Consumers want greater variety of product, and they want it faster and more efficiently than ever before. Josephine Coombe, chief marketing officer with Nulogy, tells how consumer packaged goods (CPG) manufacturers are rising to the challenge.
SCB: How is the way in which consumers are buying today making CPG producers alter their strategies?
Coombe: Today's shopper is very different from the one of 30 years ago, who would walk into a supermarket maybe once a week and fill the grocery cart with the same products and trusted brands. Today's consumers are looking for very different experiences in terms of retail formats and the kinds of products they want to buy. We're seeing the rise of new types of product categories, related to health and wellness, organic, vegan, and so on. CPGs are having to change their strategy, because the same-old same-old just doesn't work anymore.
SCB: You seem to be suggesting that SKU proliferation today is something that consumers themselves are asking for, thereby driving CPG manufacturers to match that demand. Is that in fact what's going on?
Coombe: Absolutely. Today's consumer has much higher expectations. They want significant choice, and they're willing to engage in dialogue with brands in order to find the kinds of products and brands they want to do business with. The major CPGs are moving into a more asset-lean mode of operation. They’re turning to their external ecosystems, their contract manufacturers and packagers, to help with late-stage customization, so they can bring to market a whole slew of products to cater to that new consumer. Before, simplicity and scalability were the goals of the supply chain. Now CPGs are pursuing variability and variety. The ability to roll out differentiated products for the new consumer is becoming a winning attribute of good supply chains.
SCB: How are the contract manufacturers responding?
Coombe: I think they're responding really well. The innovative ones understand that being agile and responsive demands digitalization. Many ecosystem partners are embracing a digital strategy in order to service the brands better — to collaborate more effectively, and provide more transparency into the status of orders.
SCB: What exactly is being digitized that was manual before?
Coombe: Order tracking, production processes on the shop floor, and many other aspects of the operation from end to end. In the contract packaging world, it includes the production process on the shop floor, as well as planning capabilities and collaboration with the brands themselves.
SCB: There’s nothing especially new about postponement, or late-stage customization. How does it differ from the practice that we've seen over the decades?
Coombe: It's really caught fire lately because of this drive to cater to a new type of consumer. We’re seeing variations on traditional products, whether it’s a discount version where you're doing a bundle pack, all the way up to a premium product for a luxury-retail setting. There are also multiple channels to be served, both for e-commerce and brick-and-mortar stores, with products that need to be customized for each.
SCB: What’s the biggest challenge that CPG manufacturers and their co-packing and packaging partners face in achieving these goals?
Coombe: The technology piece is a big challenge. The journey to digitalize, to change the way you interact with your overall ecosystem, isn’t quick or simple, but it’s an important one. It will allow these networks to become much more responsive and agile in the future.
SCB: How good a job are companies doing at making sure that data is swiftly moving through all those different partners?
Coombe: That's evolving quickly, but it's another huge challenge. When the demand curve changes, the things that used to succeed on the shelf maybe don’t anymore. Or a new and innovative SKU might suddenly take off, far more successfully than you expected. With these changes, is your system capable of understanding what's coming next, or are you only looking at it historically?
SCB: To what degree is automation, in the form of artificial intelligence, playing a role in making decisions that were previously made by humans?
Coombe: It's an interplay. Everybody's looking at AI and machine learning as the next wave to make systems and operations smarter. The reality is that there's always going to be the need for human intervention and creativity. I think AI is going to unleash more of the creative aspects of the human contribution to the equation, because it's going to take care of the big data analytics piece, which allows us to process massive amounts of information at a time.
SCB: I can't imagine that CPG companies have achieved nirvana in the process of attempting this.
Coombe: No. There’s such a huge cultural legacy to overcome. And a big change-management hurdle as well.
Timely, incisive articles delivered directly to your inbox.