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CEO Letter
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The Phrase that Kills CPG Supply Chains
“We’ve always done it that way” is one of the most dangerous sentences in business. And yet, it’s all too commonly heard in the logistics industry, particularly among the large, established companies that move consumer packaged goods. Technological innovation has replaced industrial innovation as the dominant force that revolutionizes industries. In the era of real-time manufacturing and nearshoring, remaining competitive requires adopting technologies that can improve efficiencies and increase margin.
With estimated annual revenues exceeding US$550bn, the Consumer Packaged Goods (CPG) industry encompasses a vast range of products, from bubble bath to duct tape to razor blades. These companies face a constant battle for market share and retail shelf space, made more complicated by the fact that customer demand can change literally overnight – especially when it comes to the ‘hot today, left behind tomorrow’ type of goods that need to be delivered as fast as possible to meet demand around a hot trend. CPG manufacturers are able to switch between different vendors or vessels within hours, not days and weeks. There is no need to plan freight routes and schedules far in advance as they are able to adjust volumes according to business demands.
As e-commerce and omni-channel retailing grows, CPG players need new ways to ensure that their supply chain can keep up with shifting buying patterns as well as costs.
Transportation costs are one of the largest variable factors impacting CPG pricing and margin. This means key challenges include just-in-time transportation, effective and sufficient inventory levels, final mile distribution and visibility along the supply chain. CPG is a global business with unique demands when it comes to logistics services. It’s one of the largest customers for contract logistics.
Established multinational CPG vendors typically use the same high-margin transportation provider for years, sometimes due to loyalty, and sometimes because it’s just a hassle to switch. The problem with this is that today’s logistics market is volatile. Even big carrier companies - like South Korea’s Hanjin - can go bankrupt, leaving customers (and their goods) in the lurch. More generally, failing to stay on top of how a longtime provider’s rates compare to the rest of the market means that CPG companies wind up paying more than they otherwise would.
Save time and feel confident
Think about this scenario: a fast-growing CPG company finds an unexpected business opportunity in region that isn’t well-served by his current logistics provider. What can the VP of Logistics at that company do to make sure that the company’s goods reach the market? Well, they can call dozens of carriers, send a pile of emails, and lose valuable time researching all relevant providers with the ability to meet their needs, and waiting for those providers to respond. Being unable to get goods to a new market quickly, efficiently and affordably is a lost opportunity.
Or they can turn to technology. A platform such as Haven can instantly connect a company looking for a freight partner to hundreds of highly-rated potential providers that service the relevant ports. This gives the CPG maker or shipper a panoramic view of all of the shipping options available, enabling them to compare quotes and select the provider that is the best fit for them. With transparency and visibility along the supply chain, Haven’s platform presents all pertinent information on a single dashboard, providing quotes that cover not only ocean shipping but air transportation and door services.
Automating traditional workflows streamlines the start-to-finish process of shipping, from initial booking to document management, frees up a company’s time and energy to focus on other aspects of growing the business. Reducing the variability of transportation costs enables CPG vendors to focus on their products, not on logistics.
This letter started with a business cliché and I’d like to close with another: “If it ain’t broke, don’t fix it.” Well, the global logistics business was broken, and technology offers a fix. The CPG companies that take advantage of this transformation today will be tomorrow's market leaders.
NO.
3 January 2017
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