As retailers become better marketers, a street fight between them and consumer products companies is waging: who can best design and execute excellence in the customer experience? Consumer products companies are rethinking strategies to better sense and shape demand, and drive a profitable demand response. The crux of the change lies in commercial and operations teams moving from a traditional brand focus to one that is market-driven.
-Lora Cecere, research director at AMR Research
A battle of retail chain loyalty versus consumer product brand loyalty is being waged. The pressure from private label and store brands has never been higher. Retail brands like Best Buy, Target, Starbucks and Wegmans have demonstrated the power of the retail brand loyalty, while retailers like Tesco and Kroger are attempting to distinguish the customer experience through private label brands to support healthy eating.
Consumer products companies want to know how can they win at the shelf and continue to build brand loyalty. The answer lies in rethinking front-office systems and processes to move to a marketing culture to a market-driven culture as part of a demand-driven change management program.
As a result, spending for demand signal repositories (DSR) and trade promotion management (TPM) has risen with the average CP company planning to spend $6m on each of these initiatives in 2008 to better sense and shape demand, and drive the profitable order.
While cost-to-serve analysis is only used by 20 percent of CP companies, 2008 will see wider adoption of both technologies and practices used to understand the impact of customer requests on the supply chain.
Excellence in global supply chains
The number one driver of growth for CP is global presence. As CP companies move from a multinational to a global focus, supply chain organizations are changing to support global trade-offs and to drive supply chain excellence. The average CP supply chain organization is relatively new-five to nine years old-and just beginning to grasp the requirements for talent development in the face of changing supply chain practices.
2008 will be a year of SCM supply talent shortages-especially in emerging markets-with a focus on training, mentoring and employee retention. Sustainability will become a reality on executive committee agendas. And traceability and supplier development will also increase in importance with a focus on product safety in the extended supply network. While few solutions for traceability meet the needs for the CP industry, look for vendors like Lawson, E2open, and RedPrairie and system integrators like Infosys and WIPRO to fill the void.
Rethinking IT strategies
With continued pressure on IT spending, the IT organization is moving from a world of project implementation to process innovation. The focus is on globalization, growth and better use of data. Solutions will increasingly become data-driven. As a result, we will see the rise of the data architect.
The following five trends will continue to play major roles:
• The LOB buyer will increase.
• IT outsourcing of non-critical business functions will increase.
• Shared service structures will mature with a focus on serving the business.
• More effective use of data will take precedence over transactional efficiency.
• Adoption of software as a service will grow in demand and supply networks, while service-oriented B2B processes will grow in importance, with data synchronization being the foundation for promotion and price synchronization.
A busy year. 2008 will be a time for CP companies to rethink processes to focus on designing and executing the new customer experience in a way that increases both brand loyalty and margin.
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