Tips To Fix Your CPG Business Vendor Management Challenges

By Rakesh Kumar, Pimcore Global Services (A Happiest Minds Company)

To keep up with the rapidly evolving digital market realities, the consumer-packaged-goods (CPG) industry is leaving no stones unturned. For serving connected customers amidst continuous fluctuations, rising financial stress, supply chain bottlenecks, and global climate changes, CPG leaders must ensure sustainable business collaborations and orchestrated service delivery in a multi-vendor environment. It demands perfect alignment of client and vendor objectives in the fast-maturing market landscapes where both parties the client and the vendor need to have a common understanding of the operational strategy and share information proactively. Although time-consuming and cost-intensive ways can improve efficiency, strategic collaboration, digital automation, and lean functioning across processes are considered the best routes to manage multi-vendor operations.

Challenges Of CPG Vendor Management

The top priorities of CPG businesses revolve around three fundamental needs that depend heavily on vendor management - optimizing demand management, complying with guidelines and regulations, and increasing supply chain agility. However, CPG businesses often find themselves in a predicament when it comes to managing their vendors. Vendor management issues arising from communication gaps, coordination troubles, frequent delays, inventory shortages, and information silos, severely impact internal cooperation, time-to-market, sales promotion, and competitive advantage. Often, at the core of these challenges lie high dependence on manual interventions to carry out operations. While companies can implement various digital solutions to augment their functioning, it is hard to understand where the bottlenecks lie and which software or systems are the right fit. Case in point: a recent EY-sponsored study found that 90% of CPG companies are yet to leverage digital technologies at scale.

To get their vendors to deliver more value, CPG companies need to replace their existing traditional vendor management practices with a more modern and collaborative approach. Let us take a closer look into the areas that CPG businesses must focus on to mend the gaps with their vendors.

• Digital Visibility

With the proliferation of the ‘phygital’ marketplace, digital consumerism is now prevalent in the CPG industry. The blurring lines between physical and digital worlds have resulted in an ecosystem where consumers increasingly demand customized and enriched products/services. Fluctuating customer preferences lead to rising freight and inventory costs. The motto of today’s customer landscape is - whatever can go digital should go digital. With such changes, 360º visibility of the entire supply chain with different stakeholders and different teams at different locations is a must-have. There is no room for legacy, manual practices that can cause inefficient energy consumption, workflow disruption, system disparity, and unscheduled downtimes.

To tackle these challenges, CPG companies must restructure their operations and raise the level of investment in digital technologies to achieve end-to-end visibility of their vendor landscape. This is important for refining collaborative demand planning, improving procurement results, and decreasing operating costs through inventory visibility, spend visibility, and supply chain control. Digital visibility of the CPG vendor landscape ensures shorter lead times, improves service levels, and prevents stockouts or excess inventory due to the bullwhip effect.

• Data Integration And Management

CPG companies must have a thorough understanding of the vendor landscape to improve all aspects of vendor management, such as sourcing, category management, and payment. For this, CPG leaders need to make sense of the vast amount of diverse and unstructured data available. Yet, companies with global operations working with multiple vendors worldwide mostly maintain their vendor data locally - in spreadsheets or storage devices. These physical systems for vendor data management have run their course. They lack the predictive or analytical capability to analyze diverse and complex data and cannot provide complete visibility into vendor performance and other relevant information. This increases the company’s supply risk, slowing down the decision-making process.

The first step to overcome it is to move all data into a single source of truth - an automated platform that cleans and classifies the accumulated data and makes it searchable, accessible, and available for analysis. A unified view of the data across product categories and markets and the ability to leverage this data gives CPG companies a competitive advantage. Hence, the right data management platforms can be a game changer for businesses.

• Vendor Portals

A vendor portal is a secure, exclusive, web-based system that CPG companies can use to manage, communicate, and collaborate with multiple third-party vendors/suppliers of goods and services. Vendors are required to register in a secure, online environment for keeping track of the products/services they provide, maintain their information, submit invoices, and track transaction disputes. CPG companies, on the other hand, can track the same data across multiple vendors, find patterns and reduce supply chain redundancies. A vendor portal allows both parties to communicate in a highly secured environment, enjoy controlled access, reduce costs, and improve collaboration. It helps in maintaining a closely coordinated and transparent relationship between the enterprise and its vendors that is beneficial for both parties. It leads to enhanced collaboration and faster communication resulting in a reduction in any kind of discrepancies.

It also can reduce operational expenses and administrative overheads, including telephone costs and expenses of transferring physical documents such as POs, remittances, vendor messages, and more. Vendors also can enjoy real-time access to payment information and track payment status. A vendor portal is a best-fit solution for modern CPGs wanting to tackle heaps of contracts, RFPs, and other documents.

• Automation And Compliance

In the CPG business, the real financial risk lies in the lack of transparency in the display package journey. This is critical for managing compliance with placement and duration guidelines. Many CPG companies handle compliance manually, physically verifying all product placements. This inefficient, time-consuming, and costly process is prone to human errors and can be easily replaced with an automated verification mechanism for ensuring CPG compliance and increasing transparency. Automation guarantees accurate data collection, improves operational efficiency, and offers streamlined working conditions for employees. CPG vendors can use tracking solutions to provide valuable insights into how displays are managed by store teams upon the arrival of the products on-site. On the other hand, retailers can carry out compliance in real-time to vendors through tracking solutions, and if necessary, relay execution challenges due to delivery hiccups.

Untangling complicated compliance measures in micro-steps is possible with automation that helps in assessing display performance and, therefore, return on investment. Depending on manual checks for verifying CPG guidelines across multiple locations hinders business growth for both enterprises and vendors. With data and automation simplifying and specifying execution, regular communication and knowledge sharing between both parties are crucial for mutual success and industry growth becomes much easier.

• Advanced Analytics

Vendor management is a relationship-oriented venture and is hence affected by the many biases that influence human interactions. Although the personal aspect of the relationship is of utmost importance, inferences about vendor performance must be based on data rather than human emotions and feelings. Hence, to gain meaningful insights one-on-one interactions and information sharing are not enough. CPG companies need advanced analytical tools to make the best sense of the data which is in their possession. They need to utilize these analytical tools to derive spending, performance, and risks—based on updated, reliable, and comprehensive vendor information. Advanced analytics can help to identify a cluster of vendors and successfully isolate vendor performance within that cluster. Thus, it can remove biases from the performance evaluation and easily identify top-performing vendors to meet increased volume.

Advanced analytics also can be effectively used to explore cross-vendor metrics for similar types of products and services. This can help CPG business leaders to define product-specific strategies across established vendors. By providing accurate information on vendor-spend, CPG companies can rationalize their vendor ecosystem with the power of advanced analytics.

Stitch The Perfect Vendor Relationship For Best Business Results

In conclusion, we can safely say that efficient vendor management is pivotal to ensuring adequate visibility into operations, improving vendor collaboration and performance, enhancing compliance, and mitigating risks. CPG businesses need a single vendor management platform that provides an enterprisewide view of the complex multi-vendor landscape. This can help CPG companies monitor vendor performance and leverage their capabilities to drive innovative go-to-market strategies, achieve cost savings, and ensure efficiency gains.

About The Author

 Rakesh Kumar is Chief Solutions Officer at Pimcore Global Services (A Happiest Minds Company). He is responsible for designing high-performing and scalable cloud applications and managing engineering and pre-sale functions across geographies. Pimcore is an open-source platform for product information management (PIM/MDM), digital asset management (DAM), content management system (CMS), and eCommerce.