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The CPG food supply chain is not a direct route from farm to table. Instead, it is a complex network that challenges manufacturers to innovate, make processes leaner, and provide added value to retailers, brands, and end consumers.
Understanding each stage of this supply chain allows manufacturers to gain a competitive advantage that can fuel revenue growth. This breakdown of the food CPG supply chain will demonstrate how manufacturers can add value in each step - from raw material sourcing right through to the delivery of the final product.
Raw Material Sourcing: Where Quality Begins
The food supply chain begins with the sourcing of raw ingredients. Organic or GMO ingredients such as grains, dairy, and lentils make up the base of millions of food products. Consumers are increasingly aware of inequities in the global supply chain and avoid products linked to unfair labor practices or environmental degradation.
In response to consumer demands, retailers look for manufacturers on platforms such as Keychain.com that integrate transparent and sustainable supply chains. The onus is now on the manufacturers to leverage to prioritize these factors and deliver the best options to their customers.
Partnering with USDA, Organic, or Fair Trade-certified suppliers can help manufacturers ensure quality inputs. Similarly, accreditations like Global GAP (Good Agricultural Practices) reflect a commitment to the safety and sustainability of farming and can attract eco-sensitive brands.
Manufacturers can reduce transportation costs and mitigate environmental impacts by collaborating with local farmers. Local sourcing allows manufacturers to vet sustainability credentials and offer a meaningful backstory that brands can use to differentiate their products.
Food Production & Development: Innovating for Consumer Demands
Food trends adapt to consumers' tastes, making innovative product development a special opportunity for manufacturers. Product formulation and development encompasses new formulation, testing of products, and scaling up of production to market demands.
Integrating product development with the needs of the consumer for eco-friendly packaging, low-sugar alternatives, or allergen-free options enables retailers to tap into niche markets and exploit emerging trends in foodstuffs. In the same vein, manufacturers can adhere to certification standards, such as HACCP, SQF, or ISO 22000, to avoid costly recalls and ensure food safety and quality.
At the production stage, Vendor Managed Inventory (VMI) assists in avoiding both excess stock in warehouses and inventory shortages, while also minimizing expenses related to labor, purchasing, and accounting. By implementing VMI, companies can effectively manage their inventory, which in turn streamlines access and expedites processing, ultimately lowering labor costs.
Manufacturing & Processing: Driving Efficiency and Reducing Costs
Once raw materials have been processed into consumables, attention turns to large-scale manufacturing and packaging. It is here that manufacturers are afforded the opportunity to really refine their process and add value to the retailer.
Efficiency in the manufacturing stage depends on Lean Manufacturing Techniques. With the help of automation and lean techniques, manufacturers can reduce the cost of production while improving quality. These savings can be passed on to retailers and increase the margin for both parties.
Warehousing and Distribution: Smoothening Logistics for Retail Success
Efficient warehousing and distribution are vital for product delivery. Without accurate demand forecasting, manufacturers run the risk of overstocking or understocking. RFID and predictive analytics can enhance inventory tracking and management and improve the bottom line.
For perishable products, good cold chain management at the time of storage and transportation is highly crucial for merchandise quality. With the proper investment in robust cold-chain solutions, manufacturers make certain that their products will arrive fresh - a must for positive customer experiences. Innovative package designs such as resealable bags and single-serve portions also add value by producing less waste while providing more convenience for the consumer.
Retail Sales: Partnership to Deliver
The last part of the supply chain puts products in front of the customer. Manufacturers can assist retailers in this last-mile process through proper collaboration and marketing promotions. Manufacturers can install vendor-managed inventory systems and various other collaborative planning tools. Keeping the right product mix on the retailer's shelf minimizes stockouts and improves sales performance.
Manufacturers can also collaborate on retail sales approaches, such as in-store promotions, point-of-sale displays, and product demonstrations to drive traffic for the products and increase their visibility.
Create a Win-Win Situation for Manufacturers and Retailers
Manufacturers can add value at every touch point of the consumer packaged good food supply chain. Investing in sustainable practices, adopting innovative technologies, and working in close collaboration with retail partners can set manufacturers head and shoulders above their competitors.
