The Role of 3PL?s in the Evolving CPG Industry

1. Introduction: CPG industry is undergoing a radical shift in trend where some large retailers are driving the change with their constantly changing delivery and inventory demands. In order to manage and maintain their cost benefits in this changing environment, mid-sized CPG companies are moving from a traditional distribution system to a more collaborative model, where the change is led by some of the leading CPG companies in the industry. 2. Main: In-order to address the overall demand from retailers and change in trend, CPG companies have started identifying the various factors/activities which might contribute to majority of the cost and complexity in addressing the current shift in the industry. Therefore with speed to market playing a key role in the overall CPG supply chain, a traditional distribution model is set to change where additional warehousing, packaging and transportation are considered to be the key drivers of cost and time. CPG companies have started addressing this issue by looking for various alternatives in terms a more collaborative distribution model, which can help reduce the overall time between manufacturing and distribution activities and also reduce the complexities in the overall supply chain. Also various factors like transportation costs, labor, inventory levels, quality are considered in understanding the overall supply chain inefficiency. 3. Conclusion: For obtaining optimum cost savings and reduced lead times between a manufacturing and distribution activities, mid-sized CPG companies can leverage on capabilities and relationships of a third party logistics provider (3PL) who can also provide packaging, warehousing and distribution activities which helps integrate their core activities and reduces cost and overall lead times. By integrating with a 3PL, mid-sized CPG companies, having smaller order volumes will benefit more when compared to global CPG Company, where the initial investment costs in terms of infrastructure is relatively low for a 3PL. Also various advantages can be leveraged in this model where it involves reduced inventory carrying risk for mid-sized CPG companies, coupled by benefits in terms of improved quality through minimum number of touch points the product has to go through till its delivery. Additionally last mile customization can be achieved by mid-sized CPG companies, by integrating with a 3PL in order to support the growing demand trends from retailers.