Consumer Packaged Goods (CPG) companies today face mounting pressure to scale operations while maintaining sustainability. The dual demands of scalability and sustainability are not just operational challenges; they are essential to remaining competitive in the modern market. Delve into the causes behind the need for scalability and sustainability, the consequences of neglecting these aspects, and how digital transformation can serve as a pathway to success.

Understanding the Causes Behind the Need for Scalability and Sustainability

Market Dynamics and Consumer Expectations

The CPG industry is experiencing rapid growth fueled by changing consumer preferences and market dynamics. Consumers are becoming increasingly aware of sustainability issues and these socially conscious buyers demand transparency regarding the origin of products and production practices. These expectations necessitate that brands not only scale their operations but also do so in an environmentally conscious manner. According to recent research, over 70% of CPG companies have adopted advanced traceability systems to enhance supply chain transparency and ensure product safety.

Regulatory Compliance

As CPG companies expand, they encounter a complex web of regulatory requirements that differ across regions. Compliance with these regulations is essential for market access and mitigates legal risks. Advanced compliance management systems integrated with ERP solutions can monitor regulatory changes in real time, ensuring continuous compliance with staggering accuracy. Companies that fail to comply may face costly penalties, reputational damage, and barriers to entry in key markets.

Supply Chain Efficiency

Effective traceability systems are crucial for maintaining product quality and safety, particularly as CPG companies scale their operations. Companies utilizing comprehensive traceability systems report a 30-40% reduction in product recalls due to improved identification and resolution of issues. Efficient recall management is critical for minimizing risks and financial losses. Moreover, transparency fosters consumer trust, which is essential for brand loyalty.

Resource Management and Environmental Responsibility

With growing awareness of environmental sustainability, companies must also focus on resource management. Regular upgrades to existing systems can enhance sustainability by improving resource efficiency and reducing waste. Technological upgrades that emphasize sustainability can lead to a 30-35% reduction in a company’s environmental impact, contributing to long-term sustainability goals.

The Results of Neglecting Scalability and Sustainability

Operational Inefficiencies

Neglecting scalability can result in operational bottlenecks and inefficiencies that hinder growth. Companies may struggle to keep up with demand, leading to increased costs and missed opportunities. Without a scalable solution, CPG companies risk stagnation or decline.

Increased Recall Costs

Failure to implement effective traceability and recall management can lead to substantial financial losses. Companies that do not prioritize traceability may face product recalls that are not only costly but can also damage their reputation. Efficient recall management can save companies up to 20% in recall-related costs, including legal fees and lost sales.

Legal Risks and Market Barriers

Without a robust compliance management system, companies expose themselves to legal risks that can severely impact their operations. Regulatory penalties can be costly and lead to a loss of consumer trust, further complicating efforts to scale. In today’s global marketplace, non-compliance can also limit access to lucrative markets, hampering growth potential.

Environmental Impact

Ignoring sustainability can also lead to increased waste and a negative environmental footprint. Companies that fail to invest in sustainable practices may not only face backlash from consumers but also increased operational costs associated with waste management and resource inefficiencies.

Embracing Digital Transformation

Digital transformation is the key to navigating the challenges of scalability and sustainability in the CPG sector. Here are several ways that companies can leverage digital transformation to address these needs: 

• Implementing Advanced ERP Systems: Advanced ERP systems like SAP Business One are pivotal for optimizing resource management and improving supply chain efficiency. These systems provide actionable insights that are crucial for scaling operations. As companies grow, an ERP system allows them to add new modules and features without disrupting existing operations, ensuring smooth scalability. Real-time analytics and reporting capabilities empower businesses to make informed decisions that support efficient scaling.
• Enhancing Traceability and Recall Management: Effective traceability systems are essential for maintaining product quality and ensuring compliance. Companies that adopt advanced traceability systems can minimize risks and build consumer trust. By integrating traceability with ERP solutions, CPG companies can efficiently manage recalls and enhance product safety.
• Streamlining Compliance Management: A strong compliance management system is crucial for tracking regulatory requirements and ensuring adherence. Integrating compliance management with ERP systems like SAP Business One allows for real-time monitoring of compliance standards, reducing the risk of legal issues and enhancing market access.
• Upgrading Legacy Systems: Regular upgrades to existing systems are vital for handling operational complexity as companies scale. Transitioning from on-premise systems to cloud-based solutions can improve sustainability by reducing energy consumption and waste. This also allows companies to utilize their technology resources and capital for tasks that add value rather than allowing them to get bogged down in administrative maintenance.

Leveraging Third Wave and SAP for Success

An ERP solution like SAP Business One can significantly facilitate the move to digital transformation for CPG companies focused on scalability and sustainability. By integrating various business processes—such as inventory management, compliance tracking, and financial reporting—SAP Business One provides a comprehensive view of operations. This centralized system enables real-time data analytics, allowing businesses to make informed decisions quickly and adapt to changing market conditions.

Trusted partners like Third Wave play a crucial role in guiding companies through the implementation of SAP Business One. With their industry expertise, understanding of the CPG landscape, and digital solutions like Versago and Bizweaver, Third Wave ensures that businesses are well-equipped to streamline operations, enhance data integration, and successfully navigate their scalability and sustainability efforts.

• Bizweaver – Bizweaver automates processes and streamlines production management by synchronizing workflows across the organization. It serves as a hub for all the transaction information flowing in and out of your business.
• Versago – Versago streamlines digital communication by connecting departments, channels, partners, employees, and locations with SAP Business One data. It gives you the flexibility to streamline collaboration and address specific issues with optimization, resource allocation, and more.

Striking the balance between scalability and sustainability is central to the success of CPG companies in today’s market. By understanding the needs behind these efforts and the consequences of neglecting them, brands can position themselves for growth and resilience. With the right tools and partnerships, companies can master the complexities of scalability and sustainability. Connect with Third Wave today to pave the way for long-term success in an increasingly conscientious marketplace.

In recent years, the Direct-to-Consumer (D2C) model has gained unprecedented traction within the Consumer Packaged Goods (CPG) industry. This paradigm shift is reshaping the way brands interact with consumers, compelling businesses to rethink their strategies and operations. Understanding the causes behind this rise, the results it generates, and the digital transformation solutions available is essential for CPG companies to thrive in this new landscape. 

Understanding the Causes of the Rise of D2C in the CPG Industry

Shifting Consumer Preferences 

The emergence of eCommerce and changing consumer behaviors have significantly contributed to the rise of D2C. Consumers today seek convenience, personalized experiences, and greater control over their shopping journeys. As a result, many brands are opting to establish their own eCommerce platforms to connect directly with customers. According to a recent study, over two-thirds of consumer product companies struggle with limited data and analytics capabilities, which hampers their ability to accelerate consumer engagement models like eCommerce. However, those that invest in robust D2C platforms can gain invaluable consumer insights and create strong loyalty programs. 

Direct Consumer Insights 

The D2C model allows companies to gather and analyze data across the consumer journey. This direct access to consumer insights enables brands to understand purchasing behaviors, preferences, and trends, informing product development and personalized marketing strategies. Building a comprehensive view of the consumer through omnichannel engagement and advanced analytics is now more crucial than ever. 

Cost Savings and Increased Margins 

Another compelling reason for the D2C trend is the potential for significant cost savings. By bypassing traditional distribution partners, manufacturers can save around 15% from wholesalers and up to 40% from retailers. This not only provides greater control over pricing and promotions but also positively influences profit margins. While the customer acquisition and marketing costs associated with D2C can be higher, the overall financial benefits are substantial. 

The Benefits (and Potential Challenges) of Effective D2C

By prioritizing direct engagement with customers, businesses can enhance customer satisfaction, promote cost and fulfillment efficiency, and empower companies to make informed decisions and quickly adapt to consumer trends. Embracing D2C can transform not just the customer experience, but the overall CPG business landscape. However, this shift in dynamics can create rifts within established retail partnerships and may lessen the bargaining power of CPG when negotiating future contracts. 

Enhanced Customer Satisfaction 

Direct interaction with buyers enables brands to receive immediate feedback, which can be leveraged to improve products and services rapidly. This responsiveness contributes to 30% higher customer retention rates compared to traditional retail models. D2C companies prioritize customer-centric cultures that enhance the overall experience, resulting in greater trust and loyalty. 

Cost and Fulfillment Efficiency 

By eliminating intermediaries, brands can save on costs associated with wholesalers and retailers, leading to better margins. However, they must also invest in efficient logistics and supply chain management to ensure timely and accurate fulfillment. This includes optimizing warehousing, inventory management, and last-mile delivery. Companies can significantly improve efficiency by integrating technology for inventory tracking, order management, and real-time analytics. 

Real-Time Data Access 

Real-time data access provides brands with visibility into inventory levels, helping them optimize stock management. Companies using real-time data for supply chain management report a 25% reduction in delivery times, which enhances customer satisfaction and loyalty. Real-time inventory tracking can also reduce stockouts by 30% and overstock situations by 20%, leading to more efficient inventory management. 

Channel Conflicts 

As brands increasingly adopt D2C models, they face potential conflicts with traditional retail partners. Effective management of these conflicts is critical. Companies must establish clear boundaries and strategies that ensure D2C efforts complement rather than compete with retail channels. Offering unique value propositions—such as exclusive products, personalized services, or subscription models—can help differentiate D2C offerings while maintaining healthy retailer relationships. 

Embracing Digital Transformation

To navigate the complexities of the D2C landscape, CPG companies must embrace digital transformation. Here are some strategies that can alleviate the challenges associated with this shift: 

• Invest in Robust Technology: Building a strong technological infrastructure is essential for D2C success. Brands need to invest in advanced eCommerce platforms that support scalability, data analytics, and seamless integration across touchpoints. By leveraging technology, companies can streamline operations and improve customer interactions, ultimately enhancing the D2C experience. 
• Technology and Strategic Partnerships: Successful D2C transitions necessitate investment in the right technology and resources. Brands must develop robust eCommerce platforms, implement advanced data analytics, and ensure seamless integration across various digital touchpoints. Partnering with third-party technology providers can accelerate this process and reduce initial capital expenditure. An agile, test-and-learn approach allows companies to adapt quickly to market changes and consumer feedback, ensuring continuous improvement and innovation. 
• Enhance Data Capabilities: Developing advanced data capabilities allows brands to build a comprehensive view of consumer behavior. By harnessing real-time data, CPG companies can make informed decisions and respond quickly to changing market conditions. Investing in data management tools can enable brands to improve consumer engagement models and drive effective marketing strategies. 
• Optimize Logistics and Fulfillment: Efficient logistics and fulfillment are critical for D2C success. Companies must focus on optimizing warehousing, inventory management, and last-mile delivery to ensure timely and accurate fulfillment. Forming strategic partnerships with third-party logistics providers can help brands scale their fulfillment operations without significant capital investment. 
• Foster a Customer-Centric Culture: D2C companies often thrive on customer-centric cultures that prioritize consumer needs and preferences. By actively engaging with customers and building community, brands can cultivate stronger relationships that lead to increased loyalty and satisfaction. A focus on providing exceptional customer experiences is paramount for long-term success in the D2C space. 

Leveraging Third Wave and SAP for Success

An ERP solution like SAP Business One can significantly facilitate the move to digital transformation for CPG companies navigating the D2C landscape. By integrating various business processes—such as inventory management, customer relationship management, and financial accounting—SAP Business One provides a comprehensive view of operations. This centralized system enables real-time data analytics, allowing businesses to make informed decisions quickly and adapt to changing market conditions. 

Trusted partners like Third Wave are instrumental in guiding companies through the implementation of SAP Business One. With extensive industry expertise and deep understanding of the CPG landscape, Third Wave’s airtight implementation process and digital solutions like Versago and Bizweaver ensure that businesses are well-equipped to successfully navigate the D2C surge.  

• Bizweaver – Bizweaver automates processes and streamlines production management by synchronizing workflows across the organization. It serves as a hub for all the transaction information flowing in and out of your business.
• Versago – Versago streamlines digital communication by connecting departments, channels, partners, employees, and locations with SAP Business One data. It gives you the flexibility to streamline collaboration and address specific issues with optimization, resource allocation, and more. 

The rise of the D2C model presents both opportunities and challenges for CPG companies. By understanding the causes behind this shift and embracing digital transformation, businesses can position themselves to thrive in the D2C landscape. With the right tools and partnerships, CPG companies can master the complexities of D2C and capitalize on the opportunities it presents. Connect with Third Wave today to explore how SAP Business One can ensure long-term growth and profitability for your business in an increasingly competitive market. 

ECommerce has emerged as a double-edged sword in the ever-evolving landscape of Consumer Packaged Goods (CPG). While it presents vast opportunities for growth and engagement, it also introduces significant complexities that can hinder success. As CPG companies strive to adapt to the demands of digital commerce, understanding the intricacies of eCommerce is vital. Explore the complexities of eCommerce, the consequences of ineffective channels, and understand how digital transformation can illuminate the path to success.

Understanding the Complexities of eCommerce in the CPG Industry

Omnichannel Strategy

The rise of eCommerce has made adopting an omnichannel strategy increasingly critical for CPG companies. An omnichannel approach integrates multiple sales channels—both online and offline—to create a seamless and consistent customer experience. According to KPMG, companies that implement omnichannel strategies report a staggering 30% higher lifetime value from omnichannel shoppers compared to single-channel shoppers. This integration not only enhances customer satisfaction but also ensures that brands can effectively fulfill orders from the most appropriate location, whether it be a warehouse, a retail store, or a third-party provider.

Effective omnichannel engagement involves leveraging various touchpoints, from websites and mobile apps to in-store experiences. Brands that can interact with customers through multiple channels increase their chances of conversion and loyalty, with studies showing that omnichannel customers spend 15-30% more than those who shop through a single channel.

Data Integration

Another significant complexity arises from data integration. Creating comprehensive customer profiles requires merging data from different touchpoints, such as eCommerce platforms, in-store purchases, and customer service interactions. This integration allows CPG companies to offer highly personalized experiences tailored to individual customer preferences. According to McKinsey, brands leveraging integrated data for fulfillment operations report a 25% improvement in order accuracy and a 20% reduction in delivery times, demonstrating how effective data utilization can enhance operational efficiency.

Product Catalog Management

Effective catalog management is vital for enhancing the customer shopping experience – especially when 75% of consumers expect consistent product information across multiple channels. A well-organized and updated product catalog ensures that customers can easily find the information they need, such as product specifications, prices, and availability. Brands that utilize automated catalog management tools experience a 30% reduction in manual errors and a 25% increase in operational efficiency.

Implementing a centralized Product Information Management (PIM) system allows brands to manage product information from a single source, ensuring consistency across all eCommerce platforms. Regular audits help identify inconsistencies, outdated information, and errors, maintaining the catalog’s accuracy and relevance.

Channel Conflicts

Channel conflicts are another significant issue in the CPG eCommerce landscape. Conflicts arise when brands sell through multiple distribution channels—such as direct-to-consumer (D2C), traditional retail stores, and third-party online marketplaces—that compete against each other. Up to 25% of CPG companies experience conflicts due to inconsistent promotional strategies across different retail partners, and according to Sutherland Global, 30% of consumers encounter pricing discrepancies between a brand’s D2C site and third-party marketplaces, which leads to confusion and dissatisfaction among customers. Addressing these conflicts is essential for maintaining healthy relationships with retail partners and ensuring customer loyalty.

The Results of Ineffective eCommerce Channels

The complex challenges posed by the modern eCommerce landscape can lead to significant negative outcomes for CPG companies who lack the proper tools. Here are some of the critical consequences of having ineffective eCommerce channels:

Increased Operational Costs

Complexities in managing multiple sales channels can lead to inefficiencies and increased operational costs. Ineffective data integration and poor product catalog management may result in higher error rates, which in turn require additional resources to rectify. This inefficiency can severely strain profit margins, especially in a market where cost control is paramount.

Customer Dissatisfaction

When brands fail to provide a consistent and seamless shopping experience, customer dissatisfaction is inevitable. Inconsistent product information, pricing discrepancies, and fulfillment errors can frustrate customers, leading them to seek alternatives. As CPG companies aim to build long-term relationships with consumers, maintaining trust is crucial.

Lost Revenue Opportunities

Ineffective eCommerce strategies can result in lost revenue. A disjointed approach may lead to abandoned shopping carts, decreased conversion rates, and ultimately, lost sales. In the highly competitive eCommerce environment, every missed opportunity can have a substantial impact on the bottom line.

Erosion of Brand Loyalty

When customers encounter channel conflicts—such as inconsistent pricing or promotions—they may become disillusioned with the brand. As they shift their loyalty to competitors, the long-term ramifications can be detrimental. Erosion of brand loyalty not only affects current sales but can also hinder future growth potential.

Embracing Digital Transformation

To avoid these eCommerce pitfalls, CPG companies must embrace digital transformation. This involves adopting technologies that enhance visibility, improve data integration, and streamline operations. Here are several key strategies for successful digital transformation:

• Unified Data Management: Implementing a unified data management system allows CPG companies to integrate data from various channels, creating a comprehensive view of customer interactions. This integration enables brands to offer personalized experiences and make informed decisions based on real-time insights.
• Centralized Product Information Management: Investing in a centralized PIM system can help brands manage product information efficiently. By ensuring consistency across all eCommerce platforms, companies can enhance the customer experience and improve conversion rates. Regular audits and updates are essential for maintaining accuracy and relevance in product information.
• Streamlined Order Fulfillment: An efficient order fulfillment strategy is critical for delivering exceptional customer experiences. Brands should leverage technology to optimize inventory management, ensuring that products are readily available and orders can be fulfilled from the most appropriate location. This approach can reduce delivery times and improve order accuracy, driving customer satisfaction.
• Enhanced Customer Engagement: Leveraging multiple touchpoints for customer engagement can lead to increased conversion rates. By utilizing online channels, mobile apps, and in-store experiences, brands can create a holistic shopping experience that fosters loyalty. Engaging customers through various channels increases the likelihood of conversions and encourages repeat business.

Leveraging Third Wave and SAP for Success

An ERP solution like SAP Business One can be a game-changer for CPG companies navigating the complexities of eCommerce. By integrating business processes like inventory management, customer relationship management, and financial accounting, SAP Business One provides a comprehensive view of operations. This centralized system enables real-time data analytics, allowing businesses to make informed decisions quickly and adapt to changing market conditions.

Trusted partners like Third Wave play a crucial role in facilitating this digital transformation journey. With their industry expertise and understanding of the CPG landscape, Third Wave leverages the capabilities of SAP Business One and other digital solutions like Versago and Bizweaver to ensure that businesses are well-equipped to streamline operations, enhance data integration, and navigate the complexities of eCommerce successfully.

• Bizweaver – Bizweaver automates processes and streamlines production management by synchronizing workflows across the organization. It serves as a hub for all the transaction information flowing in and out of your business.
• Versago – Versago streamlines digital communication by connecting departments, channels, partners, employees, and locations with SAP Business One data. It gives you the flexibility to streamline collaboration and address specific issues with optimization, resource allocation, and more.

As CPG companies face the challenges of eCommerce complexity, embracing digital transformation is essential for survival and growth. With the right tools and partnerships, CPG businesses can not only overcome the challenges posed by eCommerce but also seize the opportunities it presents. Connect with trusted partners at Third Wave to master the intricacies of eCommerce and thrive in an increasingly competitive market.u master the challenges of your supply chains and emerge stronger.

In the fast-paced world of Consumer Packaged Goods (CPG), supply chain disruptions have become a pressing challenge that companies must confront. These interruptions can arise from various factors, including natural disasters, geopolitical tensions, and logistical inefficiencies, leading to significant consequences for product availability and business operations. Delve into the causes and effects of supply chain disruptions in the CPG industry and explore how digital transformation—specifically through technologies like ERP—can serve as a solution.

Understanding the Causes of Supply Chain Disruptions in the CPG Industry

Natural Disasters and Geopolitical Tensions

Natural disasters such as hurricanes, floods, and earthquakes can wreak havoc on supply chains, causing delays and stockouts. Similarly, geopolitical issues like trade wars, international conflicts, and more recently, the longshoremen strike can result in port closures and increased tariffs, further complicating the movement of goods. These logistical challenges can result in longer lead times for production and fulfillment, which ultimately have negative financial implications.

Inefficient Inventory Management

Product availability is crucial for meeting customer demands, and disruptions can lead to costly stockouts. Traditional inventory management systems may struggle to provide the real-time visibility necessary for effective decision-making. According to a study from Fictiv, 55% of manufacturing-related businesses cite improving supply chain visibility as a top priority, emphasizing the need for better tracking of goods and supplier readiness forecasting to mitigate disruptions.

Importing, Customs, and Duties

The CPG industry heavily relies on imported raw materials and finished products. Disruptions in global supply chains can lead to delays in customs processing and unexpected tariffs, which can significantly increase costs. As tariffs fluctuate, companies must adapt their pricing strategies to maintain competitiveness. A staggering “50% of senior executives” across various industries reported that their companies are passing higher supply chain costs onto consumers, further complicating the landscape.

The Results of Supply Chain Disruptions

The implications of supply chain disruptions are far-reaching and multifaceted. Companies may experience financial costs, opportunity costs, and even reputational costs.

Customer Experience Impact

Stockouts can lead to dissatisfied customers and lost sales. A seamless supply chain is essential for meeting consumer expectations, particularly in an era where same-day or next-day delivery has become the norm. If a customer cannot find a product when they need it, they may turn to competitors.

Increased Operational Costs

Supply chain disruptions often lead to increased costs associated with transportation, storage, and procurement. For instance, during significant disruptions, transportation costs can surge due to delays and rerouting. Companies may also feel the need to maintain larger inventory buffers, which can tie up capital and reduce liquidity. This is a precarious issue as “national storage pricing has increased by 1.4% month-over-month,” intensifying the cost implications of holding excess inventory. Therefore, effective cost management becomes critical for maintaining profit margins.

Erosion of Competitive Advantage

CPG companies that fail to adapt quickly to supply chain challenges risk losing their competitive edge. The shift toward eCommerce means that consumers have more choices than ever, making it essential for companies to maintain product availability and efficient delivery in order to retain customers.

Embracing Digital Transformation

To navigate these complexities and alleviate the pains of supply chain disruptions, CPG companies must embrace digital transformation. This includes adopting technologies that enhance visibility, improve forecasting, and streamline operations. Here are several key components of a successful digital transformation strategy:

• Enhanced Visibility and Real-Time Analytics: Digital tools that provide real-time insights into inventory levels and supply chain performance can significantly improve decision-making. Companies should leverage technologies like the Internet of Things (IoT) for enhanced visibility, allowing them to monitor goods in transit and anticipate potential disruptions.
• Advanced Forecasting Techniques: Utilizing Artificial Intelligence (AI) for predictive analytics can help CPG companies better understand demand patterns and adjust production schedules accordingly. A survey found that approximately 85% of leaders in supply chain and manufacturing plan to adopt AI technologies to bolster resilience and efficiency.
• Centralized Product Information Management: Product Information Management (PIM) systems play a critical role in ensuring that accurate product data is available across all channels. By centralizing product information, companies can reduce discrepancies that may arise from manual data entry, ensuring compliance and facilitating smoother operations. The implementation of PIM systems can lead to improved inventory accuracy rates, which is crucial during disruptions.
• Effective Cost Accounting: A dynamic and flexible approach to budgeting is essential in the volatile landscape of CPG. Accurate cost accounting provides the data needed to make informed strategic decisions, such as diversifying suppliers or optimizing inventory levels. This adaptability can help companies navigate unexpected financial pressures and maintain profitability. In fact, companies using advanced cost accounting techniques have reported a 30% improvement in budget accuracy during disruptions, demonstrating the importance of adaptability in financial planning.

Leveraging Third Wave and SAP for Success

An ERP solution like SAP Business One can significantly facilitate the digital transformation journey for CPG companies. By integrating various business processes, including inventory management, financial accounting, and customer relationship management, SAP Business One offers a comprehensive view of operations. This centralized system enables real-time data analytics, allowing businesses to make informed decisions quickly.

Having a trusted partner like Third Wave is paramount for companies navigating the ERP implementation process. With industry expertise and a deep understanding of the CPG landscape, Third Wave specializes in leveraging SAP Business One and other digital solutions like Versago and Bizweaver to help businesses streamline operations, enhance supply chain visibility, and improve overall efficiency. This support from trusted advisors ensures that CPG companies are well-equipped to handle the challenges posed by supply chain disruptions.

• Bizweaver – Bizweaver automates processes and streamlines production management by synchronizing workflows across the organization. It serves as a hub for all the transaction information flowing in and out of your business.
• Versago – Versago streamlines digital communication by connecting departments, channels, partners, employees, and locations with SAP Business One data. It gives you the flexibility to streamline collaboration and address specific issues with optimization, resource allocation, and more.
• Container Management – The process of managing multiple shipments across various suppliers to ensure compliance with international trade regulations can be intricate. SAP Business One streamlines this complexity by centralizing documentation, automating customs procedures, and providing real-time visibility into shipment statuses. This enables businesses to track goods from origin to destination, minimizing delays and optimizing logistics.

While supply chain disruptions continue to present formidable challenges for CPG companies, the ability to adapt and respond to disruptions is more critical than ever. By embracing digital transformation strategies and leveraging emerging technologies, companies can navigate these challenges more effectively. Connect with Third Wave today to explore how SAP Business One can help you master the challenges of your supply chains and emerge stronger.

The manufacturing industry, a vital component of the global economy, is grappling with significant capacity constraints that challenge its ability to meet growing customer demands and navigate resource limitations. As manufacturers face these hurdles, the path to overcoming them increasingly involves embracing digital transformation. This post explores the underlying causes of capacity constraints, the resulting impacts on manufacturing operations, and how digital transformation can provide a strategic solution.

Causes of Capacity Constraints

1. Fluctuating Customer Demands

The COVID-19 pandemic has dramatically reshaped consumer behavior and manufacturing dynamics. As people spent more time at home, there was a marked increase in demand for durable goods such as appliances, furniture, and building materials. This surge in consumption amidst struggling international supply chains has placed unprecedented lasting strain on manufacturing capacities. According to recent data, post-pandemic “U.S. industrial production and capacity utilization reached their highest levels since before the Great Recession of 2007-09” following this cascade of consumer demand. In May 2022, the consumption of durable goods was reported to be 19% higher than pre-pandemic levels after adjusting for inflation. Unsurprisingly, manufacturers today are still over-extended, struggling to keep pace with buyers’ ever-increasing expectations.

2. Material Limits

Material constraints are another significant factor contributing to capacity issues in manufacturing. Supply chain management challenges have been pervasive, with 37.8% of manufacturing companies reporting continued difficulties. The disruption in supply chains, which intensified in the first half of 2023, has led to severe limitations in material availability and increased costs. In fact, “71% of global companies cited raw material costs as their number one supply chain threat.” The combination of restricted access to materials and rising costs has strained manufacturing operations, further compounding capacity constraints.

3. Labor Shortages

Labor shortages have long been a challenge for the manufacturing industry, and the pandemic has only magnified this issue. The capital-intensive nature of manufacturing means that the sector often operates with a lower percentage of the workforce relative to its output. In the first quarter of 2022, “12% of U.S. output…was from manufacturing, while the sector employed only 8.4% of the workforce.” This mismatch has resulted in increased pressure on existing employees and a greater reliance on temporary or less skilled labor. As manufacturers struggle to find and retain qualified workers, the efficiency and scalability of their operations are compromised.

Results of Over-Reliance on Manual Processes

The impact of capacity constraints on manufacturing operations can be severe, leading to several critical issues:

• Rapid Depreciation of Resources: Capacity constraints often result in the underutilization of valuable resources, including equipment and labor. When production capabilities are limited, machinery and equipment may not be used to their full potential, accelerating their depreciation in value. Similarly, labor resources may be stretched thin, leading to decreased productivity and increased turnover rates. This rapid depreciation of assets and resources can strain financial resources and hinder overall operational efficiency.
• Lack of Scalability: Manufacturers facing capacity constraints are at risk of missing out on valuable market opportunities. The inability to scale production in response to increased demand can result in lost sales and revenue. Companies that cannot quickly adapt to changing market conditions may find themselves falling behind competitors who are better equipped to meet customer needs. This missed opportunity can have long-term consequences for growth and market share.
• Customer Dissatisfaction and Reputational Risk: An inability to meet customer demands due to capacity constraints can lead to dissatisfaction and damage a company’s reputation. Delayed deliveries, inconsistent product quality, and missed orders can erode customer trust and lead to negative reviews. This reputational risk can have a long-lasting impact on customer relationships and brand perception.

The Solution: Digital Transformation

Digital transformation offers a robust solution to the challenges posed by capacity constraints. By leveraging advanced technologies and data-driven insights, manufacturers can enhance their operational efficiency and better manage their production capabilities.

Enhanced Supply Chain Visibility

Digital transformation provides manufacturers with real-time visibility into their supply chains. Integrated systems and advanced analytics enable companies to monitor inventory levels, track supplier performance, and forecast demand more accurately. This visibility helps manufacturers proactively address potential disruptions and make informed decisions to mitigate risks.

Improved Efficiency and Automation

Technologies such as automation, artificial intelligence (AI), and machine learning can streamline manufacturing processes and reduce reliance on manual labor. Automated systems improve production efficiency, minimize errors, and enable manufacturers to scale operations more effectively. By adopting these technologies, manufacturers can address labor shortages and optimize their production processes.

Data-Driven Decision Making

Digital transformation equips manufacturers with the tools to analyze large volumes of data and derive actionable insights. Data-driven decision-making allows manufacturers to optimize production schedules, manage inventory more effectively, and respond to market changes with greater agility. This capability helps manufacturers adapt to fluctuating demand and improve overall operational performance.

Partnering with Third Wave and SAP for Success

Implementing digital transformation requires a strategic approach, and ERP solutions like SAP Business One play a crucial role in this process. SAP Business One offers a comprehensive platform that integrates various aspects of manufacturing operations, including supply chain management, production planning, and financial management. This integration enables manufacturers to gain real-time insights, enhance operational efficiency, and scale their operations effectively.

Trusted partners like Third Wave are essential in guiding manufacturers through the digital transformation journey. With extensive industry expertise and a deep understanding of ERP systems, Third Wave provides valuable support in implementing SAP Business One and other digital solutions. Their role includes assisting with system integration, customizing solutions to meet specific business needs, and offering ongoing support to ensure a smooth transition.

As a trusted advisor specializing in SAP Business One implementations for manufacturers, Third Wave empowers businesses to maximize their resource utilization and unlock new levels of productivity. Our expertise extends beyond mere software implementation to comprehensive support in aligning technology with business strategies, ensuring a seamless transition and ongoing success.

Effective resource utilization and streamlined production workflows are critical for small businesses looking to thrive in a competitive global market. Tools like Third Wave’s Versago and Bizweaver help managers navigate the complexities of resource utilization by automating repeatable processes, harnessing data for better informed decision-making, and ultimately ensuring exceptional customer experiences.

• Bizweaver – Bizweaver automates processes and streamlines production management by synchronizing workflows across the organization. It serves as a hub for all the transaction information flowing in and out of your business.
• Versago – Versago streamlines digital communication by connecting departments, channels, partners, employees, and locations with SAP Business One data. It gives you the flexibility to streamline collaboration and address specific issues with optimization, resource allocation, and more.

Achieving success starts with a solid ERP solution and the right expertise. Allow Third Wave to lead you towards optimized operations and long-term growth. Connect with us to explore how SAP Business One can help your business reach its full potential.

The manufacturing sector has long been the backbone of industrial progress, driving innovation and economic growth. Yet, as the industry evolves, many manufacturers find themselves grappling with the inefficiencies and challenges posed by manual processes. From human error to reduced productivity and inaccurate data, these issues are not merely operational hurdles to be tackled at a later date—they represent substantial barriers to competitiveness and growth. We will explore these growing pains in detail, examine the consequences of an over-reliance on manual processes, and discuss how digital transformation can serve as a lifeline for manufacturers seeking to overcome these challenges.

Challenges Caused by Manual Processes

1. Human Error

One of the most significant issues associated with manual processes is human error. According to a report by the National Institute of Standards and Technology (NIST), manufacturing scrap and rework resulting from human mistakes can cost companies between 5% and 30% of their total manufacturing costs. This is a substantial financial burden that can undermine profitability and operational efficiency.

A study published in the International Journal of Engineering Research and Applications reveals that human errors account for up to 80% of quality defects in manufacturing. These defects not only lead to increased costs due to rework but also contribute to decreased customer satisfaction. As the industry becomes more competitive, the margin for error narrows, making the reduction of these defects imperative for success.

Industrial automation emerges as a critical solution in this context. The report highlights that businesses keen on staying competitive must integrate automation to meet the demands of a rapidly changing market. Automation reduces the reliance on human intervention, thereby minimizing the likelihood of errors and ensuring more consistent quality.

2. Reduced Productivity

Manual processes also contribute to reduced productivity, which is exacerbated by rising labor costs and a shortage of skilled workers. According to Deloitte, total hourly compensation in the manufacturing sector increased by 6.2% in Q1 2022 alone. This rise in labor costs strains budgets and highlights the inefficiencies inherent in manual processes.

A recent report by L2L sheds light on the broader impact of these challenges. It notes that the U.S. manufacturing sector will struggle to fill 3.8 million jobs over the next decade, driven by high turnover and significant resignations. The report, based on a survey of over 600 manufacturing professionals, reveals that 75% of respondents have noticed a lack of skilled workers, while 46% reported notable resignations. This turnover disrupts plant operations, leading to decreased productivity and efficiency in 78% of organizations surveyed.

The scarce availability and increasing costs of skilled labor highlight the urgent need for manufacturers to adopt technologies that can fulfill technical, repeatable processes which would otherwise be performed by a person. This allows companies to allocate their workforce more strategically and reduce dependency on human labor for production, thereby enhancing overall productivity.

3. Inaccurate Metrics and Poor Decision-Making

Manual processes often result in inaccurate data collection and reporting, which undermines decision-making. Research indicates that 98% of manufacturers struggle with at least one data issue that hinders their ability to utilize advanced technologies like artificial intelligence (AI) and automation. Specifically, 35% report having incomplete data, 31% have outdated data, and 30% describe their data as inaccurate.

Inaccurate metrics and outdated data can lead to poor decision-making, affecting everything from production schedules to inventory management. The inability to rely on accurate data prevents manufacturers from leveraging strategies that could otherwise streamline operations and improve efficiency.

Results of Over-Reliance on Manual Processes

The consequences of relying heavily on manual processes are multifaceted and detrimental to overall business performance. Key outcomes include:

• Increased Operational Costs: Manual processes often result in higher operational costs due to inefficiencies and the need for additional resources. These tasks can be time-consuming and error-prone, leading to increased labor costs and the need for additional personnel to handle corrections. This not only strains the budget but also impacts the overall profitability of the organization.
• Long Production Cycles: Manual processes slow down production cycles due to increased chances of errors and inefficiencies, ultimately affecting delivery times and customer satisfaction.
• Capacity Constraints and Overtime Fees: Inefficient processes often lead to capacity constraints, necessitating costly overtime to meet production demands. This not only raises operational costs but also strains workforce morale and productivity.

The Solution: Digital Transformation

Digital transformation offers a compelling solution to the challenges associated with manual processes. Automation and advanced technologies can address many of the issues highlighted above, providing manufacturers with the tools needed to enhance efficiency and competitiveness.

Reducing Human Error Through Automation

Automation is pivotal in mitigating the impact of human error. By implementing automated systems, manufacturers can ensure more consistent quality and reduce the incidence of mistakes. This transition is essential for maintaining a competitive edge in a rapidly evolving market.

Enhancing Productivity with Technology

Investing in technology training and automation can significantly boost productivity. A recent survey indicates that 34% of manufacturers have already eased talent shortages through automation, with 56% expecting similar benefits from future automation efforts. Additionally, 52% of manufacturers anticipate major improvements in the product lifecycle due to automated design optimization via AI and generative design.

Improving Data Accuracy and Decision-Making

Digital transformation also addresses the issue of inaccurate data. By integrating advanced data management systems, manufacturers can ensure more reliable metrics and better decision-making. Automation in workflow and quality control, as well as investments in predictive and generative automation, can help close the gap between current capabilities and desired outcomes.

Despite these benefits, challenges remain in integrating automation effectively. Approximately 35% of manufacturers underutilize automation, and 34% face integration difficulties. Addressing these challenges requires a concerted effort to improve data management and ensure seamless integration of new technologies.

Partnering with Third Wave and SAP for Success

ERP systems such as SAP Business One play a crucial role in facilitating digital transformation. SAP Business One integrates various aspects of manufacturing operations into a unified platform, providing real-time insights and data accuracy. This integration helps manufacturers streamline processes, reduce manual interventions, and improve overall efficiency.

Undertaking the journey to digital transformation can be complex and challenging. This is where trusted partners like Third Wave come into play. With industry expertise and a deep understanding of ERP systems like SAP Business One, Third Wave provides invaluable support throughout the implementation process. Their role extends beyond mere software deployment; they offer strategic advice, training, and ongoing support to ensure a smooth transition and maximize the benefits of digital transformation.

As a trusted advisor specializing in SAP Business One implementations for manufacturers, Third Wave empowers businesses to optimize their business processes and unlock new levels of efficiency. Our expertise extends beyond mere software implementation to comprehensive support in aligning technology with business strategies, ensuring a seamless transition and ongoing success.

Effective resource utilization and streamlined production workflows are critical for small businesses looking to thrive in a competitive global market. Tools like Third Wave’s Versago and Bizweaver help managers navigate the complexities of resource utilization by automating repeatable processes, harnessing data for better informed decision-making, and ultimately ensuring exceptional customer experiences.

• Bizweaver – Bizweaver automates processes and streamlines production management by synchronizing workflows across the organization. It serves as a hub for all the transaction information flowing in and out of your business.
• Versago – Versago streamlines digital communication by connecting departments, channels, partners, employees, and locations with SAP Business One data. It gives you the flexibility to streamline collaboration and address specific issues with optimization, resource allocation, and more.

Achieving success starts with a solid ERP solution and the right expertise. Allow Third Wave to lead you towards optimized operations and long-term growth. Connect with us to explore how SAP Business One can help your business reach its full potential.

Web Client for SAP Business One

SAP Business One 10.0 (MS SQL)
SAP Business One 10.0, version for SAP HANA

• The Web Client is based on SAP Fiori design principles encapsulating SAP Business One core processes and business logic alongside an advanced user experience
• Focused on creation, processing, and updating of Sales Quotes, Sales Orders, A/R Deliveries, and A/R Invoices
• List views for purchasing documents
• Supports creation and update of Items, Business Partners, and Activities
• The Web Client provides some sophisticated analytic charting capabilities
• For optimized user experience launch the Web Client in either a desktop computer or tablet, using the Google Chrome or Firefox web browser. The Web Client can also be launched directly from the regular SAP Business One desktop application

SAP Business One 10.0 Usability

New Skin Style – Belize Deep – SAP HANA
New modern and fresh look and feel. Plus harmonized user-experience for those who work with both SAP Business One and the Web Client.
Features:

• New skin style “Belize Deep” is added to SAP Business One 10.0, version for SAP HANA
• Inspired by the SAP Fiori design and following the Web Client look & feel
• Currently available when using the Fiori-Style Cockpit
• 4K monitors supported when using the Belize Deep skin style

Enhanced User Interface

The information about the current company and logged-in user is displayed clearly. Plus, switching between company databases and users is one-click away.

Features:

• New Show/ Hide Toolbar icon and menu option under View Menu
• Users can enlarge working area by hiding the toolbar
• The company name and user name are clearly displayed at the top center of SAP Business One window; Click it to open the “Choose Company” window directly

Alignment of Form Behavior

Increased usability by avoiding scrolling, especially in busy forms. Alignment with standard system form behavior.

Features:

• Ability to resize and maximize form size is supported in:
  Company Details, General Settings, Posting Periods, Print Preferences, Checks for Payment, Document Generation Wizard, Update Special Prices Globally, Trial Balance Revaluation, General Ledger, Layout and Sequence, Request for Generation Approval, Approval Stages, Export Transactions to SAP Business One, Payment Methods, Payment Terms, Query Authorization Groups, Report and Layout Manager, UDF – Field Data, Configuration Management, Cash Flow, Addon Manager

User Name in License & Add-On Administration

Enhanced clarity and transparency of the user’s identity by displaying the user name supports accurate license allocation and add-on administration

Features:

• A new column for displaying the User Name is added to the Allocation and Assignment tabs in License Administration window and to the User Preferences tab in Add-on Administration window
• Filtering according to User Name field is now possible within both forms
• Sorting by User Name is supported in the License Administration window

ERPs offer more flexibility than ever. The different deployment options mean that you can find the right software to fit your business’s unique needs and capabilities. The increase in flexibility, though, can also lead to overwhelm when deciding on each system. What deployment fits your business model and budget best?

ERP software is an investment of your time and money, so it is vital to understand your options and which one fits your business best. Software pricing structure falls into one of two categories: licensing or subscription. Getting to know each structure can help keep you from overspending and maximizing your return on investment (ROI).

We are going to dive into what each pricing model includes, factors to keep in mind, and questions to ask yourself when choosing the right one for your business.

Licensing vs. Subscription: What’s the Difference?

Perpetual licensing is the traditional option for most computer software for the past few decades. The subscription model, also known as Software-as-a-Service (SaaS), has become increasingly popular over the past few years. They are both different in how they charge for software:

Perpetual licensing charges companies a one-time fee and a small annual maintenance fee. It requires a larger payment up front, but then you own the license to access your ERP. The annual maintenance fee covers any updates or upgrades to the software.

Subscription, on the other hand, is a rental option. It allows you to use your ERP solution as long as you pay the subscription fee. Vendors typically charge an annual fee, which is often broken up into monthly payments. The subscription ERP model offers a lower cost upfront than licensing, but have a 3-10% yearly increase in fees on average.

Many companies fail to realize that SaaS is still software, and requires training, data conversion, and accommodation initially. Keep in mind that subscription still needs as much implementation scope and cost as licensing.

Why Choose the Licensing Model?

The subscription model does typically offer a lower initial rate, but licensing provides a better value and lower overall cost for most businesses.

To help offset rising costs in a subscription model, some companies choose multi-year leasing for a lower rate. However, this can be an expensive mistake if the company is unable to implement the software or finds it doesn’t meet their needs. If something goes wrong, they are still required to pay for the software. It also means that they are in store for a hike in prices once their lease is up, and it comes time to pay for another year. Many companies find that the software is too expensive after storing their data for years.

Contracts for a subscription can be difficult to understand and navigate. As the traditionally used method, licensing is usually straight-forward and follows standard contract law. However, companies may have trouble understanding vital issues such as data access, integration, system downtime limits, and additional fees with an increase in users and transactional volume. A SaaS agreement expert is critical for ensuring that you understand all of the charges and possible issues.

Licensing gives businesses better flexibility with their data. They can deploy their ERP on-premise or in a private or multi-tenant cloud while SaaS is delivered through a multi-tenant or public cloud environment. This can be especially critical for organizations with sensitive data that they don’t want to store in a public cloud environment.

Companies often grow and change their structure, priorities, and systems to meet their needs better. However, subscription-based ERPs are not always equipped to accommodate changes. It can be especially tricky to export your data to a new system if you need to do so because the vendor owns your data. Many companies find that it is too expensive to convert it all to a new system. They are forced to convert only the most essential data and continue to pay their subscription for access to less critical data.

However, companies that choose ERP licensing have no problem accessing and using their data as needed. Even if they find they cannot pay the yearly maintenance fee, they still own the ERP software and can use it. For new and growing businesses that aren’t sure about where best to store their data or are finding out the most effective method, the flexibility of licensing ensures that there is no headache or unexpected prices in the years to come.

Licensing is an easy and effective way to maintain control over your software and avoid unexpected price jumps. Businesses that choose the subscription model to save on upfront costs often find that it ends up costing them in the long run.

Questions to Ask When Deciding on Your ERP

Before investing years in a licensing or subscription-based model, some questions to consider include:

• Have you looked at a 10-year Total Cost of Ownership (TCO)? Many SaaS vendors draw in businesses with an initial discount. However, if you get 50% off for three years, for example, what happens when you hit year four? Look at costs over ten years to get a sense of which model makes financial sense.
• Do you understand the difference between a software partner and a software vendor? A vendor supplies the ERP, teaches you how to use it, and moves on to the next customer. A partner, though, becomes an extension of your business. Their expertise allows them to see and develop opportunities on your behalf, allowing you to grow a stronger and more effective company.
• Will you have access to your data? Some vendors purposefully make it difficult to remove your data. It ties businesses to them even when customers are no longer happy with the software. Better access to your data puts you in control of your software and organization.
• Is the software scalable? Growing companies may be shocked to find their prices skyrocket as they require more users. Licensing, though, allows you to use your ERP as much as you need because you own it.
• How do integrations work? Accessing data is often more difficult with subscriptions, so integrations may not always work or be challenging to implement.
• What if our transaction volume doubles, 5x, 10x, or 100x? Licensing gives your business the freedom to grow seamlessly. However, many SaaS models charge significantly more as the needs of organizations increase.

About Third Wave Business Systems

Third Wave Business Systems is an SAP Gold Partner, the world leader in ERP software. Our professionals can help implement ERP solutions for your on-premise and cloud deployment with in-depth industry expertise. Our experts can help you choose the best ERP solution based on your business’ unique needs and goals.

To learn more about ERP pricing options, schedule a customized demo with one of our experts today.