Various industries are actively seeking ways to enhance their operations and address ongoing challenges. This spans a range of perspectives, including strategy, operations, innovation, employee engagement and customer experiences.
In the Consumer-Packaged Goods (CPG) sector, which faced unprecedented disruptions during and in the aftermath of COVID-19, there are notable transformations on the horizon. The industry is striving to resolve supply chain issues, embrace emerging technologies and optimize online marketplaces for more efficient direct-to-consumer product delivery.
Justin Honaman, Head, Worldwide Retail & Consumer Goods Go-to-Market (GTM) at AWS, helps break down four emerging trends he sees the CPG sector continuing to embrace in the future.
Trend 1: Sourcing and procurement
Global supply chain disruptions — related to COVID-19, the ongoing war in Ukraine and the increasing occurrence of natural disasters related to climate change — have thrust unprecedented challenges upon nearly every industry imaginable, but especially consumer packaged goods, and particularly in terms of securing raw materials for production.
For instance, the conflict in Ukraine has impacted the availability of crucial inputs for various industries, prompting CPG companies to completely rethink their sourcing and procurement strategies. Today and moving forward, there is a strong focus on leveraging technology, innovation and data to enhance these processes. This entails closer alignment between business and procurement, significant investments in data-driven decision-making, supplier risk management and innovative expenditure management.
“Many CPG businesses are struggling to get certain elements that go into making a finished product,” says Honaman. “But this major challenge has also presented a major opportunity around technology, innovation and data as it relates to sourcing and procurement.”
He continues: “Next year, there will be a closer alignment between the business and procurement, with significant investment in new ways of gathering and looking at data, managing supplier risk and understanding which suppliers to work with and prioritize, what specific suppliers supply and where they’re located. There will also be new mechanisms around managing categories of spend.”
Trend 2: The explosion of the eCommerce marketplace
Another aspect of CPG that will continue to be a big focus for businesses is eCommerce.
During the COVID lockdowns, many CPG brands launched their own direct-to-consumer (DTC) sites as retail stores closed. These DTC platforms are neither efficient nor cost effective, in many cases because the businesses don’t have the right mechanisms or infrastructure to support this type of service, lacking crucial abilities like customer support and last-mile delivery — simply put, these legacy CPG brands are not structured to execute this route to market. Incidentally, digital native start-up CPG brands filled many gaps in innovation, as they are fully DTC.
“In a trend that really gained momentum in 2023, CPG brands are now leveraging eCommerce marketplace channels to boost productivity, growth and customer satisfaction. The number of entrants coming to marketplaces like Amazon will continue to grow rapidly and will be a significant part of their growth strategies, especially in global markets where marketplaces are still evolving and coming to life,” says Honaman.
Trend 3: Industry 4.0 and the smart factory
CPG brands will continue to explore integrating new technologies that help improve movement and visibility across the supply chain, such as moving products to warehouse facilities or to customers.
This is a significant challenge, not exclusively for reasons like the global pandemic, recent geopolitical issues and weather-related destructive forces — though such issues have certainly contributed to the depth of the challenge — but because CPG brands are global companies, working in different countries and already trying to overcome the inherent challenges of sourcing, making and moving products around the world and then executing that product placement and sale in a retail environment.
To cope with these demands, there is an ongoing explosion of investment in and commitment to new technology.
“One such technology is digital twins, which can model processes in a manufacturing environment to help reduce costs and inefficiencies, predict downtime, maintenance and outages and look at ways to improve existing technology deployments, like IoT,” says Honaman.
He adds: “And speaking of IoT, we are also seeing the explosion of IoT devices in warehouse and manufacturing environments, as well as across the entire supply chain.”
Trend 4: Journey to cloud
For global CPG businesses, the cloud offers the ability to leverage new technologies that support connected and smart factories, as well as cater to their ambitions to know, grow with and serve their retail partners, shoppers and consumers.
The cloud allows CPG brands to drive innovation, optimize operations and deliver a dynamic manufacturing experience, all while modernizing existing back-office systems.
This trend of cloud adoption continues to accelerate as CPG brands also begin to demand more contextual, tailored and fully customized cloud services specific to their industries and even to their own individual businesses.
Industry cloud was ranked as a key strategic technology trend by Gartner, and transformation providers like HCLTech are working with partners like AWS to deliver on these expectations.
In fact, HCLTech has been repeatedly recognized as a Leader by IDC MarketScape in its annual Industry Cloud Professional Services vendor assessments.
These contextual cloud services will not only offer continuous modernization and flexibility, but also rapid cost savings.
Cloud migration and modernization is complicated, and Honaman highlights four keys to being successful when working in the cloud:
- Boardroom/executive alignment and buy-in that technology will be a competitive advantage and priority
- A defined project or end goal to drive the migration and modernization
- The talent to support cloud adoption — whether internally or externally from a consultant or technology provider with the skill sets to support the new tech
- A timeline that maps out what workloads are going to be migrated and when — with set milestones, deliverables, and metrics