MHI Solutions Improving Supply Chain Performance
NO INDUSTRY IS closer to the ultimate end‑user than the consumer goods industry. “They have a real finger on the pulse of what the consumer wants and needs and uses every day,” Tom Madrecki, vice president of supply chain and logistics for the Consumer Brands Association, said.
The consumer goods industry encompasses all products bought by individuals for personal use, including durable goods (appliances, cars) and non‑durable goods. The Consumer Packaged Goods (CPG) field, on the other hand, is a more specialized, faster‑moving subset of this industry, focusing on items that are packaged, branded, consumed quickly and replenished frequently, such as food, beverages and toiletries.
“Consumer packaged goods are products that are typically fast moving, low margin, in constant rotation in a household,” Madrecki said.
Of course, the consumer is always changing, and so the industry is constantly adapting to meet those consumers’ demands—and that includes how they serve consumers via their supply chains.
“One of the real hallmarks of the consumer packaged goods industry and the supply chain that supports it is that it’s in this low‑margin environment, it’s constantly in flux and it’s constantly trying to adapt and pivot to maintain the margins that are necessary,” Madrecki said.
Against that backdrop, the supply chain landscape for this industry requires flexibility, innovation and cost management to be navigated effectively, according to Brad Shelton, president of retail and manufacturer collaboration for Circana, a market research and technology company.
Madrecki and Shelton shared some of the key challenges and opportunities the industry faces.
PROMINENT CHALLENGES
Madrecki said an “unheralded” characteristic of the field is that it is the largest domestic manufacturing sector by employment in the United States. Because the CPG field encompasses low‑margin, perishable products, it tends to operate closer to the consumers that it serves, he said.
“The same brands that everyone relies on every day are actually some of the biggest job creators and employers all across the country,” Madrecki said. “And we have a really unique and compelling story to tell from a supply chain standpoint, because we are making things here in America at a time when you see tariffs and other things going into effect and a lot of tension all around the world.”
That puts them in some ways better-positioned to navigate some of the geopolitical issues that have disrupted the global supply chain. However, they are far from immune as there are critical ingredients and inputs with no domestic replacement, Madrecki said.
“There is inherently this connectivity to the rest of the world when it comes to the CPG industry, and that has then, of course, elevated some of that exposure in the current environment,” Madrecki said. “It is very top of mind for CPGs to continue to deliver their products affordably and to maintain that availability in the marketplace that consumers count on.”
The pressure is unrelenting.
“They’re also facing increased competition when it comes to new startup brands,” Madrecki said. “There’s a lot of new entrants in this space. And again, this is a dynamic market, and so it forces CPGs to always be in this mode of, ‘How do I keep up?’”
Shelton said the biggest current challenges in consumer goods supply chain management include forecast inaccuracy, inventory imbalances, labor shortages and limited end‑to‑end visibility.
“These are being addressed through AI‑driven forecasting and inventory optimization, which improve demand predictions and stock management,” Shelton said. “Network redesign and stock‑keeping unit (SKU) segmentation help streamline operations and balance inventory across locations. Additionally, integrated control towers provide real‑time visibility and coordination across the supply chain, enabling proactive decision‑making and better resource allocation.”
In today’s environment, high volatility and low tolerance for disruption can lead to demand shifting faster than traditional planning cycles can adapt, Shelton said, “requiring agile and responsive supply chain strategies.” Shelton said real‑time decision‑making that uses demand sensing and rapid inventory rebalancing helps to minimize service risks and respond swiftly to market changes.
Shelton said those in consumer goods also must contend with “channel complexity,” which is driven by the rise of omnichannel retail and direct‑to‑consumer models. That trend “fragments demand and inventory, making it challenging to maintain visibility and efficiency across channels,” he said.
TECH ADOPTION
It is unsurprising that the CPG field has been aggressive about pursuing adoption of AI and automation, including in the supply chain. Madrecki said the Consumer Brands Association meets regularly with chief supply chain officers from the CPG field and “everyone has AI and automation projects underway.”
“They’re trying to operate as leanly and as efficiently as possible, given rising costs and some of the supply chain and inflationary pressures,” Madrecki said. “Everyone is extremely sensitive to affordability and nobody wants to have to raise prices, even as they’re squeezed by tariffs, rising labor costs, inflation and the combination of climate and geopolitical events that may lead certain commodities to be more expensive.”
Companies are trying to manage all of those pressures simultaneously.
Shelton believes that artificial intelligence (AI) has “fundamentally transformed” the supply chain field, particularly by shifting operations from reactive workflows to predictive and efficient models.
“The most significant impacts are evident in demand sensing, which allows companies to anticipate customer needs with remarkable accuracy,” Shelton said. “This foresight directly improves inventory positioning, ensuring the right products are exactly where they need to be to meet market demands.”