When the British-Dutch consumer packaged goods (CPG) business Unilever, maker of US mayonnaise powerhouse Hellmann’s, announced in 2010 that it would use only certified cage-free eggs by 2020, it upended the entire US supply chain.
In 2010, only 2% of egg-laying hens in the US were cage-free. “The sheer number of eggs that go into Hellmann’s products – 331 million a year in the US only – means we had to completely rebuild our supply chain in order to make our goal a reality,” the company’s marketing director, Russel Lilly, said at the time. Still, the company achieved its goal three years ahead of schedule, working its partnerships with suppliers and animal-welfare organizations to transform the US egg-production business.
Hellmann’s scramble for responsibly sourced eggs is increasingly typical of how growing health- and social-consciousness on the part of consumers is driving change in the CPG supply chain – and the supply chain is responding by applying digital technologies to the challenges of achieving farm-to-table transparency.
“As consumers increasingly make purchasing decisions based on brands’ sustainability efforts and values, grocers are putting pressure on CPG companies to act responsibly,” said Lindsey Mazza, an expert in Consumer Products and Retail, Supply Chain at French consulting business Capgemini. “Adoption of product management systems is growing in the CPG space so that suppliers can drive critical supply chain and sourcing information to the retailer, providing traceability all the way back to the farm.”
DATA PROVES QUALITY
A 2018 report by the Grocery Manufacturers Association (GMA) and Boston Consulting Group, titled “How CPG Supply Chains Are Preparing for Seismic Change,” found that 78% of CPG companies are prioritizing end-to-end data visibility—from point-of-sale data to GPS tracking data on shipments.
of CPG companies are prioritizing end-to-end data visibility—from point-of-sale data to GPS tracking data on shipments.
Source: 2018 report by the Grocery Manufacturers Association (GMA) and Boston Consulting Group
“They use predictive analytics for demand forecasting and capacity modeling, and scenario modeling to optimize manufacturing and distribution,” the GMA report said. “Geo-analytics help them improve logistics flows and route planning and build a control tower to create end-to-end visibility in the supply chain. New data architecture, built partly in the cloud, can link data seamlessly, enabling companies to leapfrog costly and lengthy ERP deployments.”
US-based Amy’s Kitchen, a pioneer in organic food production, is just one CPG company that has turned to supply chain optimization software to gain full visibility into all aspects of its supply chain. “Our goal is to make the most delicious food with the best quality ingredients, and this brings complexity into our supply chain,” said Nigel Batchem, Senior Director of Planning at Amy’s Kitchen.
Amy’s Kitchen was using Excel spreadsheets, which were becoming more ineffective with each passing day. Response times were too slow to meet changes in demand, and worse, monthly planning cycles could take as long as six weeks to complete. Amy's Kitchen's systems were simply unable to cope with the rising level of complexity. Suboptimal planning processes were actively holding Amy’s Kitchen back from further growth.
“We required a supply chain planning and optimization platform that could accommodate our intricate scheduling requirements, which stems from our unique approach of assembling and cooking products simultaneously. Using (...) software platform will enable us to maintain the high quality and fulfillment standards our customers have come to expect.”Andy Berliner
CEO at Amy’s Kitchen
The result is that Amy’s Kitchen is very happy with how digital planning has enabled it to meet its planning goals, cut costs, increase visibility and improve its ability to adapt to disruptions. In addition to business benefits, Amy’s Kitchen employees experience improvements as well. The optimized scheduling means that Amy's Kitchen can now improve the work life of its employees. For this company, it is not enough to simply produce high-quality food; the quality of the work experience of those producing the food has to match.
ANALYSIS DRIVES INSIGHTS
The data needed to drive these systems also is going digital. Sensors track factory processing information, temperatures during shipping, times and dates of pickups and deliveries, sell-by and use-by dates and a host of other metrics. To move quickly if a shipment is delayed, if temperatures are out of range for too long, or if a recall is needed, however, CPG companies need reporting systems that can access, cleanse, analyze and highlight data in real time to deliver critical insights. And that means that artificial intelligence (AI) has an increasingly important role to play.
“AI will be used to augment people,” said Simon Ellis, who leads the Supply Chain Strategies practice at analyst firm IDC Manufacturing Insights. “As CPG companies process more and more data, they will need eyeballs to look at and act on the information that brings. AI will provide the additional resource they need; if not, that data is wasted.”
How CPG companies collect and use data will become a point of competitive differentiation, Ellis predicts. “Those that will have access to data better will perform better,” he said. “Total supply chain visibility cannot be achieved without data.”
BACK TO BASICS
As the demands on CPG companies continue to grow, some are taking a back-to-basics approach tackling supply chain complexities, becoming more sustainable in the process.
“Larger multinationals are being squeezed in the market by new independent CPG companies that appeal to consumers with their strong ethics, total transparency and sustainable business models,” Capgemini’s Mazza said. “With a simplified supply chain, they are able to bring products to market much faster and react to the pulse of what consumers want.”
UK smoothie brand Innocent Drinks, for example, has built its reputation on making simple, natural, healthy drinks. Innocent’s company mission is to make products that taste good and improve consumer health. To reinforce that commitment, the company recently became a certified B Corporation, a voluntary audit carried out by global non-profit organization B Lab, which assesses companies’ impact not only in terms of food quality, but also on employees, customers, community and environment.
“We’re trying to be a good company and demonstrate that you can grow successfully doing it the right way, and we want others to follow,” Innocent CEO Douglas Lamont said in a recent interview with the London Evening Standard. That’s also why the company favors suppliers certified by independent environmental and social organizations, including the Rainforest Alliance, and pays a premium for certified fruit.
TRUST BUILDS LOYALTY
By establishing trust with consumers and helping them to be more socially responsible themselves, businesses can put people and the planet on the same footing as profits, and make sustainable capitalism work.
“Today, when it comes to their food, consumers want speed, honesty and transparency,” Mazza said. And so CPG businesses must demonstrate – with certified data delivered in real time – that they use sustainable ingredients and practices across every aspect of their supply chain.
”It’s up to CPG companies to clearly express their brand values, demonstrate how they are helping the planet and communicate their product attributes to consumers,” Mazza said. “Using technology, they can get a better grasp of their supply chain, creating products that are sustainable, traceable and desirable.”
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