Two years ago, when many of us first experienced the supply chain impacts of the COVID-19 pandemic, some situations were unprecedented — like empty store shelves, lack of availability of common household goods and only one means of shopping — e-commerce. Consumers adapted and anticipated a return to more typical conditions for purchasing CPG items. However, as new strains of the virus continue to emerge, along with inflation, those unprecedented events are becoming almost daily occurrences, along with rising prices for basic necessities.
Clearly, the CPG sector faces many supply chain management challenges — everything from increasing costs for contract lanes due to a driver shortage, to containers sitting at ports for extended amounts of time. A solution like shifting to air freight will solve the access to products, but significantly increase operating costs. Many CPG companies are increasing the price of goods to offset the cost of supply chain challenges. This begs the question — do CPG companies face the risk of passing along such severe price hikes that consumers may not return once economic conditions stabilize?
Diversification of suppliers and sourcing locations are no small tasks
Some CPG companies have changed their supplier strategy from one with a few select suppliers to an increased number of vendors. Managing more vendors inherently requires more work on the part of the shipper. Other CPGs are looking at even more drastic changes, such as having products arrive at East Coast ports, even though the ultimate destination is a retail store in California. That real scenario is the fastest way for at least one company to maintain inventory to serve their customers
While these strategies will help keep products on store shelves, they are not easy changes to implement and often have a negative impact on the shipper’s operational efficiency, at least in the early stages of adoption.
Lifestyles have changed and consumer expectations are increasing
While CPGs wrestle with these challenges, many consumers have changed their lifestyle and shopping habits. They count on e-commerce to have what they need and deliver it to their homes. This level of service may leave some consumers impatient with stock-outs or empty store shelves, especially combined with higher prices. And in reality, they do have other options — many items can be ordered online and in their hands within 24-48 hours.
New challenges require new thinking and solutions
To adapt to this new dynamic, CPGs must be able to quickly assess options and analyze potential gains versus risks. Having access to technology and market intelligence are basic building blocks. However, companies do not have the luxury of time to do exhaustive searches or requests for proposals.
It is time to say goodbye to spreadsheets, manual bids done on an annual basis and make the most of the exciting new technologies that are reinventing many aspects of freight management, beginning with procurement.
Is one bid a year agile enough to respond to a rapidly changing market? Do shippers or carriers have time to devote to many requests for proposals, which in the past have been very time-consuming? And can spread sheets and historical thinking — “we’ve always done it this way” — offer the level of business intelligence needed for today’s supply chains?
If even one of these answers is no, it may be time to reinvent the freight proposal process and revolutionize many aspects of how freight is sourced and shipped. While challenging times may have led shippers to make a change, the benefits will last much longer than their current pain points.
Debra N. Phillips is Marketing Manager at Emerge.