Reshoring: Can it bring agility to Consumer Packaged Goods & end supply chain disruptions?

Russia’s invasion of Ukraine, the COVID-19 pandemic and other major global events have forced the Consumer Packaged Goods (CPG) industry to assess its fundamental capabilities. With the constantly fluctuating demands, disruptive market volatility and overall uncertainty of supply options, businesses have faced a raft of challenges in terms of managing their supply chain.

Lacking control in an unpredictable age

Many of these relate to a loss of control and visibility. It is certainly true that a large and growing number of CPG organisations report a lack of visibility beyond tier two in their end-to-end supply chain hierarchy and consequently a loss of control along the extended supply chain.

Some CPG organisations have had to ramp up production due to demand surges, while others have had to scale it back because of lack of demand. But across the board, the keynote has been unpredictability. In the new normal, historical measures of forecasting have ‘gone out the window’ and it has been difficult for businesses to stay on top of customers’ real-time needs.

Another challenge for many organisations in today’s globalised age was an extended supply chain and a significant dependency on overseas companies for the supply of critical components. The disruption of the past three years has brought all this into sharper focus and CPG companies have come to realise that they need to change and adapt.

This lack of visibility and control is encouraging some businesses to consider reshoring. It is part of a trend among global firms, in particular, to build up resilience following the supply shocks caused by the disruptive events of the past few years.

Many CPG organisations see bringing their production and manufacturing ‘back home’ as an antidote to economic, environmental and political disruptions. Certainly, there are benefits to shortening the supply chain in this way, including bringing the source of supply closer to the customer, reducing the investment in working capital and improving product flexibility and agility.

Finding a solution

Reshoring is not easy and making that transition successfully requires solid strategic planning, with businesses defining clear goals and objectives before any changeover begins. Such a shift in logistics also necessitates enterprise resource planning (ERP), so that businesses can manage the change well, minimise costs, mitigate risks and stay compliant. Leveraging technology for ERP can give CPG supply chains the operational visibility and real-time data they need to build and manage new, localised operations that are smart and responsive.

Any organisation reshoring its supply chain will need to understand the impact on demand and anticipate it moving forwards. Reporting tools are one of the most efficient and reliable ways to do so. ERP solutions provide insights and business intelligence, such as a clearer picture where and when demand for an organisation’s products are coming from. That in turn allows the business to make properly informed strategic decisions that more accurately adapt to changes in demand and satisfy it.

Critically too, ERP provides the enhanced supply chain visibility that is so important after a CPG business makes a reshoring transition. Given the fragmented nature CPG supply chains, it is important for manufacturers in the space, in particular, to have total visibility throughout the chain as their products move from raw ingredients to finished products sitting in warehouses or retail outlets.

ERP allows such businesses to track and trace ‘from nose to tail’, ensuring timely shipping and reducing your exposure to quality and spoilage issues; safety issues and expiration date issues. The technology can also help with stock tracking, generating timely notifications and alerts when stock levels drop.  Also critical, especially at times of change such as after a reshoring process, ERP solutions will help pinpoint cost-saving opportunities, eradicate the potential for human error, and streamline systems.

Today, with disruption across the CPG supply chain increasingly endemic, it is likely that growing numbers of manufacturers will be looking to tap into the many benefits of reshoring their supply chains. Against that backdrop, technology, and resource planning, in particular, is likely to be key in enabling these businesses to make a successful transition to the new approach and run it at an optimal level over time.

 

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