Consumer packaged goods (CPG) companies rely heavily on IT services to adapt to ever-changing market demands. But managing an in-house IT infrastructure can be challenging, costly, and time-consuming. For enterprise CPG businesses, it often makes more sense to outsource these functions to a third party. In doing so, many organizations discover a newfound sense of scalability and flexibility.

Unlocking scalability through outsourced IT

Scalability involves the capacity to expand or shrink IT operations to accommodate fluctuations in workload without incurring significant costs. This is particularly prudent in CPG, which deals with variability based on season, market shifts, consumer demand, and more. CPG companies encounter unique obstacles when scaling their IT infrastructure, including:

• Rapid growth: As businesses grow, they may face a sudden increase in IT demands, such as the need for additional servers, storage, processing power, and IT staffing.
• Seasonal fluctuations: Some CPG products experience seasonal fluctuations in demand, requiring IT resources to be adjusted accordingly.
• Technology obsolescence: Keeping up with the latest advancements can be costly, especially for hardware and software investments.
• Skilled IT workforce: Attracting and retaining skilled IT professionals can be a challenge for manufacturers in general.
• Cost constraints: CPG producers may have limited budgets for their IT infrastructure, making it difficult to invest in advanced technologies or manage sudden increases in demand.

Outsourcing enables manufacturers to scale IT resources as needed. During periods of increased demand, the outsourcing partner can allocate additional resources to meet requirements. Conversely, when demand decreases, the company can reduce resources — all without significant investment or the potential for technical debt. They pay only for the services they use at a given time.

Outsourcing IT to create flexibility

Flexibility allows a company to adapt, scale, and respond quickly to changing business needs, market conditions, and technological advancements without being constrained by rigid infrastructures, systems, or commitments. CPG producers face key challenges in creating and maintaining flexibility, such as:

• Technological advancements: Manufacturers must keep up with the latest trends and innovations to remain competitive. But upgrading and integrating new technologies within an existing IT infrastructure can be complex, costly, and time-consuming.
• Changing market demands: Consumer preferences and market trends can shift quickly, requiring businesses to adapt IT systems to support new product offerings, distribution channels, and marketing strategies.
• Cost management: Maintaining and upgrading IT infrastructure is expensive. CPG companies may find it challenging to allocate resources efficiently, especially if they’re unsure about long-term IT requirements.
• Skills and expertise: IT skills required for specific projects or technologies might not be readily available in-house. Finding and training the right talent can be time-consuming and expensive, particularly for short-term projects.
• Time to market: In a competitive market, time to market is crucial. Delayed IT projects or a slow response to changing market demands can hinder a business’s ability to seize opportunities.

Outsourcing IT services offers numerous advantages to CPG companies in terms of flexibility and adaptability. For instance, outsourcing allows manufacturers to tap into external expertise and experienced resources quickly. They can scale IT services up or down as needed to respond promptly to market fluctuations and changing business requirements.

Another advantage of outsourcing IT services is accessing the latest technologies and innovations. IT service providers typically stay updated with technological trends and innovations. By outsourcing, CPG companies can leverage these cutting-edge technologies without bearing the burden of continuous research and investment.

Outsourcing certain IT functions also frees the organization’s internal IT team to focus on strategic initiatives and core competencies.

Best practices for outsourcing IT

Outsourcing isn’t a catchall solution for creating scalability and flexibility in a CPG environment. It’s imperative to work with a partner who’s cognizant of the industry’s unique challenges and can adapt in tandem with them. Be mindful of the following when considering an outsourced IT partner:

• Conduct a comprehensive IT needs assessment. Whether in-house or currently outsourced, this assessment should involve key stakeholders and decision-makers to identify specific goals, performance requirements, and desired outcomes from the outsourcing arrangement.
• Use an outside sourcing advisor. A sourcing advisor can assist in evaluating the current environment, establishing requirements, defining priorities, and navigating the vendor selection process. Research and choose an advisor carefully, and ensure they have the organization’s best interests in mind.
• Select the right partner. Companies should thoroughly evaluate potential vendors based on their capabilities, track record, industry expertise, financial stability, security measures, and cultural fit.
• Set expectations and performance metrics. Key performance indicators (KPIs) should be agreed upon in the contract to measure the vendor’s performance. This practice helps in monitoring progress and holding the vendor accountable. Many providers now have experience with establishing an experience management office (XMO) along with user experience measurements (XLAs).
• Establish communication and collaboration processes. Organizations should establish regular communication channels with the vendor to address any issues, changes, or updates promptly. Clearly defined escalation procedures and governance mechanisms help guarantee smooth operations.

Outsourcing IT services provides CPG companies with the tools to build adaptable organizations capable of thriving in a dynamic business landscape. Specifically, entrusting IT needs to external experts offers access to a range of benefits fostering scalability and flexibility. Through outsourcing, companies are empowered to be more agile, resilient, and adaptable — hallmarks of a successful manufacturer.

Learn more about how outsourced IT services can empower CPG companies at windzr.com.