Executive Briefings

Digital Transformation to Put the Consumer Back in Consumer Packaged Goods

Analyst Insight: The lines between consumer products and retail are more blurred than ever. But for large CPG companies, the challenge remains to create seamless, responsive supply networks optimized to sense demand and respond efficiently, whether shipping to a major retailer or an individual customer. The next five years will see increased adoption of digital technology, heightened M&A activity, and new competition from unexpected sources, all jockeying for a place in customers' homes. – Matt Gunn, manager of Industry Solutions, GT Nexus

Digital Transformation to Put the Consumer Back in Consumer Packaged Goods

Procter & Gamble believes winning customers' business comes down to two moments of truth: the first comes when customers see a product on the shelf and buy it, and the second when they take the product home and use it. But what happens when customers aren't going to stores in the first place? And what if they don't care what the product looks like or where they buy it from?

Customer centricity is more vital than ever for CPG companies looking to survive and thrive in an increasingly competitive — and highly distributed — world. The result is the increased focus on new channels and distribution methods, as well as the wholesale adoption of digital transformation among consumer brands.

Changing consumer preferences and segments. There’s a reason Unilever paid $1bn for Dollar Shave Club, and why The Honest Company could soon sell for even more. Customers expect more from the products they buy, whether it’s in the way those goods are made or how they’re delivered.

Emerging consumer segments (millennials, new international markets) are driving dramatic shifts in product and brand preference, purchasing, and social feedback. Customers want more transparency into where their products come from and who makes them, and the internet has become a great enabler for product research as well as an avenue for new competition to quickly and efficiently carve out market share. Many traditional consumer goods companies were unprepared for this rapid shift, and they’ve spent the last several years catching up through M&A and the introduction of many new products. But it’s also led to increased complexity across the supply network. Supply chain innovation is now focused on supporting new delivery models, fulfillment channels, and more flexible manufacturing models. Sustained population growth in urban centers, paired with the threat of stricter trade policies on the horizon will continue to push CPG companies to innovate how they make and move goods to the market.

Digital Supply-Chain Transformation. Marketing and sales drove the rapid adoption of new digital technology over the past 10 years. Now that trend is shifting to the world of inbound supply chain and logistics. Companies have already started investing in automation, visibility and advanced manufacturing. The next step is to connect the dots between those early efforts and the untapped potential of big data and deeper interconnectivity across the supply network. The move toward digital transformation means the use of any combination of technologies, such as cloud, advanced analytics, mobile, Internet of Things, 3D printing, and enhanced connectivity among suppliers and logistics partners. All with a focus on improving operational efficiency, customer service, employee engagement and customer experience.

The Outlook

In 2017, we’ll see more emphasis on the technological underpinnings of CPG supply networks. And it’s driven largely by customers’ increased interest in the way their products are made and how they’re delivered. Mergers and acquisitions only get a business so far. The most successful CPG companies will be those that incorporate the right mix of marketing prowess and digital supply-chain technology — and not only tell customers that they're listening, but also show it through the advanced capabilities of their supply networks.

Procter & Gamble believes winning customers' business comes down to two moments of truth: the first comes when customers see a product on the shelf and buy it, and the second when they take the product home and use it. But what happens when customers aren't going to stores in the first place? And what if they don't care what the product looks like or where they buy it from?

Customer centricity is more vital than ever for CPG companies looking to survive and thrive in an increasingly competitive — and highly distributed — world. The result is the increased focus on new channels and distribution methods, as well as the wholesale adoption of digital transformation among consumer brands.

Changing consumer preferences and segments. There’s a reason Unilever paid $1bn for Dollar Shave Club, and why The Honest Company could soon sell for even more. Customers expect more from the products they buy, whether it’s in the way those goods are made or how they’re delivered.

Emerging consumer segments (millennials, new international markets) are driving dramatic shifts in product and brand preference, purchasing, and social feedback. Customers want more transparency into where their products come from and who makes them, and the internet has become a great enabler for product research as well as an avenue for new competition to quickly and efficiently carve out market share. Many traditional consumer goods companies were unprepared for this rapid shift, and they’ve spent the last several years catching up through M&A and the introduction of many new products. But it’s also led to increased complexity across the supply network. Supply chain innovation is now focused on supporting new delivery models, fulfillment channels, and more flexible manufacturing models. Sustained population growth in urban centers, paired with the threat of stricter trade policies on the horizon will continue to push CPG companies to innovate how they make and move goods to the market.

Digital Supply-Chain Transformation. Marketing and sales drove the rapid adoption of new digital technology over the past 10 years. Now that trend is shifting to the world of inbound supply chain and logistics. Companies have already started investing in automation, visibility and advanced manufacturing. The next step is to connect the dots between those early efforts and the untapped potential of big data and deeper interconnectivity across the supply network. The move toward digital transformation means the use of any combination of technologies, such as cloud, advanced analytics, mobile, Internet of Things, 3D printing, and enhanced connectivity among suppliers and logistics partners. All with a focus on improving operational efficiency, customer service, employee engagement and customer experience.

The Outlook

In 2017, we’ll see more emphasis on the technological underpinnings of CPG supply networks. And it’s driven largely by customers’ increased interest in the way their products are made and how they’re delivered. Mergers and acquisitions only get a business so far. The most successful CPG companies will be those that incorporate the right mix of marketing prowess and digital supply-chain technology — and not only tell customers that they're listening, but also show it through the advanced capabilities of their supply networks.

Digital Transformation to Put the Consumer Back in Consumer Packaged Goods