E-commerce Puts Increased Pressure on CPG Supply Chains

A new report authored by The Boston Consulting Group (BCG) and commissioned by the Grocery Manufacturers Association (GMA) shows that online shopping, new digital technologies, and increasing channel fragmentation are intensifying the pressures on US consumer packaged goods (CPG) supply chains.

The report, How CPG Supply Chains Are Preparing for Seismic Change, is based on the findings of an in-depth benchmarking study of more than 30 leading CPG companies.

Respondents were asked to rate the issues that were “top-three concerns” for them. The top five issues that came up were:

• Logistics Cost – 47% rated this as a top-three concern
• Customer Service – 47% rated this as a top-three concern
• Capacity for Growth – 37% rated this as a top-three concern
• Complexity – 33% rated this as a top-three concern
• Channel Proliferation – 33% rated this as a top-three concern

The report states that the need to achieve high service levels while keeping costs low is only growing with the rise of e-commerce.

Brick-and-mortar grocery retailers are under immense pressure: consumers today expect more variety and lower prices, and Amazon’s acquisition of Whole Foods “marked a pivotal moment in the emergence of online grocery buyers.” CPG supply chains are likely to feel the squeeze from this. 

Not surprisingly, respondents of the study believed that their biggest growth over the next two years would be in e-commerce (predicting 58% through online channels compared to 3% for brick-and-mortar sales). Yet, their preparation for this growth was somewhat lacking.

Only 6% of CPG companies have dedicated e-commerce supply chain teams, and only 3% are able to fully track sales by channel. 58% of companies have some visibility into omnichannel online sales, such as online Walmart sales, but 21% have no tracking ability at all. 

BCG outlined 5 “must-do’s” for CPG companies to prepare for seismic change:

• Keep seeking efficiencies;
• Capitalize on big data and digital tools;
• Secure new skills;
• Prepare for online growth;
• Sell customers on the benefits of collaboration.

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