5 Ways Sustainability Impacts CPG Margins
Businesses across the world are increasingly recognizing sustainability as a critical element of their operations. From reducing environmental impact to improved margin expansion, organizations everywhere have embraced sustainable practices but how can they make sure these measures pay off?
I believe there are five ways in which CPG companies may maximize the advantages yielded by sustainability and how Artificial Intelligence (AI)-driven demand forecasting and optimization models can help them realize those benefits—including increased margin.
1. Cost Savings from Energy Efficiency
Sustainability practices are not just good for the environment, they can also lead to significant cost savings. Investing in energy-efficiency measures offers CPG companies a unique opportunity for cost savings—the International Energy Agency's report notes that implementing such strategies can result in reductions of up to 30% on corporate energy bills. Organizations can achieve this by reducing waste and shifting away from inefficient energy sources towards more efficient ones like LED lights which reduce power consumption while providing ample illumination. Effectively, increasing their margin via cost savings.
AI has now also become a viable tool for optimizing inventory levels through demand forecasting—enabling companies to lessen their overhead while simultaneously reducing their carbon footprint. Think about how the excess inventory in the supply chain could cause excess warehouse storage space, and excess transportation, which ultimately leads to wasted energy. Lesser warehouse storage space is required by reducing excess stock, therefore lesser energy cost. Ultimately, sustainability benefits both bottom lines: monetary gains and ecological consciousness.
2. Reduced Supply Chain Costs
Sustainable practices, such as reducing waste and sourcing local suppliers can improve the efficacy of your supply chain while also strengthening your brand's reputation with eco-conscious consumers.
AI-powered network optimization and design tools allow you to identify areas for cost savings in a streamlined manner. Implementing sustainable solutions is not only beneficial from an economic standpoint but it allows companies to demonstrate their commitment towards environmental stewardship - demonstrating that sustainability activism isn't limited strictly outside the realm of business operations.
3. Higher Sales Through Sustainability Marketing
By promoting the sustainability of their products and packaging, CPG companies can appeal to consumers who prioritize environmental responsibility. With the help of AI-powered demand planning, personalization engines, and promotion optimization tools, CPG companies can identify the most effective markets for their messages to reach their target audience. Sustainability can be a key differentiator for CPG brands, and by using it as a marketing strategy, they can potentially increase their sales, gain a competitive advantage, and increase their margin.
4. Improved Efficiency Through AI-Powered Demand Forecasting
Utilizing AI-powered demand forecasting strategies, CPG companies can optimize their production processes while minimizing waste. This valuable tool predicts product demand with precision so that businesses may refine the level of output and abstain from producing excess goods. Resultantly, this environmental sustainability strategy helps to lower expenses and boost profitability for Food & Beverage companies in perishables markets.
5. Intelligent Order Promising Improves Customer Satisfaction
Through intelligent ordering solutions, CPGs can maximize their market position by prioritizing, promising, and allocating their inventory across orders for all sales channels, including DTC, in an efficient manner reducing sub-optimal inventory levels in the supply chain.
By improving fill-rates and service levels, CPG companies can improve their reputation and increase customer loyalty.
Sustainability is an essential strategy for CPG industry success and increasing margin. Leveraging AI-powered tools, including demand forecasting and intelligent order promising, to adopt sustainable and efficient practices can result in impressive benefits: cost savings, increased sales revenue, and improved brand reputation as well as a disruptive innovation that unlocks long-term competitive advantage.
Jasneet Kohli is the head of Solution Consulting at antuit.ai, part of Zebra Technologies.