Consumer Packaged Goods Industry

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The Consumer Packaged Goods (CPG) Industry and Solution Providers

By Jay R. Jeffreys, PE; Director, Wonderware Solution Provider Programs

Table of Contents 1. The CPG Industry ................................................................................................................................... 3 2. Industry Comparisons ........................................................................................................................... 4 3. What CPG Companies Need from Solution Providers ................................................................ 5

The Consumer Packaged Goods (CPG) Industry and Solution Providers

Page 2

1.

The CPG Industry

The Wonderware Solution Provider Program currently involves some 625 value-added resellers (VARs) and Original Equipment Manufacturers (OEMs), and over 3,000 systems integrators (SIs) worldwide. The Wonderware Solution Provider community is an important part of Wonderware's success. Wonderware relies on their services and expertise to take it into new opportunities and markets. From the 625 VAR/OEMs, approximately 2.5% use Wonderware software to create solutions for food-products machinery in the Consumer Packaged Goods (CPG) industry. Out of almost exactly 3,000 SI companies currently active in the Wonderware Solution Provider Program, more than 46% devote some portion of their practice to serving customers in the CPG industry. 63 % of Wonderware Certified SIs and 82% of Wonderware’s ArchestrA Certified SIs are involved in the CPG industry. But just what do we mean when we talk about the CPG industry? The free reference section at Hoover’s online (www.hoovers.com/free/ind/dir.xhtml) includes a useful directory of industries and the following general definition: Consumer Products Manufacturers - Companies that design, manufacture and/or market apparel, cleaning products, hand and power tools, home furniture, housewares, linens, and consumer electronics and appliances. However, things may not really be that simple. It’s actually more meaningful to describe the CPG industry as a set of consumer behaviors rather than trying to draw boundaries around a specific list of product names or brands. And the key behavior that best describes the CPG market is that of replenishment on some regular or frequent basis. The items are in fact consumed, in some sense or another, fairly rapidly. This means that they do have a shelf life – whether it’s the perishable nature of a snack food item or the fleeting glamour of a cell phone with features like text or pictures or videos. And of course that can mean that the value of an entire warehouse inventory, for a whole generation of product can go to zero in a hurry! Those behaviors tend to result in a steady flow of small recurring expenses (for a tube of toothpaste, a pack of beverages or even the latest personal electronic gadget) rather than large infrequent ones like the acquisition of a major capital asset for manufacturing. The problem for our manufacturing customers is that those small replenishable items still require the major manufacturing assets to produce them. The ability to rapidly reconfigure and re-task those expensive production machines and factories when customer whims change – in other words, agile manufacturing – can make the difference between profitability and receivership.

The Consumer Packaged Goods (CPG) Industry and Solution Providers

Page 3

2.

Industry Comparisons

The financial research tools at www.etrade.com (account membership required) offer some useful comparisons between the consumer goods industry and other major industry sectors. It’s not necessarily the fastest-growing business sector – compared to general technology, financial or energy companies – but certainly respectable when it comes to overall sector profit margins. The non-cyclical sub-category of the CPG industry, in fact, ranks well above the Transportation, Basic Materials, and Capital Goods and...
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