Late, short deliveries cost food and CPG makers $100 billion

Cleo estimates that late and incomplete deliveries cost U.S. and Canadian consumer packaged goods (CPG) and food and beverage manufacturers about $100 billion a year. The supply chain software company released the figure Tuesday in a report on on-time, in-full (OTIF) performance.

Direct costs such as retailer chargebacks, expedited freight and dispute management make up $10 billion to $11 billion of that total, according to The $100 Billion Supply Chain Penalty: OTIF’s Total Economic Impact. Cleo attributes the other $85 billion to $90 billion to losses that rarely appear in financial reporting: lost shelf space, smaller retailer orders, excess inventory and manufacturing inefficiencies.

Retailers fine suppliers when orders miss the delivery window or arrive short. Walmart requires suppliers to deliver on time and in full on 98% of orders or pay a fine of 3% of the cost of goods, when the retailer tightened its standard in 2020.

“A missed delivery can cost a manufacturer its next order, its shelf space, and ultimately its standing with a retailer. The chargeback captures only a fraction of that damage,” Cleo President and CEO Mahesh Rajasekharan said in the release.

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