Too Many Decisions, Not Enough Time – Here’s How CPG Companies are Evolving to Keep Up
How do you keep customers happy and achieve your business goals? Short answer: It’s complicated.
The longer answer is that decisions in CPG organizations have become increasingly more complex as competition ramps up to meet the ever-evolving demands of socially-conscious, digitally-enabled consumers. This is a trend that’s taking place across the board in business, as Gartner has noted:
“65% of decisions made are more complex than two years ago.”
– Gartner®, “Smarter with Gartner: How to make better business decisions,”
October 20, 2021
But it’s particularly evident in CPG because the competition has become much more varied. Vertically-integrating e-commerce giants like Amazon have been able to hyper-segment the market, delivering ultra-personalized products and experiences in addition to very competitive pricing. Meanwhile, small digital-native brands are disrupting markets as a result of lower barriers of entry. CPG companies can find it difficult to keep pace ... and, whenever those heightened customer expectations are not met, social media will be there to make sure everyone knows about it.
Large CPG companies have responded by acquiring or building new brands and by extending existing brands, resulting in SKU proliferation. The number of channels that companies must sell into has also increased. Omnichannel retail is now table stakes for even the longest-established brick-and-mortar retailers. Rapid-delivery startups like Instacart, Uber Eats, and Gopuff are disrupting customer expectations and adding more complexity. And CPG brands themselves have seen the value of D2C channels and owned e-commerce presence.
What previously could be decided by production line or by pallet now needs to be decided at the SKU, shelf, or unit/item level. And the logistics of how these products are delivered becomes much more complicated.
Consumers are also demanding that the companies from which they buy be aligned with them on Environmental, Social and Governance (ESG) issues. Climate change and sustainability are top of mind for consumers, which leads to the question: how can CPG companies truly incorporate sustainability metrics into planning and operations without appearing to be greenwashing?
Sustainability and risk management are also driving sourcing decisions. Until recently, supply chains could focus on cost and operational efficiency, relying on a reasonably-stable geopolitical situation. Strategic sourcing was all about aggregating buying power and negotiating with a smaller number of strategic vendors. While this approach drove efficiency, it made supply chains fragile. Today, labor shortages, distribution issues (e.g. port congestion, logistics disruptions) and sourcing issues complicate the landscape.
COVID-19 and other disruptive events have shown that CPG firms need to diversify their supply bases, and that CPG manufacturing supply chains need to become more resilient. Diversifying the supply base (and, in many cases, reshoring or near-shoring) means fragmentation and more suppliers to manage. The only way for companies to remain competitive is to evolve business decision making to address these new realities.
What’s Driving the Speed and Number of Decisions at CPG Companies?
As complexity in the CPG industry has increased, so has the number of decisions to be made on a daily – or even hourly – basis. Behind every exception to a business process or plan is a decision that must be made. And increased volatility in markets and supply chains has increased the number of exceptions resulting from unanticipated demand or supply shocks.
Case in point: with social media and the emergence of mega-influencers with tens of millions of followers, just one post or video can shift demand through a positive – or negative – review, invalidating all the carefully-crafted plans a manufacturer has put in place. Those sudden shifts in demand can either be a foundation for future growth and future plans, or they may be short-lived. Either way, taking days to respond to these shifts may mean millions of dollars or euros in lost opportunities.
Because of this volatility, many CPG companies have responded by accelerating their planning cycles and evaluating how to reduce or eliminate the Frozen Planning Period. Planning processes that used to take weeks now need to be done weekly or every few days. This requires dozens or even hundreds of decisions to be made on a very tight schedule.
‘The Great Resignation’ Adds Fuel to the Fire
The Great Resignation has led to staffing shortages across the board. When the market changes, supply shortages happen, and exceptions need to be managed, people are making decisions with the benefit of years of experience and collective institutional knowledge – plus an intuition for how the business works that helps them assess the situation. However, longtime employees are leaving and less-tenured people are being hired to fill their roles. Even if every position can be backfilled, the organization’s capacity to make fast, accurate decisions is shrinking over time.
Decision Intelligence is the Game-Changer for CPG
Decision Intelligence turns this challenging environment around and gives CPG companies a competitive advantage. Instead of relying solely on teams of people to make the decisions with the help of dashboards, analytical tools, or spreadsheets, those thousands of decisions can be digitized, augmented, and automated across the enterprise.
One global fast moving consumer goods (FMCG) manufacturer took advantage of this approach by deploying Aera Decision Cloud™ in order to harmonize data across the organization and accelerate business decision making. The results were astounding. In just one month, Aera Decision Cloud made over 12,000 recommendations, of which 74% were auto-accepted. The customer calculated that it would have taken over 40 man-years to make all those decisions – in other words, decision automation unlocked opportunities that never would have been possible otherwise.
Decision Intelligence is giving CPG manufacturers the ability to make better decisions, more quickly, and at scale across the enterprise. This allows decision makers and leaders to focus on the strategic decisions that will help the company grow and better respond to what customers demand, or how markets and supply chains are changing. Decision Intelligence makes possible the agile business processes and constant evolution that will be the norm for consumer goods manufacturing and retailing in the future.
Download our new white paper to learn more about how Decision Intelligence is helping CPG companies address common pain points and make better decisions, more quickly and effectively.
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