CPG companies garner multiple benefits from automation—at a cost
For the CPG industry, automation means better information management; more opportunities for on-line sales, including direct-to-consumer; and more efficient, safer manufacturing.
Automation holds out the promise to reduce costs, make up for labor shortages, and keep product flowing smoothly through the end-to-end supply chain. But automation costs: according to one estimate, CPG companies will spend over $23 billion on digital transformations by 2030. They need assurance of a reasonable return on their investment.
The effect of siloes and poor collaboration on automation ROI
Successful automation begins with consistent data gathered in a consistent form across the end-to-end supply chain. Only full collaboration and consistency between functions and business units will generate trustworthy data for automated forecasting, demand planning, and sales, inventory, and operations planning (SIOP)—not quantity alone but quality.
Visibility into the supply chain—an in-depth examination of operations, procurement, logistics, and network design—enables the company to evaluate the information being generated. Does every link in the plan-buy-make-move-fulfill supply chain align with the company’s goals and strategies? Are the right people providing data, and are the right people receiving it? Is the data on regulatory compliance, due diligence, productivity, and consumer protection initiatives verified and timely? What gaps in information, processes, and control is automation expected to fill—and can automation alone succeed?
The effect of supply chain and labor issues on automation ROI
Supply chain disruptions and labor shortages are profoundly affecting the consumer products and retail (CPR) industry. In its outlook for 2022, the Consumer Brands Association urged the need for “meaningful control” over the supply chain to deal with the soaring wholesale price of heavily used commodities like oats (98% increase), edible oils (46%), and aluminum (44%). Labor is also an issue: the industry added just under 4300 jobs but has openings for over 120,000.
While many parts of the supply chain can be automated, automation has limits. If the procurement department has randomly added on supplier after supplier without a coherent policy, automation will not make the supply chain more predictable. If machines are standing idle between shifts, automation won’t make them go faster. If key manufacturing information is held close by a few employees—who then retire—automation won’t create documentation out of thin air. Visibility into the supply chain identifies those problems before automation simply perpetuates them. With visibility, it becomes possible to optimize first and then automate the optimized processes.
End-to-end supply chain visibility also reveals where automation of roles has the greatest impact and delivers the highest ROI.
The effect of ESG policy decisions on automation ROI
The digitization of consumer buying has deepened the public’s emphasis on environmental and social issues. The SGS-Maine Pointe report, The Simple Guide to ESG in the Supply Chain, reveals that “80% of global consumers expect CEOs to lead on societal issues.” It points out that “ultimately, ESG is about the long-term sustainability of people,” including suppliers, employees, customers, retailers, and company stakeholders.
Supply chains provide many opportunities for ESG; for example, by reducing waste or creating more efficient delivery routes that consume less fuel. Supply chain visibility not only finds those opportunities for embedding ESG, but also creates high ROI optimization at every stage from planning to fulfillment.
Supply chain visibility improves EBITDA before and after automation
Using data analytics and applying Total Value Optimization™, SGS-Maine Pointe helped a highly automated CPG client reduce inventory, speed up response times, save over 10% in packaging costs, and improve EBITDA. All of this was accomplished by concentrating on end-to-end supply chain visibility and optimization before any further investment in infrastructure or automation. To find out how SGS-Maine Pointe can make your supply chain automation more effective and deliver higher ROI both before and after, submit the form below.