Consumer product goods (CPG) producers were hoping for an easier year in 2023 with fewer challenges from COVID-19 and moderating inflation. However, challenges remain with more than half of CPG manufacturers struggling with inflation and significant numbers reporting problems finding skilled workers and the continuing problems of the supply chain.
Those were key findings of the recently released 8th edition of Rockwell Automation’s State of Smart Manufacturing: CPG Edition. Consumer good makers continue to try find the right balance between upholding quality and attaining profitable growth. Additionally, 36% of them find the deployment of technology and data utilization to be substantial internal challenges. Worker retention (35%) and enhancement of employee onboarding (34%) also rank as pivotal concerns.
The report offers perspectives from 216 CPG leaders on the current challenges they face and the evolution of their operations and technological utilization as they seek to fortify their businesses for the future. Among these leaders, who spanned home and personal care as well as food and beverage manufacturing, 25% represented companies with revenue exceeding $1B, originating from 13 countries.
Technology: A key solution
Manufacturers reported a strong desire to invest in technology to mitigate internal and external risks to elevate quality, sustain competitiveness and ensure business continuity. Nearly half (49%) have already embraced smart manufacturing, with an additional 45% planning to do so within the year. Furthermore, 42% of businesses are hastening their digital transformation to remain on par with competitors, while 44% are driven by the goal of enhancing quality.
A noteworthy 78% of those surveyed firmly believe in the paramount importance of smart manufacturing for their businesses’ future triumphs. This belief is grounded in the fact that smart manufacturing technologies optimize production processes, diminish downtime and curtail waste. Real-time data collection and analysis facilitate enhanced monitoring and control of production lines, leading to improved resource utilization and overall efficiency. Extracting value from data takes center stage in steering business outcomes, as underscored by the 43% of CPG manufacturers who emphasize refining data analytics.
Significantly, the enhancement of technology usage is recognized as a catalyst for effectively managing workforce challenges with 48% of CPG leaders augmenting process automation to counter labor shortages. As a result of technology adoption, 90% of manufacturers anticipate either maintaining or expanding their workforce, with 38% foreseeing the reskilling of existing personnel. Furthermore, 29% anticipate an expansion in their workforce due to technology adoption.
On average, CPG businesses allocate just over one-fifth of their operational budget to technology investments. Leading areas of investment include cloud technology (45%), supply chain planning (42%), cybersecurity (41%), training (35%) and business process automation (33%). These investments are yielding returns, with CPG manufacturers pinpointing cloud technology and process automation as the two most impactful and rapidly effective technologies.
In terms of technology application, 57% of CPG businesses use software for process automation, while 63% employ it for enhanced corporate data tracking. Smart manufacturing initiatives are either adopted or planned across various domains: quality management systems (55%), production monitoring (55%) and enterprise resource planning (ERP) (55%).
Among those who have already implemented smart manufacturing initiatives, ERP demonstrates the highest return on investment, followed by supply chain planning (SCP) and quality management systems (QMS). In addition, smart manufacturing has enabled CPG manufacturers to overcome challenges and mitigate risks, notably in keeping up with market changes, addressing the pandemic’s impact and managing cybersecurity.
Despite the evident value and tangible ROI of these initiatives, obstacles to adoption persist. Chief among these is cost, reported by 44% of respondents, followed by knowledge gaps (41%) and skill shortages (39%).
The significance of ESG
Environmental, social and governance (ESG) initiatives assume growing importance in the CPG sector for several reasons. ESG values align with shifting consumer preferences, enhance risk management and innovation, attract investment and facilitate regulatory compliance. Additionally, they foster employee recruitment, positive engagement, supply chain transparency and long-term value creation, bolstering brand reputation.
Nearly all (95%) of surveyed CPG leaders have implemented ESG initiatives. Moreover, 40% of these manufacturers pursue ESG endeavors with a desire to contribute positively. As sustainability and ethical considerations gain prominence, CPG manufacturers recognize the strategic value of integrating ESG practices into their business strategies, benefiting both business and the greater good. Of CPG leaders, 44% pursue sustainability and ESG initiatives as competitive differentiators, and another 40% do so to enhance efficiency. Notably, while 31% prioritize recycling and eco-friendliness, 30% emphasize product quality within these initiatives.
Focusing on the future
The CPG industry has weathered a convergence of challenges in recent years, a complex blend of external economic factors and internal organizational issues. However, amidst these difficulties, a silver lining emerged: the realization that embracing smart manufacturing technologies can enable CPG manufacturers to evolve to intelligent data-driven operations. And, with 43% of businesses emphasizing better data analytics as key to improved business outcomes, this data can be leveraged to drive agility, flexibility and more informed decision making, coupled with advanced manufacturing initiatives, to solve challenges and move confidently into the future.
The full findings of the State of Smart Manufacturing: CPG Edition can be found here.