CPG Software

The consumer packaged goods (CPG) industry is one where small businesses and startups are doing better than big brands. Small players have benefited from the e-commerce boom and new marketing channels, such as Amazon Go Store, that have disrupted the CPG market. This has lead to a shift in customer demand from traditional packaged products to local and healthier alternatives.

While the market trends are favorable, small CPG companies still face the challenges of keeping logistics costs low, ensuring on-time delivery to retailers, improving product marketing, managing product recalls, tracking inventory and more.

This is where consumer packaged goods software comes in. If you're not leveraging CPG software, your operations will suffer and you'll have a hard time seeing your business grow. In this Buyer's Guide, we will look at how CPG solutions benefit SMBs and the key considerations for first-time buyers of the software.

Here's what we'll cover:

What Is Consumer Packaged Goods Software?
Common Features of Consumer Packaged Goods Software
What Type of Buyer Are You?
Key Considerations
Market Trends

What Is Consumer Packaged Goods Software?

Consumer packaged goods software helps businesses manage and monitor products as they move along the supply chain: from manufacturing to sales.

CPG solutions boost transparency and simplify the production, warehousing, distribution, marketing and sales of consumable goods.

Here's an example of how CPG software can give users added insights into their business processes:

Purchase order entry in Epicor

These tools are essential for small manufacturers and distributors of consumer packaged goods, who need to track and monitor their products for quality compliance. Besides that, these tools help in financial planning, product shipping, pricing management and much more.

Common Features of Consumer Packaged Goods Software

CPG solutions offer functionalities that help SMBs streamline production, optimize the distribution and manage sales of consumable goods via online or brick-and-mortar retail stores.

Here's a quick look at the common features of CPG tools:

Lot tracking	Track products along the supply chain by lot numbers to manage quality control and compliance.
Inventory management	Access centralized, real-time records of customer orders, shipped products and warehouse stock.
Financial accounting	Manage the general ledger, accounts payable and accounts receivable to generate profit and loss statements.
Electronic Data Interchange	Transfer files such as bills of lading, payment documents and more securely via built-in EDI systems.
Pricing management	Create sales quotes and handle product discounts as well as rebates.
Customer management	Maintain a repository of customer profiles segmented by their preferences, purchase history, loyalty programs and other details.
Trade promotion	Plan, evaluate and track return-on-investment (ROI) of product marketing and promotion efforts.
Forecast and demand planning	Build product demand forecast reports by analyzing historical sales, pricing variations, customer demand and market share.

What Type of Buyer Are You?

The ideal CPG software for you depends on the requirements and budget of your businesses.

Most CPG solutions are designed to help you manage the production and distribution of products. However, some tools also offer a full-suite of features that help in product marketing, sales management and customer management.

Here are two of the most common types of buyers and their concerns:

• Small business buyers: These buyers are looking for ease of use and affordable tools, instead of full-featured solutions. That makes cloud-based solutions ideal, as they come with a subscription based pricing model with small monthly payments. Since the pricing is tiered according to different plans, buyers can choose the one that fits their budget. Also, cloud-based software vendors typically offer support services for bug fixes, software updates and data-backup, which is ideal for small businesses who don't have a large IT team and dedicated data centers.
 
• Large enterprise buyers: These buyers are typically looking for full-suite software. The ideal solution should have product performance monitoring and data collection as well as built-in e-commerce and customer management tools. Also, integration with popular third-party accounting tools, customer relationship management (CRM) software and product life cycle management (PLM) solutions is necessary to ensure that data transfer is seamless across the different systems that an enterprise is using or intends to use.

Key Considerations

Aside from the size and scale of your business, there are a couple of factors that should determine your software purchase decision. Let's have a quick look at what they are:

Manufacturer vs. distributor: Whether you're the distributor or the actual manufacturer makes a difference in the choice of software. For instance, small distributors of food products will find niche food distribution software more relevant and cost-effective than a full-fledged CPG solution. Likewise, those who are strictly manufacturers will benefit more by opting for food manufacturing software.

Retail management functionalities: Small CPG companies that handle retail by themselves need certain add-on functionalities. For instance, if you run a retail outlet, then you need a POS solution to transact and track in-store payments. Additionally, if you want to showcase and sell your products online, you should look for a built-in e-commerce platform.

Integration: While CPG tools offer many functionalities that help companies manage different business processes, these tools are part of a larger software ecosystem consisting of tools such as PLM, CRM and more. The CPG tool you buy must offer built-in integration with this closely-related family of third-party tools. A benefit of this, for example, would be the ability to extract business insights and pricing guidelines from tools such as a CRM.

Market Trends

The consumer packaged goods industry has a love/hate relationship with technology disruptions. On one hand, studies reveal a rise in logistic costs for CPG companies owing to the e-commerce boom. On the other hand, small CPG startups are holding their own in an industry dominated traditionally by large players.

Here's a quick look at a few tech trends and their benefits:

E-tail: According to studies, about 70% of US consumers will purchase groceries online by 2020. This means that the internet will be a bigger destination than brick and mortar retail stores for shoppers in the near future. Businesses selecting CPG tools must look for e-commerce capabilities that will help them market products online.

Robotic Automation: Robotic automation has hit the supply chain and retail industry hard and fast. With Amazon's trailblazing warehouse robots that the company claims cut its operating costs by 20%, more companies have followed suit—including FedEx, which introduced “tugger" robots that lug freight at its shipping hub. While the technology is not yet widespread enough for SMBs to start leveraging it, robotic automation is here: be it lugging freight in a warehouse or assisting shoppers in a retail store.

Artificial Intelligence (AI) and Internet of Things (IoT): At Software Advice, we have published reports on how AI and IoT impacted supply chain management. These technologies primarily benefit CPG companies in compliance and delivery management. For instance, products can be constantly monitored in an IoT-enabled transportation environment consisting of “internet-connected" sensors, which improve product traceability and prevents loss of goods in transit. Similarly, AI, which is an amalgam of computer vision, natural-language processing and many other technologies, helps CPG companies automate different business processes, such as demand planning, forecasting and pricing optimization.