March 17, 2023 | Supply Chain Strategy
CPG and retail companies have had to deal with numerous supply chain challenges over the last few years, among them inflation, shortages, demand spikes and transportation constraints.
Just-in-time inventory management strategies lost favor during the pandemic as supply chain disruptions led to empty shelves, but simply maintaining a larger inventory isn’t an option in 2023. National storage pricing is up 1.4% month over month, and 10.6% on an annual basis, reflecting full warehouses across the U.S.
With supply chain constraints easing, optimizing inventory levels will be crucial in 2023, and CPG and retail firms should look to advanced inventory management solutions to do so.
In the current inflationary market, CPG and retail companies must adopt new tools to manage inventory with more agility and visibility in order to balance supply and demand and fuel continued growth into new markets.
Maintaining inventory levels became more challenging in 2022 due to increasing demand from consumers and multiple store outlets. Management and optimization of product flows are important to balance supply and demand and optimize working capital for businesses in the current unpredictable marketplace.
Inventory optimization solutions are anticipated to be critical in 2023 as they help CPG and retail firms in accurate forecasting and product planning.
For CPG and retail companies, there is often a lack of transparency with respect to product pricing. Despite the availability of the category price, it is not defined how the price is broken down specifically by material component, wastage, conversion, labor, and premium added for the product.
Moreover, category prices are often not indexed to basic commodity prices. This has caused category prices to diverge from commodity prices. In 2022, consumers favored buying goods whose commodity price technique was listed in a corrugated method.
In 2023, due to factors like purchasing power decreasing as a result of inflation, it is likely that consumers will be even more selective with their purchasing decisions. To maintain profitability in this environment, companies must work to control costs by getting real-time visibility into costs and optimizing inventories.
Demand for a particular commodity or product varies from region to region.
Entering new markets and even developing brand new distribution and fulfilment channels are expected to benefit CPG and retail companies and help them overcome key supply chain obstacles.
However, to facilitate new growth in an inflationary period, they must adopt new tools and technologies that let them manage inventory with agility and adapt to changing demand signals.
Stay tuned for more CPG and retail industry insights in GEP’s forthcoming 2023 CPG Outlook.