Looking ahead to 2023 in CPG: From the smart factory to the cloud | HCLTech

Looking ahead to 2023 in CPG: From the smart factory to the cloud

Looking ahead to 2023 in CPG: From the smart factory to the cloud

Justin Honaman, Head, Worldwide Retail & Consumer Goods Go-To-Market (GTM) at AWS, explores four major 2023 trends that will be embraced in the CPG industry
 
9 min. read
Nicholas Ismail
Nicholas Ismail
Global Head of Brand Journalism, HCLTech
9 min. read
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As 2023 approaches, industries across the spectrum are looking at how they can improve and mitigate the challenges from the year before—from a strategic, operation, innovation, employee and customer experience perspective.

In CPG, a sector that was heavily disrupted by COVID-19 and the ongoing war in Ukraine, there are vast changes on the horizon as the industry looks to solve sourcing issues, embrace new technologies and take advantages of online marketplaces to get their products to direct-to-consumers more efficiently.

Justin Honaman, Head, Worldwide Retail & Consumer Goods Go-To-Market (GTM) at AWS, helps break down the four trends he sees the CPG sector embracing in 2023.

Trend 1: Sourcing and procurement

The disruption caused by the COVID pandemic and now, the war in Ukraine, along with other factors, has led to several challenges that have never been experienced by the CPG industry—which includes product manufacturers and distributors—before.

Suddenly, upstream sourcing and procurement became the most critical challenges facing CPG business. Put simply, they didn’t have access to the raw materials that go into making products.

For example, the war in Ukraine has hindered automotive giants’ ability to obtain wire harnesses. This has disrupted the production of vehicles for some European manufacturers and even forced Volkswagen, BMW and Porsche to suspend production at some of their plants. CPG manufacturers use crop inputs from Ukraine to produce products like cereal and granola bars.

“Many CPG businesses are struggling to get certain elements that go into making a finished product,” says Justin Honaman, Head, Worldwide Retail & Consumer Goods Go-To-Market (GTM) at AWS.

But he adds: “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

The second area that will continue to be a big focus for CPG businesses is eCommerce.

During COVID, many CPG brands launched their own direct-to-consumer (DTC) sites as retail stores closed. These DTC platforms are not efficient or cost effective, because they don’t have the right mechanisms or infrastructure to support this type of service, lacking crucial abilities like customer support and last mile delivery – legacy CPG brands are not structured to execute this route to market. Incidentally, the digital native start-up CPG brands filled many gaps in innovation as they are fully DTC.

“In 2023, continuing from 2022 and 2021, CPG brands will leverage 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 strategy especially in global markets where marketplaces are still evolving and coming to life,” says Honaman.

Trend 3: Industry 4.0 and the smart factory

In 2023, CPG brands will explore integrating new technologies that help improve movement and visibility across the supply chain, such as the movement of a product to a warehouse facility or to a customer.

This is a significant challenge, not only because of the pandemic and recent geopolitical issues, but because CPG brands are global companies, working in different countries and dealing with the challenges of sourcing product, making product, moving product and then executing that product placement and sale in a retail environment.

To cope with these demands in 2023, there will be an explosion of investment in new technology.

“One is digital twins, which can model processes in a manufacturing environment to reduce cost and inefficiencies, predict downtime, maintenance and outages and look at ways to improve existing technology deployments, like IoT,” says Honaman.

He adds: “Another will be the explosion of IoT devices in a warehouse and manufacturing environments, and across the entire supply chain.”

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“CPG brands can leverage these sensors, which might be on products or pieces of equipment, collect data from them to analyze and create actionable intelligence that can be used by the business to improve productivity, drive decisions and get an entire view of the supply chain.”

CPG brands can leverage AI/ML, analytics, automation, IoT and digital twins and continue to embrace Industry 4.0 initiatives and smart factory ambitions to get a better view of the total supply chain as well as operational performance in a manufacturing environment.

Trend 4: Journey to cloud

For global CPG businesses, the cloud offers them the ability to leverage new technologies that support the connected and smart factory as well as their ambitions of knowing, growing with and serving their retail partners and end shoppers / consumers.

The cloud allows CPG brands to drive innovation, optimize operations and deliver a dynamic manufacturing experience, while modernizing existing back-office systems.

This trend of cloud adoption will accelerate in 2023, with CPG brands also expecting more contextual or tailored cloud services, specific to their industry or even individual business.

Industry cloud was ranked as a key 2023 strategic technology trend by Gartner and transformation providers, like HCLTech, are working with partners like AWS to deliver these expectations.

In fact, HCLTech was named by IDC MarketScape as a Leader in its Industry Cloud Professional Services vendor assessment for 2022.

These contextual cloud services will not only offer continuous modernization and flexibility, but also rapid cost savings.

Cloud migration and modernization is complicated and there are four key areas that Honaman highlights to be successful when working in the cloud:

  1. Boardroom/executive alignment and buy-in that technology will be a competitive advantage and priority
  2. A defined project or end goal to drive the migration and modernization
  3. The talent to support cloud adoption, whether internally or externally from a consultant or technology provider–skill sets to support the new tech
  4. A timeline that maps out what workloads are going to be migrated and when–with set milestones, deliverables, and metrics.

 

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