Unleashing the Power of Connectivity: Transforming Contract Manufacturing for CPG Companies

By - David Freed

Digital transformation is revolutionizing the way we produce, package, and consume goods. Indeed, for large Consumer Packaged Goods (CPG) companies, choosing the right contract manufacturer is no longer just about physical production capabilities. The capacity for integration, system connectivity, and automation stands out as critical factors to enable scaling and flexibility.

Recently, an insightful piece from PackWorld emphasized the value of connectivity in co-man/co-packer facilities.

“The ability of a CP/CM [co-manufacturer and co-packer] provide up-to-date, accurate data for raw, in-process, and ready to ship levels of production can be a crucial component for the execution of ongoing support.” - Robby Martin

In this companion article, we will delve deeper into the reasons for the increasing importance of connectivity from a CPG perspective and explore how CPGs can safeguard their brand interests.

The Case for Better Connectivity

Today’s competitive CPG companies oversee vast supply chains with multiple manufacturers producing numerous products for their brand(s). Without proper connectivity, maintaining an overview of production status, stock levels, or quality metrics becomes a logistical nightmare. Simply "going paperless" doesn't suffice; relying solely on emails, phone calls, or sporadic reports creates delays and leads to multiple sources of truth. Any delay in the process can result in significant losses and exacerbate the well-known "bullwhip effect" prevalent in the supply chain.

Here’s where system integration and automated reporting come into play:

1. Real-Time Data Access: By integrating systems through common data portals, Application Programming Interfaces (APIs), Electronic Data Interchange (EDI), or even traditional methods like FTP, CPG companies can have real-time access to their production, logistics and inventory data. This immediacy ensures timely decisions and responses to any unforeseen challenges.
2. Improved Efficiency: Automation, in its essence, reduces manual processes. No more waiting for daily or weekly reports. Automated reporting ensures that any change or update in production, inventory, or shipment is reflected and accessible. A study by Capgemini found that companies with connected contract manufacturing facilities can achieve up to 20% efficiency gains.
3. Error Reduction: Automated systems dramatically reduce the chance of human error in reporting, ensuring more accurate data and reducing potential losses or miscommunications. Custom barcodes, for instance, are an excellent method of tracking products as they move through third party logistic services.
4. Enhanced Collaboration and Compliance: With connected systems, collaboration between CPGs and contract manufacturers becomes seamless. Both parties have a clearer understanding of quality issues, progress, challenges, and requirements. You can then work on solving issues rather than spotting them in a collaborative environment.

Turn Data into Trust with AI Tools

Integrated systems generate a wealth of information that CPGs can leverage to their benefit. However, the sheer volume of data can be overwhelming. Instead of relying on one-off reports or burdening analysts with the task of wading through spreadsheets and data tables, AI tools can be trained to recognize patterns and monitor all aspects of production. This article from Food Industry Executive delves into how AI tools are revolutionizing complicated production systems, introducing a new level of transparency and simplicity.

How to Choose the Right Contract Manufacturer

Big CPGs must prioritize manufacturers that not only have top-notch production capabilities but also robust technological infrastructure. Here are key considerations when choosing a contract manufacturer:

1. Technology Compatibility: Ensure that the manufacturer's systems are compatible with your own, allowing for seamless integration, whether it's through API, EDI, or FTP. Also, the manufacturer should give you dashboards of their data through Tableau or other BI tools.
2. Data Security: With connectivity comes the responsibility of data protection. Ensure that your manufacturer has robust cybersecurity measures in place.
3. Flexibility & Scalability: Opt for manufacturers who offer flexibility in their integration capabilities. As technology evolves, you want a partner who can adapt and scale with you.
4. Support & Training: Integration and automation require continuous monitoring and occasional troubleshooting. Choose a manufacturer that offers dedicated support and training.

Is Your Company’s Future Connected?

As the packaged goods industry evolves, so must our approach to choosing partners. While the quality of production will always be paramount, the ability to integrate and automate has become equally crucial. It’s about creating an ecosystem where data flows seamlessly, decisions are made efficiently, and collaboration thrives.

For big CPGs, the future hinges on connectivity. By aligning with contract manufacturers who grasp and prioritize this effort, brands can ensure they remain agile, well-informed, and ahead in this competitive landscape. At MSI Express, we acknowledge the significance of the PackWorld article shedding light on this crucial aspect, and it falls upon industry leaders to respond and adapt.

Ready to go further? MSI Express has the systems and team to support your company’s connectivity goals.