Seven areas to consider in a post-COVID world for CPG companies: part 1
Despite all the negative impacts that COVID has created, it has provided opportunities for transformation. CPGs need to adopt a new model, that looks quite different from the old model, by continuing to leverage scale advantages, changes in marketing, supply chain and back office.
1) Supply chain resilience
The widespread disruption has exposed many inefficiencies in the supply chain, resulting in delays and out of stock situations. Shifting consumer demands, along with sweeping reductions in SKUs produced and supplied have called into question whether demand patterns will ever return to pre-pandemic levels. Regardless, reacting more quickly to anticipate consumer demands has become a priority for many retailers.
Tomorrow’s supply chain must operate in real-time and with sufficient information to enable cost reduction, resilience, flexibility, and traceability, especially post–COVID-19.
Success requires harnessing digital data throughout the value chain and using it in an integrated, automated corporate planning process. A major benefit of this shift is the ability to move from monthly to more frequent S&OP cycles that maximise sales while reducing obsolescence and working capital.
Many retailers expect moderate to major supply chain investment. Order fulfilment including delivery and click and collect will see the biggest investments, followed by warehouse management and procurement.
Most mature CPG players need a complete review of their legacy IT set-up and to move into a cloud scenario focused on customer-driven processes built for agile decision making, not people emailing Microsoft Excel spreadsheets.
2) Embrace technology for demand forecasting
The pace of consumer demand changes highlighted the limitations of existing supply chain strategies. CPG companies have had to rapidly explore options for more accurate and timely forecasting, allowing them to be more proactive. Leaders are now using external data sets such as point of sale data, weather projections and even mobile phone location data to predict true demand by customer and channel.
By contrast, companies that are lagging behind are ignoring forecast accuracy metrics and missing insights generated from the peak COVID-19 months, which will be a missed opportunity to advance their future planning skills.
3) Cost realignment opportunities
The retail industry already struggling with debt burdens, compressed marketing and increased competition, saw COVID compound problems. By now, big companies have been able to regroup and rebalance their cost structure.
Effective planning has enabled many manufacturers to simplify or optimise their SKU portfolio by cutting most lower-performing products. Companies have seen, in some cases, a five to ten percent improvement in the overall equipment effectiveness by rationalising sub-optimal SKU lines.
Whilst cost reductions are a good start, a complete transformation of the retail model will be required to thrive post-pandemic. Cost restructuring, a priority, will require a thoughtful approach that doesn’t impede a company’s ability to respond quickly to changing demand signals.
For further information, including details on how to respond to these changing consumer trends and how connected planning can help, download our full whitepaper.
Check out the next four areas in our upcoming blog, so keep an eye on our social channels where we’ll be publishing details.
If you missed our blog on new consumer trends, click here.