Connected Value Chain: A Panacea for Consumer Goods Companies

By: Sriram Bharadwajan, Management Consultant, Consumer Business Unit, Wipro Limited

More than a billion middle income people will be added to the consumers’ list from emerging markets alone by 2020. Digital Channel with the use of Digital technology such as Smart Phones, Tablets, iPads, has transformed the Consumer Industry to an altogether new paradigm.

The “Free Home Delivery”, a traditional retailing concept is prevalent even now in India and the emerging markets amongst the mom and pop and convenient stores, despite a boom in the digital channel in recent times. Free Home Delivery takes the next avatar now, where CG companies can better service consumers at a one-on-one level via insights and preferences gathered through the buying behaviors, product choices and price points. Home Shopping experience is getting defined and redefined by the various ecommerce and mobile apps for the comforts and convenience of consumers. Leading analysts predict that more than a billion middle income people will be added to the consumers’ list from emerging markets alone by 2020. Use of Digital technology has been a key enabler in the recent years’ growth for the Consumer Goods Industry.

Building A Value Chain

The imperatives of e-commerce drive CG companies towards what is a “Connected Value Chain.” The name of the game is speed. The speed at which demands get sensed, acknowledged, to fulfillment from the distribution centers and delivered at the door step of consumers/shoppers will largely define the success of CG companies. As seen in the figure below: “Connected Value Chain”, enables identification and fulfillment of consumer needs at a personal / one-to-one through a digital channel that includes smart devices, real time insights and analytics and most importantly seamless integration of Supply Chain solutions.

Consumers, the driver to online New Product Introductions

Consumers are becoming more environment friendly and because of which, demand for more sustainable products is the need of the hour. At the same time, participation of consumers in the innovation process via new social media connects such as Crowd Sourcing provides greater opportunity for CG companies.

Responsive Manufacturing:

Ensuring that products are actually fulfilled on time is just as important as much as products are made available. Agile and visible manufacturing that works in tandem with the needs of the Dynamic Demands and is flexible to capacity adjustments at the plant level provides optimum product costs.

Ability to provide manufacturing insights through real-time meaningful manufacturing KPIs for enabling key supply chain decisions is the way for forward for an efficient connected value chain.

This is the direction in which top tier CG companies are more directed towards. Technological advances in the form of 3D Printing is providing ammunition where innovation can be directly prototyped in manufacturing, cutting down the time to launch cycles significantly.

Consumer-Oriented Distribution:

Distribution Centers (DCs) today are fulfilling more online orders along with traditional orders. Inventory visibility across product mix not just within, but across DCs is key for efficient and on-time fulfilment.

In fact, there are definite collaboration trends where CG companies have opened their DCs for online retail giants to enable fulfillment directly from their DCs, This will not only result in efficient fulfillments, but also offer better price points to consumers.

It may not be too far-fetched for CG companies to explore newer fulfillment models on the lines of what the automotive sector is doing. For example, instead of a “Make to Stock,” why not look at a “Pack-to-Fill” or a “Fill-to-Order” type of models. Imagine beverages getting shipped to DCs in bulk from plants and then the DCs do the packing and filling, depending on the order size needs.

Digital Consumer and Digital CG Company:

Usage of digital devices such as smart phones and other mobile devices have not just grown on the consumer side of things, but has increased exponentially internally within the CG companies itself -- in their plants, distribution, sales and marketing operations. Ability to connect the devices across these functions through Internet of Things (IoT) is bringing the value chain more connected and so much more agile.

It will help expedite supply chain decisions if orders can get picked up on the field by sales staff while they also have visibility into the inventory at a warehouse or at plants in real time through smart devices.

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Collaborated Consumer Insights:

Most CG companies hitherto have been relying on multiple sources of information, each with its own silo of analytical capability. With better Consumer Insights and behavioral patterns on the front end of the value chain and better visibility of the supply chain and manufacturing responses, CG companies are now looking at solutions that provide an integrated view for enabling collaborated value chain. Getting a real time view on Fill Rates, On Time Accuracy, Fast / Slow moving products, etc assist in making informed decisions.

Enabling Connected Value Chain:

So what can be some enablers for connected value chain?

“Time to Market’ has been one of the perennial drivers for CG companies as a product differentiator in the market. More and more solutions around it especially in the “Concept to Launch” value chain have been gaining traction. Crowd Sourcing solutions addressing the Ideation Management are among the top candidates. Although many CG companies have one PLM system in place, this is still work in process for many others too. How tightly is this integrated with the ERP and the supply chain in ensuring a tighter Concept to Launch Process? This will ensure two outcomes, one a collaborated R&D across the company towards globalization and harmonization and two, a robust and agile process for launch / re-launch across anywhere in the world.

Manufacturing outsourcing is not uncommon in CG today, where dynamic demand is a norm. Supply Chain planners need to look beyond their manufacturing capacities for fulfilling unplanned demand spikes. CG companies are now moving towards solutions such as Warehouse / Manufacturing Intelligence that provides them real time visibility of inventory / plant performance and capacities at HQ through KPI based dashboards. This gives the planners the needed visibility to gauge whether there is additional capacity in-house, for an informed Make/Buy decision, saving significant dollars.

In short, future looks at solutions that are platforms, may be even command centers and will provide collaborated end to end supply chain right from sensing demand at the consumer’s point to fulfillment back to him / her in the shortest time.

Conclusion:

The scenario today is that vast majority of consumers / shoppers still go to the actual grocery stores for their shopping. Order online for delivery to home has a higher penetration (in excess of 15%) among the Generation Z and the Middle age (25 to 33 years) group category. These numbers however, will significantly change going forward. The numbers are significantly higher in the emerging markets compared to the developed marked because of higher urbanization, increased disposable incomes and significant growth in the digital market as growth factors.

That said, while the market may not hit the other side of spectrum of being totally digital and we will of course have a mix of both online market and instore market exist together in the offing for consumers, how significantly it will continue to grow online in future remains to be seen. Either ways, Free Home Delivery to the consumer with delivery at the consumer desired levels is something that will be a differentiator and a true value add from a consumer standpoint, whatever the channel.

By: Wipro