Managing Complexity Within Growing CPG Brands
Joshua Schall, MBA
Functional CPG Strategist | Your CEO's Favorite Content Creator | Backwards Hat Wearing Rust Belt Native | Commerce Nerd | Entrepreneurial Ideation to Commercialization Expert | Early-Stage Investor | Futurist |
As many CPG brands recently found out, demand spikes and complexity don't always mix.
I'm notorious for pressuring my hyper-growth CPG clients to constantly pursue simplicity throughout their business model. That being said, I can understand how brand owners feel compelled to constantly add complexity by launching new SKUs. With consumers’ product preferences diverging and retail formats proliferating, CPG brands are increasingly looking to expand into enticing opportunities. The major issue I've consistently come across surrounds the fact that many CPG brand owners are over-indexing on the commercial opportunity, but suppressing the associated constraints.
Not All Complexity is Created Equally
The opportunities within the CPG industry are limitless, which makes mastery of distinguishing between good and bad complexity invaluable.
- Good Complexity = drives incremental sales and volume that exceed the incremental expenses incurred
- Bad Complexity = restricts supply-chain agility, erodes profit, and increases inventory
Diminish Complexity
To evaluate complexity within your CPG brand, the most common strategic initiatives would undergoing a comprehensive SKU rationalization or manufacturing optimization analysis.
- SKU Rationalization = process of deciding which products to keep/improve and which ones to discontinue
- Manufacturing Optimization = process of deciding how to minimize costs, maximize flexibility, and keep systems current
Simplicity Achievements
While SKU rationalization and manufacturing optimization might seem complex in their own right, they're rooted in providing a level of simplification that will almost always work out in your favor. The key achievements from having less complexity in your business might include; better financial performance, sourcing efficiency, higher forecasting accuracy, faster innovation, and greater customer satisfaction.
Global Sourcing and End to End Supply Chain Management Executive
3 å¹´Periodic review is a way to go.
Being careful would be an understatement in CPG !
President || COO || GM
4 年Absolutely. In the not too recent past, the best way for a brand to test new product concept was via limited SKU releases. Basically brute force trial and error. Better tools exist today (market survey data, brand cohort analysis, etc.) but they’re unfamiliar or out-of-reach to many brands, especially smaller brands. To your point, the result is often SKU proliferation and ultimately value dilution. Very few things create cash flow risk like a boatload of SKUs in production without sell through data clarity. But very common.