Years ago, I saw a statistic that many people do not purchase a fire extinguisher for their residences until after they experience an actual incident. There are probably other examples in the same light that we can conjure up; spare house keys, an extra pair of eyeglasses, and so on. The same concept works for business and manufacturing. It isn’t until a crisis occurs and a recovery plan needs to be in place that businesses actually think about putting a plan in place.
As the world sorts through life with COVID-19 and trying to plan for the aftermath, many Consumer Packaged Goods (CPG) manufacturers and suppliers are developing and implementing risk management policies and procedures. Production must continue with or without an existing risk plan to try to keep the business operating. Once recovery begins, producers of food and consumer products, and their suppliers should assess their risk management structure from top to bottom and implement all necessary changes now. This way, a plan is in place to deal with the next crisis.
Crisis management plans will go from optional to mandatory for CPG companies, especially those in food and beverage and suppliers who want to compete in the post-pandemic market. Plans to deal with a crisis and risk and evaluating such, need to be deeply rooted in a company’s culture. Companies should document and communicate crisis management processes to every facet of the organization and where possible, digitally integrate those processes into all systems.
Executives of CPG manufacturers need to take a new look at crisis management as a matter of social responsibility. Practices are in place to follow global and local ordinances such as the Food Safety Modernization Act, the General Food Law, the Consumer Products Safety Act, and the General Product Safety Directive. Consumers are significant drivers of these regulations and their buying habits are putting pressure on manufacturers to operate in ethical and sustainable ways especially when it comes to food and other personal products. In an age of increased disruption, it’s no longer just about corporate profits but public safety as well.
To complete in today’s CPG marketplace plans to manage operations during and after a crisis need to be in action now. Here are four things that will help to assist CPG manufacturers to proceed successfully after a crisis.
In taking both a short and long term view of risk management, the best approach is inclusive – and prioritized. Critical planning scenarios such as packaging, information technology systems, inventory loss, production stoppages, logistics, and labor issues that result from natural disasters, pandemics, and other unplanned events should be the top priority. Supply chain procedures should be in place starting with an assessment of how individual risks could impact your customers’ customer (the consumer) back upstream through your supplier network. Government agencies typically rehearse emergency management practices in the event of a disaster. CPG manufacturers should routinely run drills on their risk and crisis management plans to ensure the right priorities are in place and that when an issue occurs, the programs can be activated.
Update to a Cloud-Based Technology Systems Infrastructure
Based on my experience, many CPG companies, especially those in food and beverage, rely on outdated technologies throughout their supply chain. Some are, however, starting to embrace digital transformation in their overall business processes. As part of a comprehensive risk management plan, employees must be able to remain connected while working remotely via technologies that are accessible via the cloud. In addition to providing essential platform functions, such as data entry and reporting, adaptive cloud-based ERP and Digital Supply Chain Planning systems can support the direction of the company by responding quickly to disruptions and providing managers with data they can use to determine a course of action.
Develop Contingency Planning
Backup and contingency plans are essential to ensuring continuity in the event of any departure from business as usual. A robust contingency plan outlines the steps required to return to normal business operations, including a process to restore lost production and data. The strength of an organization’s contingency plan also relies on the organization’s ability to communicate critical instructions to its supply chain partners to ensure they know their role in the successful execution of recovery plans.
Sales and Operations Planning
To move forward successfully after a crisis, manufacturers need to have a strategy in place for every function of the business. This includes alternative sources of supply and manufacturing capabilities such as co-packers/contract manufacturers. Supply chain networks may need to be restructured based on shifts in product demand. There is no better way to accomplish these tasks and keep the supply chain intact than to have a sales and operations planning process (S&OP) in place. Consumer packaged goods manufacturers typically have short product lifecycles, cyclic and seasonal demand with high volatility that requires integrated business management up and down the supply chain and across all business functions. A properly implemented S&OP process that routinely reviews customer demand and supply resources is in itself, a contingency plan.
CPG manufacturers are heading into uncharted territory. Today, it’s easy to assume that given all the new advancements in technology over the last half-century, we might be immune to most disruptions. That is unfortunately not true. I have seen more disruptions in recent years that have impacted consumer packaged goods manufacturers’ ability to deliver the right product to the right time than ever before.
Manufacturers need a reliable, cohesive risk management process in place throughout the entire enterprise to manage these disruptions and in some cases, help turn them into a competitive advantage. Businesses that choose to produce consumer goods have an obligation to more than just their shareholders. Choosing this business commits them to provide safe products. Companies without a well-defined, rehearsed and comprehensive plan will struggle to identify and resolve issues that could potentially disrupt their businesses. Customer service, manufacturing, distribution, financial and sales processes can all be compromised. Advanced adaptive business systems that are integrated into a company’s operational and risk processes will help food and beverage manufacturers run their businesses during a crisis. These systems can help food and beverage manufacturers stay in business, which is a critical consideration, but more importantly, they can help these companies continue to provide consumer goods and foods to society.