Introduction to Consumer Packaged Goods (CPG) Logistics Optimization
Inefficient logistics operations are causing yearly losses for Consumer Packaged Goods (CPG) businesses.
Avoiding these financial losses can boost your business’s profit margins.
This article will discuss finished product logistics operations for Consumer Packaged Goods (CPG).
We will also share a guide with three elements for successful logistics operations.
Understanding and implementing these elements is key to overcoming logistics challenges.
Why Efficient Logistics Operations Are Essential
Now, let’s explore why efficient logistics operations are essential.
Finished Product Logistics Operations is a critical component of business success. Ineffective logistics operations can result in large business losses.
For instance, frequent stockouts can result in lost sales revenue. Studies from the ECR Shrink Group indicate a 4% to 8% decrease in sales per stockout instance.
Benefits of Optimizing Consumer Packaged Goods (CPG) Logistics
Efficient logistics are crucial for smooth delivery and a competitive CPG industry.
Companies must optimize logistics to meet evolving consumer demands while cutting costs. This includes:
- Improvements in inventory management and transportation
- Enhancing supply chain agility. Deloitte’s explanation of agility for supply chains.
- Boosting customer satisfaction
Optimized logistics also maximize profitability. But how?
By reducing waste and stockouts and improving inventory turnover.
In the fast-paced CPG world, efficient logistics aren’t a function. They are a strategic necessity for success and growth.
What You Will Learn
By the end of this article, you will…
- Learn the three elements to guide you in optimizing CPG logistics operations.
- Understand why this is a strategic necessity to:
- Enhance customer satisfaction
- Lower Costs
- Foster long-term business growth.
In the fast-paced CPG world, efficient logistics aren’t a function, they are a strategic necessity for success and growth.
Arturo Murakami
3 elements to optimize Consumer Packaged Goods (CPG) logistics operations
If your goal is to optimize logistics operations for your CPG business, consider the following three elements:
Let’s dive deeper into each of these elements.
Consumer Packaged Goods (CPG) Logistics Element 1:
Warehouse efficiency
Consumer Packaged Goods (CPG) companies must reduce inventory levels to achieve warehouse efficiency.
Recognize that inventory should be a buffer to supply unexpected events.
To fulfill customer orders 100% of the time, your company must:
- Maintain safe stock levels.
- Ensure a smooth product flow.
3 Strategies to Achieve Warehouse Efficiency:
- Develop a warehouse strategy centered on SKU components. Design distinct processes for high-frequency items and slower-moving products.
- Avoid establishing unnecessary satellite warehouses, as closing them can prove arduous and costly.
- Ensure impeccable inventory record accuracy through robust monthly counting and cycling processes. A lack of inventory accuracy can impact order fulfillment capabilities.
Consumer Packaged Goods (CPG) Logistics Element 2:
Transportation and Logistics
Whenever possible, companies should aim to reduce:
- The number of times they handle products.
- The distance they transport products.
This is because fewer touches and miles translate to improved cost efficiencies.
3 Strategies to Optimize Transportation and Logistics:
- Choose direct shipping from production sources to customer warehouses. Especially for high-frequency SKUs, to establish a continuous product flow strategy.
- Enhance forecast accuracy to reduce last-minute customer orders. Also, your company must aim to mitigate the need for expensive spot orders. Your commercial go-to-market strategy influences forecast accuracy. Try to refrain from incentivizing month-end deliveries through promotions.
- Develop a comprehensive order-to-delivery map and footprint to understand lead times. Then, align them with the commercial team’s objectives.
Fewer touches and miles translate to improved cost efficiencies.
Arturo Murakami
Consumer Packaged Goods (CPG) Logistics Element 3:
Supply Chain Strategy by Customer
CPG companies must collaborate with commercial organizations to tailor supply chain strategies by customer or sales channel.
Don’t forget to recognize that not all customers have identical demands.
Companies need an agile and reliable supply chain approach.
2 Strategies while Developing a Supply Chain Strategy by Customer:
- Define logistics trade terms with customers to drive efficiencies. For example, offering full-truck or pickup discounts.
- Establish a straightforward returns and refusals policy. Why? Because ambiguities in this area can lead to significant waste and customer dissatisfaction.
Conclusion
Remember…
Optimizing logistics operations is more than moving products. It’s a strategic necessity to:
- Enhance customer satisfaction
- Lower costs
- Foster long-term business growth.
Now, it is time for you to optimize your logistics operations.
Start by examining these elements in your Consumer Packaged Goods (CPG) company.
Stay tuned for more valuable insights in our upcoming articles.
We look forward to connecting with you.
Let’s continue the conversation about optimizing logistics costs!
Schedule a 30-minute consultation using my Calendly link for personalized insights and strategies.
