-European Union member state.

Retention period of the categories of data processed:

Connection data are kept at the latest within one year after connection to the www.dataimpact.io website.
Data relating to applicants for a post are kept at the latest five years after the last contact, with a view to possible recruitment.

Data of prospects are kept no later than three years after the last contact.

Customer data are kept for the duration of the service contract.

Protection of your data:

DataImpact ensures that its employees and service providers, subcontractors or hosts, also respect the absolute confidentiality of the information provided to them.

We maintain in-house electronic and organizational security measures in relation to the collection, storage, and communication of data.

Your rights under the Data Protection Act:

DataImpact takes all appropriate measures in order to facilitate the exercise of the rights of its clients regarding their personal data (right of access, rectification, deletion, limitation of processing, portability, to define the fate of its data after death).

The information provided in connection with the exercise of these rights is provided in writing or electronically. On request, the information may be provided orally. All requests should be sent by post to 739 Rue Lucien Sampaix, 75010 Paris or to [email protected].

In accordance with the regulations in force, your request must be signed and accompanied by a photocopy of an identity document bearing your signature and specify the address to which the reply should be sent. A reply will then be sent to you as soon as possible and in any event within one month of receipt of the request.

Flows out of your data after your death:

The new article 40-1 of the French Data Protection Act allows individuals to give instructions regarding the storage, deletion and communication of their data after their death.

You can read the procedure relating to these directives by following the following link: “https://www.cnil.fr/fr/ce-que-change-la-loi-pour-une-republique-numerique-pour-la-protection-des-donneespersonnelles#mortnumerique”.

Cookies:

You are informed that, during your visits to the www.dataimpact.io website, a cookie may, if necessary, be automatically installed on your browser software. A cookie is a small file stored on your computer. As such, it is a block of data that does not allow users to be identified but is used to record information relating to their browsing on the site. Cookies are used, on the one hand, to facilitate your navigation on the site and, on the other hand, for statistical purposes. In order to better know the frequentation of the site, we (mainly) measure the number of pages viewed, visitors, visits, as well as the activity of visitors on our site and their frequency of return.

The parameters of the browser software make it possible to inform about the presence of cookies and possibly to refuse them in the manner described at the following address “http://www.cnil.fr/vos-libertes/vos-traces/les-cookies/”.

You have the right to access, withdraw and modify personal data communicated through cookies under the conditions indicated above.

Terms of Service

Article 6 III of the Law of 22 June 2004

Société par action simplifiée DataImpact
39 Rue Lucien Sampaix, 75010 Paris
T: +33 (0)1 42 51 87 08
M: [email protected]
RCS PARIS 799 367 222

Director of publication: Yacine TERKI

Hosting : O2 SWITCH 222 Boulevard Gustave Flaubert 63000 Clermont-Ferrand

Terms and conditions of use:

The information contained and consultable on this site is provided for information purposes by DataImpact. They can be modified at any time without notice. Under no circumstances does it constitute advice or a service of any kind whatsoever. You assume full responsibility for the use of this site or the information it contains.

DataImpact cannot be held responsible for damages related to the consultation or use of the website by the user. Hypertext links may refer to third party sites over which DataImpact has no control.

DataImpact declines all responsibility for the content of these sites. The use of this service is reserved for strictly personal use. Any reproduction or representation, of all or part of the information, brochures or logos contained on the site, on any medium whatsoever, is prohibited. Failure to comply with this prohibition constitutes an infringement that may result in civil and criminal liability of the counterfeiter.