How IoT Is Revolutionizing CPG Industry

retail iot

The key to success for any CPG company is its ability to predict demand and agility in response to changes in consumer demand. In a situation where a CPG company is left with no choice but to find options to please its customers to keep the business running, technology and data can be a savior. With technology expansion, the CPG industry stands a big chance at success. CPG companies have many digital technologies and predictive analytics tools at their disposal.

The digitization of the entire manufacturing and supply value chain is gradually becoming a reality. Quite a few leading consumer-goods companies have started to explore the use of digital solutions in manufacturing, supply chain and delivery processes as a performance booster. Some consumer-goods companies, however, still lack clarity as to where to start from: what processes can be improved by deploying today’s digital technologies?


There is a lot of scope of IoT and Predictive Maintenance in improving processes specific for CPG companies. Let’s examine the ways in which consumer-goods companies are using digitization majorly to optimize value chain processes and operations:

·         Avoid sudden, unplanned downtime period and accurately forecast demand with predictive analysis

·         Better inventory management to avoid stock-out situations and ensuring products are always placed on shelves

·         Greater visibility into store and warehouse operations, order processing, production mapping with demand forecasts etc. for consistent supply flow

·         Effective forecasting of demand based on consumption data, customer preference data, location- based data, past purchase data, customer spend patterns etc.

·         More attention can be paid on how vendors maintain, replenish supplies and ensure product quality for better partner collaborations

·         Using the location of users visiting their website or retail stores and linking their purchase behavior data for offering targeted discounts, promotions, and segment-based pricing to attract or retain different consumers.

How CPG firms can leverage IoT and Predictive maintenance to ensure success:

Predicting demand: Predicting demand for majority of products that are in the “long tail” of consumption, is quite crucial for CPG firms. Firms need very accurate demand forecasts because maintaining inventory incurs cost. Keeping products on shelves and maintaining stock levels in warehouse can impact both revenue and customer engagement, thus necessitating hyperlocal forecasts. In modern times, a CPG firm relies heavily on data which gives a good enough reason to adopt IoT or Predictive maintenance for better forecasts. Not only can accurate demand forecasting save you money (from overproduction, over-stocking), it can sustain customer satisfaction and reduce lost sales by avoiding stock-out or late delivery incidents.

Efficient Operations and Stock Maintenance: Smoothly operating supply chains are key to consistent profits. Machine downtime imposes a cost to firms due to compromised productivity and can be particularly disruptive for both complex manufacturing supply chains and consumer products. A wave of new data generated by IoT can provide real-time records on detailed aspects of production processes. CPG companies can schedule maintenance in a proactive manner wherein data-based models are used to detect variances at an early stage.

Retail Optimizations: Retail environments have significantly changed over the past two decades due to digitization, especially the rise of online shopping. IoT can provide traditional retailers with the tools to coexist—with the online retail world as “omni-channel” shopping, which erases the demarcation between online and offline shops. IoT technology can also provide data to optimize store layouts, enable fully automated checkout, and fine-tune store management for customer convenience. Such innovations enable new business models to allow retailers improve productivity, reduce costs, and raise sales.

Inventory Management: With too much inventory in hand can result in high carrying costs and risk with unsold items. Too little inventory results in stock-outs. In-store inventory levels can be fine-tuned using automated shelf replenishment and real-time inventory monitoring. Using sensors to track the weight or height of items in inventory, optimizing inventory spaces, triggering automatic reordering based on specific conditions are some use cases of IoT technology. This could help in automating inventory replenishments and bring down inventory carrying costs by up to 10 percent, which could have an impact of $5 billion to $15 billion per year in 2025 (Source: McKinsey Report, June 2015)

Asset Tracking: Traditionally, tracking numbers and barcodes were used for managing goods throughout the supply chain. But with the advent of IoT, tracking assets has become enhanced, faster and smoother. New RFID and GPS sensors can track products flying far. At any point in time, CPG players can plan their sales and store efforts with the help of these sensors to gain granular data like the temperature at which an item was stored, how long it was placed in the warehouse, and even how long it took to fly off the shelf, compare the stock clearance of various products and SKUs etc. The type of data gained from the IoT can help CPG companies get a tighter grip on quality control, on-time deliveries, and product forecasting.


The data inflow from connected devices, smart sensors at retail stress, smart wearables, trackers and predictive mechanisms can really make it all smooth for the CPG players. They can remain privy to many market forces, changes in consumer behavior, industry dynamics, competition, global economic states and go one step ahead to correctly forecast demand. It’s not a guarantee of success, but it’s a better way to make decisions than relying on educated guesses and unconscious assumptions. IoT and Predictive Maintenance is already transforming the way companies handle logistics, product placement and tracking. With so many unprecedented opportunities to build long term customer relationships, we are yet to see how CPG players leverage these opportunities innovatively.