Rising input costs, tariffs and persistent manufacturing inflation are forcing food companies to reconsider one of the biggest supply chain decisions of the past decade. Rather than relying more heavily on external manufacturing partners, many are reassessing which products should move back into owned facilities to improve cost control, increase execution consistency and simplify increasingly complex networks. Conagra’s latest strategy provides a clear example of this shift, combining insourcing, SKU rationalization and targeted capital investment to redesign its supply chain around greater control rather than simply lower cost.
In Brief
- Food manufacturers are increasingly using insourcing to improve production control, simplify supply networks and reduce long-term cost-to-serve.
- Portfolio simplification is becoming a critical companion to network redesign by reducing planning complexity, inventory and manufacturing changeovers.
- Capital investment, productivity and service performance are increasingly being managed together so supply chain transformation strengthens margins without compromising customer availability.
Insourcing Is Becoming a Network Decision
For years, outsourcing provided manufacturers with flexibility, lower capital requirements and additional production capacity. Today’s environment is changing that calculation.
Higher inflation, tariffs and greater supply chain volatility are exposing the trade-offs that accompany extensive reliance on external manufacturing partners. As a result, more manufacturers are evaluating whether greater ownership of production can provide stronger long-term operating performance.
Conagra is following that path. The company plans to increase capital expenditure toward the upper end of its long-term target while directing much of the incremental investment toward bringing fried chicken and other protein production into its own manufacturing network. Management has described insourcing as a way to improve supply chain control while reducing structural costs.
Moving production into owned facilities represents far more than a manufacturing decision. It changes how capacity is planned, how raw materials are sourced, how production is scheduled and how quality standards are managed across the network.
For supply chain leaders, the question increasingly becomes which product platforms create enough strategic value to justify greater manufacturing control and which remain better suited to external partners.
Capacity Planning Changes When Production Moves In House
Insourcing affects almost every layer of network design.
Production volumes previously managed by co-manufacturers must be transferred into existing plants or supported through new capacity. Procurement teams assume responsibility for raw materials that suppliers may previously have managed. Manufacturing schedules become more complex as new production ramps while maintaining customer service.
These transitions also require careful planning to avoid disruption. Capacity must be phased into facilities without affecting maintenance schedules or reducing service performance. Quality processes that previously sat within supplier agreements become internal operating disciplines. Inventory policies often need adjustment as production locations and lead times change.
Conagra has indicated that maintaining service levels remains a priority throughout this transition, suggesting that capacity expansion and operational stability are being managed together rather than sequentially.
Simplifying the Portfolio Reduces Network Complexity
Insourcing alone cannot resolve a network burdened by excessive product complexity.
Conagra has acknowledged that its portfolio of approximately 5,500 SKUs has created unnecessary operational complexity and plans to conduct a zero-based review of the entire range.
For supply chain organizations, SKU rationalization often produces benefits well beyond inventory reduction.
Fewer low-volume products simplify production scheduling, reduce manufacturing changeovers and improve line utilization. Demand planning becomes more accurate as forecasting effort concentrates on higher-volume products. Warehouse operations benefit from fewer inventory locations, while transportation planning becomes less fragmented.
The objective is not simply to eliminate products.
It is to ensure that every SKU justifies the operational complexity it introduces across manufacturing, planning, procurement and distribution.
As manufacturers continue facing inflation and capacity constraints, simplifying product portfolios is increasingly becoming an operating decision rather than only a commercial one.
Productivity Must Work Alongside Pricing and Service
Conagra continues targeting productivity improvements while acknowledging that inflation remains above expected productivity gains.
Management has described productivity as the first line of defense against cost inflation, with pricing providing additional support where necessary. At the same time, the company continues targeting high customer service levels while avoiding supply-driven disruptions.
Those priorities illustrate an increasingly common challenge across manufacturing.
Productivity programs cannot focus solely on reducing cost. They must also preserve service performance, support pricing strategies and maintain production reliability.
That places greater emphasis on disciplined execution. Productivity initiatives need clear delivery plans, measurable operational improvements and close coordination across manufacturing, planning and commercial teams so that efficiency gains do not create unintended service problems.
Inventory and Service Must Improve Together
Another notable feature of Conagra’s approach is the way inventory and customer service are being managed together rather than as competing priorities.
Management highlighted continued improvements in inventory while maintaining strong service performance. Achieving both outcomes simultaneously requires more responsive planning rather than simply holding additional stock.
For many manufacturers, that means reviewing demand and supply plans more frequently as pricing actions influence customer demand. Inventory policies become more selective, with greater protection for strategically important products while lower-priority items carry leaner stock levels.
Portfolio simplification supports this effort by reducing demand variability across thousands of lower-volume SKUs and allowing inventory investment to concentrate on products that contribute most to revenue and customer service.
Capital Investment Supports Long-Term Network Capability
Conagra is also treating higher capital expenditure as part of a longer-term operating strategy rather than a temporary response to inflation.
Management expects capital investment to remain toward the upper end of its long-term range while continuing to invest in manufacturing capability, technology and process improvements. The company also highlighted Project Catalyst, an initiative designed to simplify work and improve how employees manage information and business processes.
Although Conagra has provided limited detail about the underlying systems, the broader direction is consistent with many large manufacturing organizations. Capital investment increasingly supports both physical capacity and the planning capabilities needed to operate more efficiently as networks become more integrated and data-driven.
The combination of manufacturing investment, digital capabilities and simpler product portfolios creates a stronger foundation for future productivity than isolated cost-reduction initiatives alone.
Building Simpler and More Controllable Supply Networks
Conagra’s strategy reflects a broader shift taking place across consumer goods manufacturing. Rather than viewing outsourcing, product proliferation and low capital spending as the default model, manufacturers are reassessing how much control they need over production, planning and inventory to compete in a more volatile environment.
For supply chain leaders, the practical questions are becoming increasingly clear. Which production platforms create enough strategic value to justify insourcing? Which SKUs generate complexity without strengthening the business? How should capital investment be directed toward manufacturing capability rather than simply expanding capacity? And how can inventory, service and productivity improve together instead of becoming competing objectives?
Conagra provides one example of how these questions are being addressed. The broader lesson is that supply chain redesign increasingly depends on simplifying networks, concentrating manufacturing capability around core products and investing where greater operational control creates lasting improvements in cost, service and resilience.
