The consumer goods (CG) industry has faced an environment of increased volatility and uncertainty over the past few years. The industry will need to tackle a number of challenges in the coming year, including:
rising commodity and energy costs
product safety and traceability
supply chain cost and complexity
growth of private label
a focus on consumer-centricity
the explosion of big data
trade management profitability
In order to keep up with these challenges, CG companies will need to have the ability to respond to shifts in customer demand, and increase velocity and agility in the supply chain. There are a number of technologies and strategies that can help companies meet these goals.
Trade promotion management and optimization
Trade promotion is intended to stimulate demand and help pull product through the distribution channel to reach consumers more immediately. Effective trade promotions can generate enthusiasm for a product and help build brands. Because of the proliferation of brands in the consumer market, there is fierce competition for shelf space.
In consumer goods, trade promotion cost is often cited as the second largest line item on company profit and loss statements. Companies find it difficult to understand the true profitability and long-term return of promotions. It is important for CG companies to integrate trade promotion into the company planning process. Profitably optimizing trade promotion, media investment, consumer promotion and social media presents many new opportunities. Providing a targeted, personal experience to the consumer can be a challenge, but can yield great success.
The ability to accurately monitor the effectiveness and efficiency of trade promotions is a challenge. Many companies still do not have a good handle on their ROI. CG companies are constantly looking for opportunities to maximize spend effectiveness by anticipating demand and predicting revenue, volume and profitability. As a result, they are expanding their trade promotion management initiatives to include advanced analytics and optimization capabilities. It is important to consider tools, process and analytics to improve the effectiveness of trade funds.
Integrated business planning
Integrated business planning (IBP) integrates financial, sales, and operational planning to optimize business performance. It is an enterprise-wide undertaking in which all functional areas understand the financial impact of decisions across the organization. For it to work, financial and operations plans must be aligned top to bottom, with a systematic approach to information-sharing between finance and operations in which everyone involved is looking at the same data — with a single source of the truth.
IBP should be recognized enterprise-wide as the decision- making forum to address risks and opportunities, but instead, it is typically supply-chain centric. What’s holding IBP from taking off at a more rapid pace in CG companies? Many surveys have cited that the lack of active participation from finance is holding many companies back. Executives need to take charge and lead the process across the company. When implemented correctly, IBP can plug the gap between strategic, financial and operations planning.
Product lifecycle management
Consumers are looking at in-store and private label brands more favorably, forcing CG companies to innovate. CG companies continue to invest in product development and innovation to better the value perception of their brands and enable them to better compete with in-store brands. Creating differentiation to maintain and grow brand loyalty is paramount to succeed. Thus, CG manufacturers must continually launch innovative products to meet the needs and desires of consumers.
In an effort to improve innovation and achieve competitive advantage, CG companies are rapidly adopting product lifecycle management (PLM) solutions. PLM helps CG companies improve the success rate of new products, shorten time-to-market, ensure compliance, and reduce cost.
A cross-channel approach to consumer engagement
Today's consumers shop across channels, including retail stores, websites and catalogs. Social media and loyalty programs are increasingly affecting the brand experience. With the advent of social media, CG manufacturers are increasingly developing integrated cross-channel strategies to ensure that consumers are engaged by the proper brand experience at every touch point.
Consequently, CG manufacturers need to adapt as retailers have, with investments in innovative technologies and processes to build the infrastructure to support market demand. With advances in social networking, digital marketing and mobility fundamentally changing the way consumers behave, the door has opened to building a more direct relationship with customers.
Using big data to drive competitive advantage in consumer goods
The amount of data in the consumer goods industry has been exploding in recent years, with the advent of social media and an increase in multimedia. Companies will have to harness an increasing volume of detailed information with big data appliances that can collect and analyze large data sets. Many CG companies are drowning in data and starving for insights. The availability to collect specific, detailed data — such as what products are selling in which stores on what day — combined with the potential for real-time visibility into the demand and supply chains of an organization present an opportunity to deliver an unprecedented amount of decision-making power to executives.
Unlocking key patterns and trends in large volumes of structured and unstructured data require analytical capabilities to gain a deeper understanding of customers and products. Turning data into usable knowledge and analyzing data in real-time speedily is paramount to sustained competitive advantage in today’s economy. Companies that build a modern enterprise architecture and a scalable, high-performance computing environment that can capture and harness the massive amounts of data are gaining a competitive advantage.
Cassandra Moren is senior director of consumer goods industry marketing at Oracle.