CPG Market Demanding More Flexible Logistics Solutions
According to a new study released by Transport Intelligence (Ti), one of the world's leading providers of expert research and analysis dedicated to the global logistics industry, the consumer packaged goods (CPG) sector (also known as Fast Moving Consumer Goods or FMCG) is a giant with global sales exceeding $550bn (USD).
The Consumer Packaged Goods sector is one of the largest customers for contract logistics, according to author and Ti Senior Analyst Thomas Cullen.
"With estimated revenues of over half a billion, it is a global business that can make unique demands of logistics services. The Global CPG Logistics 2015 report looks at both the size of the logistics operations supporting CPG and the nature of what the CPG industry demands from logistics providers."
Ti's research shows that the CPG sector in North America spends 6.8 percent of revenue on logistics. In Europe, the logistics spend is up at 10.5 percent, largely because of Europe's stronger disposition towards e-commerce.
The markets that make up this global sector are diverse in character, so what are CPG manufacturers demanding of their logistics partners?
First of all, e-commerce and omni-channel retailing have a major impact on supply chain and logistics needs. In fact, e-commerce has the potential to take over from bricks and mortar operations so logistics providers have to be ready to manage inventory from production right through to the end customer and handle possible returns as required. Customers have to make sure their supply chain is equipped to offer maximum flexibility. They are demanding transport acceleration, transport postponement, and effective and sufficient inventory levels. They want final mile distribution (to the end-customer) and digital visibility along the entire integrated supply chain.
For logistics providers, the right balance between speed, costs, and inventory equilibrium levels is the key to success. They have to offer this integrated management by utilizing the entire service portfolio of extensive origin value-added services like quality control, labeling, reconditioning, packaging, and co-packaging; along with multi-vendor consolidation, and multi-country consolidation.
Providers must offer global transport solutions (across all transport modes and in accordance with specific needs), customs brokerage, distribution center operation, as well as final mile deliveries into retail outlets and even direct to end-users. North America remains the world's largest consumer market and logistics facilitators must be focused on providing this market with best-in-class supply chain solutions for the retail industry.
DB Schenker's upcoming dedicated Fashion and Luxury Fashion warehouse in New Jersey is a perfect example. The facility is dedicated to receiving airfreight shipments within a dedicated environment offering those benefits and standards which customers expect—standards with regards to equipment (e.g., garments on hangers) but also with regards to security and operational expertise. Fashion and Luxury Fashion clients demand a seamless, integrated service experience, from origin to final destination—worldwide.
Logistics providers with a global presence and reach certainly have an advantage. A young footwear manufacturer experiencing enormous global growth came to us in 2012 looking for solutions to its logistics challenges. They lacked oversight of their ocean freight and visibility of their shipments. They had too many different service providers to gain a global view of their products' movement and their freight. Logistics and transport costs were eating up their profits and restricting their growth.
The solution was to offer a flexible Distribution Center option that allowed for growth and scalability in the United States and Canada, reducing lead times and costs for end consumers. We also developed a global ocean platform to service their current and future needs with fixed costs at the piece level. Visibility was established at the purchase order and sales order levels by creating a dedicated system for tracking and tracing.
In another case, a French Luxury retailer needed a logistics partner to provide end-to-end control and visibility through each phase of each of their projects: project planning, organization, realization and finalization. They were managing multiple suppliers worldwide per project and had specialized material handling and customs management with specific delivery coordination requirements requiring both short and long term storage.
The solution was to create a dedicated team based in New York State with the expertise to manage the complexities of each project phase, providing accurate transport and customs cost estimates for budget planning and management. The team also committed to immediate advisement of any delivery time deviations and summarized monthly billing by project.
The end result in both cases is an informed customer that has more control over its logistics, increasing profits with enough room to grow well into the future. Being flexible was the only way to get it done.