From Sourcing to Shelf: Understanding the CPG Supply Chain Process
The consumer packaged goods (CPG) supply chain encompasses all the necessary steps and actions to effectively bring consumer products from production to market. It covers everything from sourcing raw materials and manufacturing to packaging, distribution, and retailing.
What sets the CPG supply chain and logistics apart is its emphasis on high-volume, fast-moving goods consumed rapidly and requiring regular replenishment. This focus ensures that high-quality products reach consumers promptly.
CPG Supply Chain and Logistics Process
This is an outline of the CPG operations, supply chain and logistics:
Sourcing of Raw Materials: Companies source ingredients for food products and chemicals for cleaning products.
- Sourcing of Raw Materials: Companies source ingredients for food products and chemicals for cleaning products.
- Manufacturing and Production: Raw materials undergo a series of processing and manufacturing stages until they are transformed into finished products. Quality control ensures the products meet standards and regulations.
- Packaging: Packaging can be outsourced or handled in-house. It ensures product protection, simplifies transportation and offers marketing and information to consumers.
- Quality Assurance and Products Testing: Products undergo rigorous testing to guarantee quality and compliance with legal and safety standards. This includes various types of testing, such as lab testing, shelf-life testing, and safety checks.
- Inventory and Warehouse Management: Warehouses store manufactured goods until they’re transported to retailers. Efficient inventory management balances supply and demand, preventing overproduction or stockouts and controlling costs—a common CPG supply chain challenge.
- Order Processing and Distribution: Retailers must place product orders, and the CPG company processes them. Once processed, they will arrange the transportation of goods from their warehouses to retail locations or distribution centers.
- Transportation and Logistics: Products are transported from their manufacturing site or warehouse to their final destination.
- Retailer and Shelf Management: Retailers stock shelves, set displays, determine prices, and promote the products.
- Consumer Purchase: Consumers purchase the products from the retailer.
CPG Supply Chain Challenges:
These are some common CPG supply chain challenges:
- Inventory Management: Overproduction and stock shortages are costly challenges. Proper CPG supply chain management includes using software, analyzing market trends and consumer data to better understand consumer demands.
- Cost Management: CPG supply chain and logistics needs to have high visibility and transparency to reduce costs. A CPG supply chain solution could be outsourcing packaging or manufacturing to a reliable company.
- Sustainability: Consumers demand better environmental practices from companies they support, but adoption of sustainable practices. A CPG supply chain solution could be sustainable packaging which reduces the carbon footprint.
- Global Supply Chain Risks: Supply chains can face supply chain disruptions due to geopolitical tensions, trade disputes, and other global issues. These potential risks and have contingency plans in place to mitigate their impact.
- Quality Control: With many moving parts, CPG supply chain quality can decline. By outsourcing packaging or manufacturing to facilities that meet regulatory standards, businesses can make better products.
- Customer Experience: Finding new solutions to enhance customer experience can be a challenge. One CPG supply chain solution to this could be making packaging more user-friendly.
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