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Top 11 Benefits of BI and Analytics in the CPG Industry
Smart consumer packaged goods (CPG) companies are leading their organizations into the world of Business Intelligence (BI) and Analytics through intelligent IT investments. These companies recognize that BI and analytics offers enormous advantages, especially in today’s increasingly digital-first world. Let’s take a closer look at what’s driving BI and analytics in the CPG industry, and why all CPG companies should adopt this technology in order to stay competitive.
Growth Imperatives and Challenges
Before diving into how CPG companies can use BI and analytics, let’s first understand the trends and industry shifts that make BI and analytics a crucial part of business today:
- Internet Penetration is Increasing: This has the potential to impact the traditional sales model and force CPG companies to innovate on multiple platforms. Better-informed consumers are demanding more and their expectations have expanded well beyond the traditional brick and mortar ordering platform.
- Global Scaling: Global borders are shrinking, and international trade and access to natural resources for products are causing CPG organizations to adjust to increased dispersion within their organization’s supply chain. Asia and other emerging markets now comprise a much greater share of the total CPG base. This requires a paradigm shift for the traditionally Western-based CPG industry.
- Data-Driven Revenue Growth: Partnerships with retailers are now driving winning companies to share data and consumer insights. This symbiotic relationship works well, as evidenced by winning companies sharing 75% of their data with their partner retailers, whereas the other 25% only share on an ad-hoc basis.*
- Supply Chain Optimization: The order fulfillment of old was a relatively long and somewhat painful process. New demands on CPG companies, however, have created a need for agility in supply chain management. Delivery requests now come in from multiple channels, and they are fulfilled via numerous paths. This agility is required for companies that wish to stay ahead of the pack.
- Packaging, Marketing and Shelf-Space Innovation: CPG companies have traditionally fought on the front lines via shelf space, vying for that premium, eye-level position. As consumer behavior shifts to online shopping , packaging and marketing need to be more innovative. The balance point is to keep brand loyalty without too much change, while adjusting appropriately to keep up with the times and shifting customer demands.
- Direct-to-Consumer Selling: Some CPG companies are doing away with the middle-man retailer, as they look to sell directly to the consumer. Given the nature of consumer packaged goods, their ability to do so rests largely on their infrastructure and supply chain ecosystem. Any savings brought about by the direct sell method can be passed on to the consumer, and given the competitive nature of the goods they purvey, that can mean a significant leg up on their challengers.
Consumer-Packaged-Goods Industry – Outlook for the Future
The CPG industry is facing challenges on multiple fronts. The increasing presence of deep discounters and the consolidation of retailers has created a need for cost reductions. Digitally-savvy consumers with ever-changing needs are seeking value like never before – thus creating unique industry challenges. All of this coupled with the industry’s dependent relationship on the macro-economy has forced CPG companies to seek a differentiator to bring them across the proverbial finish line.
Business Intelligence is the focus for more and more manufacturing and consumer packaged goods companies. The reality is, however, that they are not viewing analytics as the turnkey to their decision-making. Simply put, companies will flounder if they do not understand the importance of analytics on business planning and operations.
Among those currently using analytics, most are looking backwards at the data, at what has happened as opposed to what will happen. While useful, this approach does not fully exploit the many possibilities that advanced analytics offers. With predictive analytics, CPG companies can make smart business decisions based on what WILL happen, a form of limited future-gazing. This shift will truly differentiate those in the CPG industry as innovators and will reduce costs, thereby improving profitability.
The Benefits of Analytics and BI for the CPG Industry
The CPG industry has enormous opportunity to move forward and benefit from advanced analytics. Predictive analytics is arguably, nearly as big a disruptor as was e-commerce. Business intelligence and analytics impact so many different aspects of the commercial process that they have an explosive multiplier effect on cost reductions and profits. Every area on the value chain, from manufacturing to supply chain to packaging, is affected by advanced analytics.
Given that, CPG companies can benefit immensely from implementing an advanced analytics strategy. The broad-based benefits, listed below are examples of what can be accomplished when you implement an analytics and BI solution at your CPG company.
1. Supply Chain Management
Data make complicated supply chain structures and operations become much more clear. Data sharing will enable CPG companies to seamlessly identify cost reduction opportunities, perform demand analysis, troubleshoot high-impact issues, and many other critical elements necessary to keep a supply chain running smoothly. BI systems can create the environment necessary for seamless, real-time knowledge transfer and collaboration, allowing for a full view of a CPG company’s ongoing supply chain operations.
2. Globalized Operations
With the increasingly globalized structure of our macro-economies, companies are expanding operations worldwide via mergers and acquisitions (M&As), or simply through organic growth. Using a BI solution can provide you with the ability to gather seemingly disjointed information during the M&A, and make sense of it all through analytics. Mission-critical tasks can be consolidated via dashboards to ensure your CPG company has a holistic view of daily events across the globe.
3. Inventory management
Understanding your company’s inventory is critical to success. Supply and demand economics make it difficult to maintain optimized inventory control. Few other industries rely more on inventory management than the CPG industry.
However, with an analytics and BI solution, alerts for low inventory, product shelf-life and share-of-wallet product affinity can make data-driven decision-making more accessible to those in the CPG industry. In addition, a BI tool can enable more accurate demand planning, helping companies obviate extra, unfulfilled inventory.
One of the greatest inventory management benefits that an analytics and BI solution offer is the ability to provide data consolidation from disparate sources, allowing you to manage inventory across divisions and around the globe. Insight into your sales pipeline and your inventory will allow your company to significantly reduce overages in inventory, thus reducing your costs and improving your bottom line.
4. Quality Assurance
A successful product will require effective inventory management as it flies off the shelves. But the same cannot be said if you are looking at a product with quality issues. Products that suffer from poor quality will have both a short- and long-term impact on your consumer base. Being able to predict failures (and thereby keeping them off the shelves) is paramount to a company’s success.
Analytics and BI gives your company visibility into the causes for degraded quality, including sourced components. These insights can be achieved through deep analysis of the production line and quality processes used in the development of the product. With the ability to predict failure and drill down to the component responsible for the failure you can avoid bringing products to market that could harm your reputation and cause profit losses.
An analytics and BI system can help you discern patterns so that you can alert your floor manager where failed components are most likely to occur and at what stage, thereby allowing for maintenance to be performed at low-impact times and improving the quality of your finished product. Identifying patterns can also lead to improved supplier management as analysis performed on products can provide your executives with an understanding of repeated failures on specific components, something that might lead to a switch-out of suppliers due to their own degraded quality.
5. Delivery Model Changes
The once standard delivery model has now morphed into a vast array of delivery models, due in large part to the proliferation of the omni-channel experience. Today’s customers are tech-saavy with constantly evolving demands. As a result, CPG companies are learning to adapt and provide new, innovative delivery models. Utilizing analytics allows CPG companies to identify the most effective and efficient models for their business based on data gained from individual consumer profiles and, more broadly, customer segments.
6. Social Media Insights
Tracking customer behavior via social media has never been easier or more important. Given the millennial generation’s propensity for updating their social feeds with everything (from what restaurants they frequent to what brands of diapers they most prefer to purchase), social media is a treasure trove of information that can be analyzed to predict future behavior. Using APIs, analytics allow your CRM to capture the pertinent consumer purchase patterns and use it to create targeted, relevant marketing campaigns.
7. Marketing and Sales Coordination
A seamless integration between sales and marketing lines of business is the holy grail of many CPG companies. This becomes possible using analytics tools, which help to narrow the gap between the two considerably. Sales and distribution channel analysis helps CPG companies understand the viability of their current channels and the need for future alterations. By analyzing macro-economic fluctuations companies can predict changes in consumer behavior, allowing them to develop new products, sales channels, direct marketing efficacy and promotions and pricing.
8. Consumer Personalization/Targeted Marketing
In the world of customer segment blindness, the one-eyed CPG company is King. As Jill Puleri, IBM’s VP of Global Industry Retail, put it, “We need to use data to start treating people like individuals, not market segments.”
With changing demographics, from urbanization to melting pot expansion, the consumer base is increasingly moving away from homogeneity. One size does not fit all, and the sooner CPG companies learn to adapt to a mode of targeted marketing, the sooner they will reap the rewards of brand loyalty from different customer segments. The use of data to focus on the company’s message is a direct benefit of advanced analytics.
9. Consumer Collaboration
Consumers are also becoming collaborators on consumer products. Through social media and websites like Yelp, consumers can deliver unfiltered product reviews. For CPG companies this information is valuable for future product and marketing planning.
Consumers are now in the driver’s seat of this customer-centric age, and marketing does well to give them proper consideration in developing new products and/or deciding on inventory management. Analytics allow CPG companies to sift through the reams of data and spotlight emerging trends, supply chain issues, and much more.
10. Mobilizing Consumers
The relatively new concept of “click and deliver” allows consumers to order online from their favorite restaurant and get notified via text message when the order is ready for pickup. Analyzing patterns in these click and deliver orders allows companies to plan for staffing and raw materials, among other things.
Some CPG companies have begun to sell direct to consumers now that they are able to minimize costs on their newly adopted business models. Unlike the durable goods industry, consumer packaged goods rely on fast turnover and must have a highly flexible and dynamic delivery model. If a company does not adapt their business model to the mobilized consumer, they will find their costs driven up and their profit on sales declining dramatically.
11. The Customer of Yesterday, Today and Tomorrow
The long-term vision of customers is now, more than ever, a reality. Being able to view, and evaluate, how your customers will purchase, what they will purchase and when they will purchase gives CPG companies a tremendous amount of data that they can use to build out business plans for the future. Never before has this purchase profiling capability been so conceivable as today.
The ability to detect product failure rates, consumer demand and order fulfillment brings CPG companies to the forefront of their competitors. A CPG company must efficiently manage raw materials sourcing and quality, continually optimize product inventory, and understand margins over costs.
In an ultra-competitive industry like CPG, the adoption of analytics and BI will be the factor that will drive a CPG company forward.
Making the decision to embark on an analytics and BI journey is a smart decision, and it’s important to choose wisely when deciding on a vendor platform.
Hitachi Solutions, a leader in the CPG technology space, provides you with an end-to-end implementation backed by Microsoft. The extent to which we plan for your journey is also rather unique. We believe strongly that mapping out the journey for your company is what leads to success. From the front-line staff to the C-suite officers, Hitachi Solutions works with your people to properly understand and contextualize the path to analytics success.
Have questions on what Hitachi Solutions can do specifically for your business? Please contact us today.
* McKinsey, “Winning in consumer packaged goods through data and analytics”, August 2016