The consumer products industry has experienced a major shift in the way business is conducted. Out of the pandemic, new business models have emerged, as well as changing expectations from customers and suppliers, and the rise of inflation has added a compounding effect. To address these challenges, consumer products companies should focus on these key areas:
- Pandemic and inflation impact on consumers: Consumers expect more flexibility, access and cost efficiency for goods and services.
- Supply chain resilience: The demand for consumer goods continues to increase but material and product shortages and other supply chain issues are heavily weighing on the industry.
- Social change and product expectations: Product sustainability and Environmental, Social and Governance (ESG) issues will continue to require company attention and resources.
- Consumer data and insights: Proprietary and third-party data should be leveraged to gain insights that predict outcomes can be leveraged to personalize the consumers experience and build brand loyalty.
SAP has tools and solutions that can help organizations address these items and, in this post, we highlight some of the capabilities.
Counteracting pandemic and inflation impact on consumers
There has been an unprecedented shift in economic demand and customer preferences. Consumer products companies have an increasing need to improve ordering and delivery times, product availability and the ability to convert data into actionable intelligence. SAP provides the following solutions to meet these needs:
- SAP Commerce Cloud – Consumers have shifted to omnichannel experiences. They want an integrated and seamless experience across various channels without having to start from scratch. Companies are shifting direction to enable omnichannel strategies and become customer-centric, focusing on more centralized data management. SAP Commerce Cloud helps to address this need by offering solutioning on unification of sales channels, customer service and analytics. For example, retailers can better understand the purchasing patterns and potential marketing opportunities for a customer purchasing online and picking up in store.
- SAP Analytics Cloud – Planning (SAC-P) – This tool gives companies the ability to improve forecasting and planning, and provides more agility to adjust to higher prices, predict consumer demand more accurately and gain insights on market changes and how they impact the bottom line. For example, we worked with a CPG client to drastically reduce planning and planning iteration times, allowing for more frequent feedback and quicker visibility into the impact of changes to planning variables.
- S/4HANA – The digital core for a company’s foundational systems, SAP S/4HANA is the backbone that supports core processes for the business (order to cash, procure to pay, record to report, etc.). This foundational system supports the ability to transact business, turn data into insights, and integrate with SAP Analytics Cloud, SAP Commerce Cloud and other SAP and third-party solutions to improve agility and flexibility to better meet consumer needs and adjust to the constantly changing marketplace. Many clients have leveraged S/4HANA to establish improved business processes and improved visibility into business operations.
Building supply chain resilience
With the increasing need to mitigate supply chain disruptions and the global impacts to supply chain planning, consumer products companies need to shift to a model that allows greater forecasting and quick responses to a constantly shifting marketplace. The following solutions can help companies meet these needs:
- Integrated Business Planning (IBP):
- Automate statistical forecasting and generate inventory targets that allow an organization to maximize profit. This solution will provide more collaboration across departments and teams for a more integrated sales and operations planning process.
- SAP Logistics Business Network:
- Get real-time insights into the supply chain for inbound and outbound processes, freight management, transportation planning and demand planning. Leveraging this solution can help to allow advanced notifications and real-time tracking and allow for lower freight and transportation costs.
- Manage procurement processes for supplier management, contract management, invoice management and supplier risk analysis on a cloud-based solution. This solution allows for savings and efficiencies by giving insight into global purchases and intuitive buying channels.
Adapting to continuing social change and product expectations
With a global push to improve company stewardship and improve accountability for social responsibility, sustainability and governance, consumer products companies need to determine how best to execute and measure the success of their ESG initiatives. SAP provides the following solutions to meet these needs:
- ESG Cockpit – Records data based on actuals for better time-to-value and granular visibility into audit-ready reporting for improved sustainability management. The ESG Cockpit does this by allowing integration with the Data Warehouse and Financial Planning and Analysis (FP&A) software and allowing better visibility into supplier scoring and real-time supply chain planning.
- SAP Responsible Design and Production – Gives a lifecycle view of costs and the impact of design choices which allow the decrease of waste and increases circulation of material. This product allows greater visibility into reporting and helps with calculating taxes and fees to increase sustainability.
Maximizing the customer experience and insights
Consumer insights are becoming increasingly important in the market to provide exceptional customer experiences, new streams of revenue and new target audiences. SAP provides the following solution to meet this need:
- SAP Analytics Cloud Reporting (SAC) – SAC has become a major tool for SAP in recent years. It is an intuitive model for analytics and business intelligence by providing self-service data visualization. This allows all financial and operational plans to be centralized, which can enable greater collaboration and outcomes for future business plans. Protiviti assisted a CPG client with profitability reporting to better enable decision making for underperforming products.
While many of the tools mentioned here are new and evolving, there is significant benefit in the subset of S/4HANA, Ariba, SAC and IBP. Consumer goods companies can gain significant advantage by developing a strategy around these solutions and a deployment roadmap based on their specific priorities and needs.
- Companies must assess the potential of these tools for their specific environment, business needs and maturity. Once these needs are clearly understood and agreed to, it is critical to develop a roadmap to achieve the desired transformation. The following are key steps for developing a transformation roadmap:
- Agree on a list of business objectives and priorities based on customer centric goals that will deliver the most value to the organization.
- Establish the priorities and finalize scope and phasing of the desired innovations and tie them to anticipated value. In this stage, it is important to clearly lay out the desired outcomes and set up KPIs to monitor value realization.
- Determine resource needs, including people, dollars and time to effectively execute the program and ensure the initiative is adequately funded and staffed for success.
The fundamental shift facing the consumer products industry is driven by several external factors and is forcing companies to quickly adapt. Companies must optimize and extend current processes to become more integrated, enabling transformation to a customer-centric model. By implementing these solutions, companies can improve insights, customer service and agility, effectively positioning themselves for success.