Speedy adjustments to market fluctuations are key to FMCG success
In the previous post of this four-post series (How consumer brands can win in a virtual world) we offered advice on protecting your brand from digital threats.
Brand is one of four differentiators that can help fast moving consumer goods companies gain momentum and revenue growth:
- Supply chain
Speed (aka Agility) is the next on the list. So how do you first attain it and then leverage it for success?
Speed to market
The strongest brands within FMCG have a vast edge in experience with product launches. If new products are introduced online by start-ups, their level of success is easy to notice. A response with your own, similar products is required. And it’s easier to organize than ever before, either on your platforms or others.
FMCG companies should continue to invest in technologies that reduce product development time and evolve production lines, supply chains, distribution and marketing. But there is a growing necessity to counter new digital challenges.
Unfortunately, IT is often an inhibitor — rather than an enabler — for speed. In 2011, a BCG FMCG speed-to-market survey rated IT integration as the worst lever for faster product launches. Perhaps this was the beginning of outsourcing’s competitive advantages.
Agile companies focus on their most important value drivers and tend to outsource others. That’s the model to follow. From a post-COVID-19 perspective, consulting firm Kearney sees leaner organizations focusing on core activities as one of the top trends for consumer packaged goods companies1.
As an example, take application support — the annoying task of operating and enhancing software like SAP. Application support is already often out-tasked to specialized providers, some of which now offer shared delivery models aimed at FMCG. This translates to even more increased speed, experience and cost efficiency.
Shared delivery models use specialized centers to support several or all brands and subsidiaries of an FMCG company. With access to broad and deep CPG application support expertise across the globe, they deliver faster, smarter resolutions and lower costs. It is an opportunity for FMCG to shift more radically to outcome-based contracts, which can be aligned to corporate financial scorecards, as a way to incentivize the outsourcer’s performance and innovation.
The leading shared delivery providers also utilize the latest in automation technology, passing the benefits to their FMCG clients. Artificial intelligence and machine learning help reduce support tickets by 15%-18% and cut SLA response times by 15%-20%. How? Automated resolutions, wherever possible, plus digital assistants for standard and self-service help without helpdesk staff support.
Controlling digital platforms, in turn, requires equally skilled data analysts with a sound understanding of relevant products, competitors and industry mechanics. They need powerful tools that enable them to collect vast volumes of data, find patterns, test and implement rules. Big data, eventually from the cloud, and state-of-the-art analytics tools are in support.
Retailers have invested heavily in digital labs to innovate, take Walmart for example2, and FMCG companies would be wise to establish similar analytics centers.
Customer feedback can and should be collected from an ever-growing number of channels as well. Digital channels even allow for the collection of feedback on competitive products. FMCG companies must find ways to automatically identify common issues or opportunities and to make findings widely available within the company. Artificial intelligence combined with software robots makes it easy to automate and maintain the necessary processes without the impairment of existing systems.
The development of the required software itself must also be agile. Projects with carefully planned comprehensive functionality, thorough testing and enterprise-wide rollouts take years and only will solve problems of the past when available.
FMCG companies need to consolidate designers and developers in agile development centers or software factories. There, they’ll use methodologies like Scrum, Kanban, SAFe and DevOps to constantly collect ideas from inside and outside the organization and turn them into small software increments that quickly deliver value.
State-of-the-art software factories use distributed agile models that allow internal and third-party staff to work together seamlessly: on-site and remote, on- and offshore, in design, build and integration. The results can be up to a 60% boost in productivity3.
One trend is clear: The importance of online retailing for consumer goods will continue to grow — stronger and faster than before COVID-19.
Mergers and acquisitions
Other industries even use disruptive situations like mergers and acquisitions (where neglected IT integration is a common source of failure risk4) to standardize or transform by creating specialized M&A centers.
A small standing team of internal and external experts drives those projects with a mature and customizable set of standardized methods and tools, managing the complexity of parallel streams and interdependencies. This includes tools for strategic planning and business case management, application roadmaps, enterprise architecture repositories or communication, mobilization and training plans.
In M&A, 50% to 60% of the initiatives intended to capture synergies are strongly related to IT, but most IT issues are not fully addressed5.
For the foreseeable future, the COVID pandemic will place more pressure on FMCG companies to maximize efficiencies due to a multitude of challenges and uncertainties.
- Will there be a second wave of sharply declining sales?
- How and for how long will supply chains be affected?
- Will consumers have a greater demand for other products in the future?
Despite these questions, one thing is already clear: The importance of online retailing for consumer goods will continue to grow — stronger and faster than before COVID-19.
For a more in-depth review of the potential growth prospects for the FMCG industry in today’s dynamic business environment, please download the Atos white paper, “How FMCG can win in a virtual world: Grappling with the new retail reality.”
1. https://www.jp.kearney.com/article/?/a/cpg-perspectives-how-brands-can-thrive-in-the-new-normal 2. https://corporate.walmart.com/tech 3. https://www.igi-global.com/article/new-factors-affecting-productivity-of-the-software-factory/240762 4. https://deloitte.wsj.com/cio/2018/08/15/the-risks-of-underestimating-it-alignment-in-ma/ 5. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/understanding-the-strategic-value-of-it-in-m-and-38a
By Dr. Matthias J Förster, Manufacturing Market, Global Consulting Industry Leader
Posted on December 16