New Study Reveals What’s Holding Back the Consumer Packaged Goods Industry

Most consumer packaged goods firms (CPG) are bullish about growth within the coming year, according to a new study, but fragmented backend systems and a lack of visibility threaten to hold back the industry.

The outlook for the CPG industry is promising, according to a new study just released by Canam Research and Navigator Business Solutions.

DOWNLOAD YOUR COPY [2023 TREND REPORT]

Fully 70 percent of CPG firms polled said that they expect a growth rate between 2 and 10 percent in the coming 12 months, and 16 percent estimated that growth at their firm would be between 10 percent and 25 percent.

Further, CPG firms view expanded sales channels as a key for ongoing growth. Roughly 42 percent of CPG firms are currently in the process of expanding sales channels, and an additional 30 percent are planning on expanding sales channels within the next 12 months, according to the study.

Top of the sales channel list is expanding the direct-to-consumer channel and boosting retail sales after the dip from the pandemic, according to the study. CPG firms also are looking to boost retail in-store channels and wholesale and distributor sales, although e-marketplaces and agents/brokers are less of a priority for most CPG firms right now.

CPG Problems with IT Fragmentation and Visibility

What might put a brake on growth and expanded sales channels is IT fragmentation and the lack of visibility that results from siloed backend systems.  More than half of CPG firms cited isolated and fragmented business processes, siloed systems, and a lack of scalable digital infrastructure as the primary challenges that could derail their growth plans, according to the study, and another quarter of respondents cited the lack of visibility that comes from fragmentation as the biggest challenge to meeting company goals.

With an additional 10 percent of CPG firms claiming that an inability to support the sales volume and scale as the biggest impediment to growth, the problem for CPG businesses is clear: roughly 88 percent of CPG firms lack an integrated digital backend that can support growth plans.

This is summed up by the fact that less than 30 percent of CPG survey respondents run their backend with a modern resource planning solution (ERP), the foundation for centralized business processes and the collection all of a company’s data for visibility and insight.

Cloud ERP Addresses What Ails the CPG Industry

The reason that fragmented business processes and siloed systems hold back CPG firms is because consumer expectations are evolving fast, and marketplace dynamics are shifting rapidly in the new sales environment. Consumer packaged goods firms that lack the visibility and nimbleness to adjust to the changing dynamics brought on by influencers, social media and online research can’t keep up with constantly evolving marketplace needs.

There’s a healthy demand for CPG products, but the majority of CPG firms don’t have the backend systems to adequately identify and flow with these changing needs.

Addressing this challenge comes back to having the right ERP system in place. Instead of fragmented systems that capture data but make it hard to use this data, ERP serves as a central nervous system that handles all business processes end-to-end and brings the full scope of CPG data within a single system. This centralization of data increases business visibility and enabled faster trend-spotting and adjustment through real-time reporting and artificial intelligence that can help uncover shifts in marketplace dynamics.

Lacking a centralized ERP system, which is the situation for 80 percent of CPG firms today according to the study, businesses simply cannot leverage consumer and operational data efficiently enough or quickly adjust when trends change.

A modern, cloud-based ERP system also is critical for expanding sales channels. To juggle multiple sales channels and effectively offer direct-to-consumer sales through company web sites, CPG firms require a centralized backend infrastructure that can integrate with the various sales channels and deliver the real-time coordination necessary to make it work. This only is possible when a CPG’s backend is centralized and in the cloud.

This clear need for cloud ERP is why 30 percent of CPG firms have recently upgraded to a new ERP system, according to the study, and an additional 35 percent are planning to upgrade within the next two years.

Digitally Transform Your CPG Business

The term for putting this necessary ERP backend in place is called digital transformation, and Navigator can help.

Over the past 25 years, we’ve assisted CPG firms and other lines of business with more than 500 ERP implementations as an SAP Gold Partner. From our long experience helping CPG firms modernize their digital backend, we’ve also developed prepackaged industry solutions for several segments of the GPG industry, including CPG distribution and CPG manufacturers. These prepackaged solutions significantly reduce the time, cost, and complexity of rolling out a modern ERP system.

If your business is being held back by fragmented processes or a lack of visibility, learn more about our prepackaged ERP industry solutions for CPG firms or contact one of our experienced consultants by calling (801) 642-0123 or writing us at info@nbs-us.com.