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Why are CPG companies scrambling to get more agile?
CPG companies typically operated with 2 channel intermediaries… distributors and retailers. A segment of their distribution network used to have even 3 intermediaries in the form of wholesalers and sub-stockists.
Higher number of channel intermediaries meant more inventory in the system which acted like a shock absorber. Even if the distributor went out of stock, retailers still carried significant inventory to service consumers.
The emergence of Modern Trade often shortened the channel when companies started selling directly to them.
E-Commerce channels worked on the concept of just one channel intermediary, the e-com platform.
D2C channel like website sales meant that there were no channel intermediaries at all. A stockout at the company’s warehouse affected consumer sales directly.
As the channels get shorter with less number of intermediaries, companies need to respond faster to demand shifts, to avoid stockouts. Their supply chains must become more agile in terms of speed of response.
CPG companies have realized this dynamics and are working hard to make their supply chains more agile.
Are you in?