The consumer goods industry is grappling with a multitude of supply chain challenges that can have far-reaching implications for its ability to meet consumer demands. Ninety-five percent of supply chains must quickly react to changing conditions, but only 7% are able to execute decisions in real-time, according to Gartner.
As a result of these obstacles, CPGs are paying greater attention to today's supply chain technology trends in order to place smarter investment bets.
What are the US supply chain issues?
Labor shortages and climate issues are at the forefront of supply chain issues today, according to Douglas Kent, EVP of strategy and alliances at the Association for Supply Chain Management (ASCM), who notes that low water levels and the subsequent pile-up of vessels in the Panama Canal is the latest cause of congestion.
Around 90 ships pass through the canal daily, Kent says, but due to the drought, that number has almost doubled, and long product delays will have a ripple effect on the CPG industry, consumer goods retailers, and consumers as we approach the holiday shopping season.
What’s more, recent UPS labor negotiations and the filing of bankruptcy by shipping company Yellow serve as stark reminders of the vulnerability of logistics systems, he says, with retailers beginning to worry and brace for higher shipping costs, delays, and capacity constraints.
“Unfortunately, supply chain disruptions have an inevitable impact on consumer confidence and buying behaviors leading to the bullwhip effect, which is something retailers need to be aware of in the coming months.”
While supply chain health is improving overall, it’s been a much slower, more incremental recovery than many had expected, says Dustin Verdin, executive director of business innovation at supply chain solution provider Zipline. “That continues to put a lot of financial pressure on
asset-heavy carriers that have been burning through working capital, as well as the digital freight brokerages that rely on a healthy margin to undercut prevailing market rates.”
What are the things that can disrupt the supply chain?
The core principles of supply chain dynamics play a critical role in understanding the effects of supply chain disruption, according to Christian Roeloffs, co-founder and CEO of Container xChange, an online container logistics operating platform. The delicate interplay between supply, demand, and market prices means that a disturbance in one area reverberates across the entire system and cascades in impact, with fluctuations often triggering a cyclical ebb and flow within global supply chains.
“The black swan events over the past three years, like the pandemic or geo-political upheavals like Russia's war in Ukraine, have wielded a permanent influence on the strategies adopted by manufacturing and retail enterprises,” he says. “These events have engendered a series of domino effects — ranging from inflationary pressures to economic recession, labor strikes, surplus production capacity, and broader supply imbalances — all of which have had a compounding effect on the consumer goods supply chain.”
What’s more, significant changes in consumer trends and behavior in the U.S. and Europe have caused an imbalance between supply and demand, which he says has resulted in abundant capacity in shipping terminology relative to consumer requirements, and put downward pressure on prices.
What are the problems faced by supply chain management?
“Manufacturers are constantly dealing with the ripple effects of supply chain disruptions such as geopolitical conflicts, severe weather challenges, and uncertainty over trade policies,” says Tom Madrecki, VP of supply chain at Consumer Brands Association. If imposed, tariffs on tin mill steel stand to drive up the price of canned food and aerosol products from 19-30% due to the resulting sourcing difficulties that would be created for producers of canned goods, he notes.
“We must focus on averting policies that will make it harder for the supply chain to operate seamlessly and inhibit the ability to meet consumer demand on top of so many existing challenges beyond all control,” Madrecki stresses.