ntuuromjtojropkiirmkopjhkftohj … · 2020. 11. 20. · '#:2!6!3. 5+2( 9#% $!3"02 $ +9 *# !3 6' 7...

Leaders at the helm of CPG companies have tough decisions to make almost every passing day. What does the consumer sentiment meter read during this festive season?

What products would be in demand and take the place of current favorites like hand sanitizers and masks? Is the shift to digital shopping channels here to stick forever? If so, how should the inventory be shaped to meet customer needs in every channel?

To answer these crucial questions, a heightened prominence is seen in implementing demand sensing techniques that tap into consumer behavior and trends to stock the necessary inventory without stuffing or underfilling it. Once demand sensing signals are picked up the ordeal to ensure the flow of goods both inbound & outbound is huge. Mass-produced packaged goods that hit the shelves after the demand peaks are a definite no and so are stale produce.

Mapping an intelligent demand

fulfillment strategy for consumer goods

Introduction

1

Responding nimbly to demand with a flexible supply chain is now a mandate

to survive in the volatile and competent consumer goods segment which has

its unique set of challenges.

Mapping an intelligent demand fulfillment strategy for consumer goods

2


The evergreen CPG problem of anticipating consumer demand and aligning supply got more complex

in the past few months when toilet papers and disinfectants were wiped out clean from supermarket

shelves, leaving manufacturers confounded in restocking high-demand items. In India, rural segments

saw a rise in branded packaged goods consumption that required changes to existing demand

fulfillment strategies.

Omnichannel and D2C fulfillment

Taking a cue from the surge in eCommerce shopping, global brands started revamping their

omnichannel fulfillment and direct-to-consumer models. 80% of consumers report a convenient and

positive experience via D2C channels and food and household essentials have seen an average

growth of over 30% in online customer base across countries in 2020.

Consumer behavior trends

Enter the era of healthy-conscious millennials and eco-friendly GenZ who don't merely want their

needs met faster but also gauges sustainability measures pursued by a CPG brand. 85% of

respondents in a BCG survey affirm that they would prefer a retailer promoting healthy solutions.

Millennials using smartphones to make most of their purchases and return policies being one of the

main criteria for 67% of shoppers to buy a brand indicate the importance of keeping a constant tab on

consumer behavior.

Retaining brand loyalty

Call it the adventurous spirit of today’s shoppers or the abundance of choices in the market, brand

switching is on a steep rise with 36% of US consumers trying a different brand during the COVID

crisis. Convenience, availability, and product value are seen as the major factors that enhance brand

loyalty.

Priority to risk and cost control

Though minimizing inventory and boosting efficiency was the prime focus of the consumer goods

industry, building resilience by cost-effective means has taken the spotlight in recent months. Digital

solutions are being adopted to manage risks proactively with companies reporting a 50% lesser risk

spend than counterparts who aren’t ready to tackle disruptions.


PandoCorp Ltd. has worked with major CPG giants like

Britannia, Marico, and J&J to name a few, and has a

thorough understanding of the challenges, hurdles as well

as opportunities that lay buried in their multitiered, massive

supply chain ecosystem. We believe that to succeed in the

consumer arena, a tightly coupled demand and

transportation planning engine is essential in keeping up

with the supply-demand trend. Hence, complementing a

CPG company’s smart demand sensing model should be an

intelligent demand fulfillment strategy that embeds

technology and integrates data right from the procurement of

raw materials to the last-mile delivery and reverse logistics

operations.

Drawing from our expertise in assessing, consulting, and

implementing custom digital solutions for leading Fortune500

consumer-facing brands, we’ve outlined five critical areas in

the CPG value chain where intelligent demand fulfillment can

reap incredible returns for your customer-driven business.

3


5 key areas in the CPG supply chainImpacted by Intelligent demand fulfillment

Transparent sourcing & inbound movement

5-6

Mitigate stockouts & own optimal inventories

7-9

Intelligent order fulfillment strategies

10-13

Well-planned last-mile deliveries & reverse logistics

14-15

Centralized data-driven control tower

16-17

4


4

Transparent sourcing and inbound movement

5


6

Given the variety of products and the range of raw materials

and packaging required to arrive at a finished product, it is

no wonder that CPG manufacturers have a tiered and

fragmented supplier base. Take a look at the numbers.

On an average, the BOM of a smartphone reveals about

300-500 key components and sub-assemblies of 40+

different varieties which when broken down inches towards

2000 parts.

Dealing with such large numbers of components and SKUs

over complex distribution channels, the inbound sourcing

strategy to procure, transport, and handle these materials is

fairly complicated. Throw in the variables of local disasters,

emergency situations, plant shutdowns, and what we see is

a composite equation laden with risks and additional costs.

Brands in an attempt to pivot their supply chain design on

resilience are looking at diversifying the supplier base and

nearshoring or moving their entire manufacturing operations

to other countries. Yet, finding trusted supplier partners and

structuring new production lines have their drawbacks in

terms of costs too. Other than alternate sourcing and

switching procurement regions, collaboration and visibility

among stakeholders go a long way in streamlining the

upstream processes.

Integrating data from the sales, marketing, supplier,

distribution, and transportation partners in a CPG company

would provide superior visibility of inventory across different

channels in both inbound and outbound movements. Having

transparency at each of these nodes would make

decision-makers aware of disruptions who can then alter

their downstream activities accordingly to minimize the

impact on service levels. Optimizing the transportation of the

raw materials and channelizing the smooth flow of materials

enables CPG brands to stay in pace with customer

demands.



4

Mitigate stockouts and own optimal inventories

7


8

CPG companies have their name at stake when consumers

don’t find their favorite products on supermarket shelves. To

avoid consumer fallout, every fast-moving goods

manufacturer desires to have on time and in full stock

available at any given point in time. But the barriers of

meeting on-ground SLAs and a dearth in comprehensive

demand planning and adept frameworks for manufacturing

cause stock leakages.perations.

While safety stock provides the extra cushion to reduce

out-of-stock orders and gives sufficient supplier lead time,

maintaining a large inventory of high margin products like

smartphones and luxury cosmetics tends to freeze the

working capital of a company. Also, in the pursuit to fulfill

pressing demands on time, CPG supply chains undergo

immense pressure to support increased throughput and a

significant part of the total product cost is eaten up by

distribution.

Though nailing the perfect inventory levels or eliminating

stockouts completely is implausible in the CPG sector,

relying on modern mathematical models of demand sensing

rather than traditional monthly or quarterly forecasting

methods have promising returns. Nike invested richly in

digital demand sensing and inventory visibility which brought

down lead times by 83.3%. Picking demand signals from

weather patterns, consumer behavior, moving inventory like

shipments and orders placed, and blending them reduces

forecasting error by almost 40% while optimizing the

inventory by up to 20%.

Mitigate stockouts and own optimal inventories


9

Integrate data across systems: Too often data churned by

individual technology blocks stay confined within the

respective software. A steady flow of information from ERP

to stock orders and accounting is needed to mine granular

insights which can then be put to use in optimized planning,

risk mitigation, and process improvements.ions

Monitor inventory in transit: Keeping an eye on the flow of

materials right from the supplier to factories or from plant to

warehouses and distribution centers, gives CPG producers

the ability to predict breaches in timelines of the inbound

activities and take necessary action to maintain high service

levels downstream. Tracking products from the point of

manufacture to shelves with accurate ETAs and real-time

weather and traffic updates help preserve the shelf life of

items, especially for perishables.

Centralize inventory view: In a multitiered and complex

supply chain manufacturing diverse products distributed

over several locations, consumer goods companies have

trouble getting a unified view of their entire, updated

inventory. A centralized outlook ensures that wastages in the

supply chain are at a minimum and resources are utilized to

their fullest potential. Once integrated, it is vital to reflect a

single version of truth regularly updated to all stakeholders

in the value chain apart from capturing critical data points

within the system.

a Fortune100 leader in food

processing and packaged food, had disparate

technologies functioning in silos on their highly

complex supply chain arm leading to a

fragmented view of their network.

The surge in eCommerce opened new

channels of demand fulfillment for Nestle which

further pressurized their supply chain, creating

the need for their existing systems to be

integrated and monitored.

We unified their tech stacks on one digital

platform thus providing a single source of truth

for their PAN-India operations and cleared their

path for 100% visibility on all demand

channels. A digital control tower was set up for

better process management which led to a

40% improvement in dispatch capacity and

helped Nestle achieve 94% compliance in

internal processes.

, Nestle

To keep the demand and inventory balance so that the stock replenishment matches market needs, it becomes imperative to:


4


10


11

IDC’s 2020 supply chain survey unraveled that fulfillment

and logistics took the third spot in the top five focus areas

for supply chain risk mitigation. The pressure to compete

with retail behemoths like Walmart and Amazon in speed

and quality of order fulfillment has strained many CPG

supply chains. Consumers have got used to getting orders

delivered faster and expect the same out of digitally naive

brands too. 24X7 product availability is demanded both on

physical shelves and in eCommerce sites, yet 57% of

grocery retailers fall short in store order fill rates which

impact service levels adversely.

Our estimation of freight costs of a hypothetical CPG

company of $10M spend stood at 17 to 20% of the total

spend, not to mention the intangible loss in customer

experiences. Intuition-based planning rather than relying

on demand forecasts and siloed supply chain node

operations were seen as the main reasons behind these

huge value leakages.

A highly capable transportation planning and optimization

engine allows overall freight cost savings of up to 10% and

here are a few tactics that can be employed for better

order fulfillment.



Synchronized order management: Despite the

presence of a strong demand sensing model, the logistics

arm of a company operates independently of the sales team

which directly impacts how sales orders are serviced. Due to

this misalignment of both internal and external teams, there

arises the obstruction of information flow between the

departments. The perishability of goods and the need to

meet fill rates lead to redundant trips in the fulfillment

process without any optimal planning which spikes the

logistics costs.

Real-time visibility of sales data keeps a check on the

current demands and allows transportation to be planned as

per the demand. Consolidating sales orders across multiple

channels and cost-effectively fulfilling them can be done by

integrating the orders on a digital platform before processing

and picking orders.

Network-powered transporter sourcing and capacity

utilization: Driver shortages and the pressure of customer

demands have left CPG shippers scurrying for freight

capacity and due to the fear of missed deliveries, they settle

for partners charging higher or conveying mediocre

performances. Shippers are then forced to use the available

capacity efficiently and choose between preferences of

faster or more reliable deliveries. A network-powered digital

freight platform provides a comprehensive view of the

shipper and transporter community giving real-time updates

on available capacity and rates. Looking at the dynamic

rates and past performances of the transport partner, CPG

shippers then have the control to source the transporter of

their choice with detailed suggestions on the truck type,

material, and volume combinations for both their upstream

and downstream operations.

Having complete visibility over the geographical network

both lane wise and truck wise gives CPG brands the ability

to efficiently plan reverse hauls & minimize empty truck runs.

1.

2.

Smart shipment consolidation: DCPG manufacturers

face unjustified charges when their shipments travel in less

than truckload capacities. In such cases, the strategy of

shipment consolidation can be adopted which offers its

benefits of lower freight costs, reduced emissions, and

lesser lead times. Multiple shippers can have their orders

consolidated according to their preferences and cut back on

shipping costs.

A smart shipment consolidation strategy takes into

consideration the constraints of consignees that can’t be

clubbed together in terms of material type, volume, or brand

competition, and groups them according to the desired

delivery time windows. Trucks no longer have to leave

distribution centers with less than full loads thus preventing

value leakage there.

Improved load and lane optimization: Though the

problem of capacity crunch in the CPG fulfillment space is

acknowledged, it is shocking to note that 65% of the

outbound freight is underutilized. Truck utilization can be

drastically improved using intelligent filler algorithms that

prioritize the stacking of materials according to available

stock levels.

Loading and truck space utilization can also be optimized by

using 3D planograms which help logistics planners to

simulate and visualize SKUs in the truck space. Robust

optimization engines also help in choosing cost-effective

routes and in matching truck type to lanes that cause

minimal damages.

3.

4.

12


Organized labor and inplant operations: Precious lead

time is oft lost because the right people are not available at

the right time to handle incoming goods at a warehouse or

plant. Sharing information on truck arrivals, stacking norms,

and loading priorities with onground personnel aids in the

planning and allocation of necessary resources, shortening

loading/unloading time, avoiding congestions at docks or

warehouses, and reducing truck turnaround times (TAT).

Marico Ltd., owner of 15 popular household hair care and oil

brands, saw a 30% decrease in truck TATs through the live

visualization of all its in-plant movements and advanced time

slot scheduler implemented by Pando.

Reliable shipment tracking: Outbound shipments rely

heavily on predictive arrival times since round the clock

product availability is a priority to CPG shippers and any

delays in their shipment have to be notified in advance for

alternate arrangements to be made. Weather patterns and

traffic hiccups have a direct effect on the shelf life of a

packaged good which calls for rerouting of trucks in transit.

Hence real-time notifications of truck status become

necessary for CPG shippers and transporters who otherwise

lack visibility of where their shipment is. Tracking can be

done via apps or driver SIM or hardwired GPS modules as

per the convenience of the company.

Integrated indent issuance to payment options: Digitizing the

entire indent to payment process turns out to be beneficial

for all the stakeholders in the fulfillment process. Automatic

indent generation, transporter acceptance and truck

assignment workflows, and the scope to configure

shipper-specific constraints in this system eases the

transportation planning and execution process while also

ensuring transparency in operations. Damages, detentions,

and delays can be easily captured on the digital platform

and electronic proof of deliveries can be updated for

comments and feedback on deliveries.

5.

6.

an industry leader in healthcare and consumer

health products, on their mission to empower

their delivery function across the APAC region

and Japan, streamlined their freight planning,

execution, and payment processes on Pando.

Their transportation planning was done based

on weight and not capacity, leading to incorrect

truck type selection and they also saw

unjustified freight costs during peak weeks in

their partial truckload (PTL) contracts. Planning

the right capacity with the proper modality mix

of goods and restructuring rates with a hybrid

FTL /PTL model saw a 95% increase in the

utilization of trucks in their primary movements

and a 10% drop in their secondary costs.

Route and load optimization further cut back

J&J’s primary spend by 6%.

Johnson &

Johnson Ltd.

13


4


14


15

Whether one would blame or thank the Amazon Prime

delivery is debatable but it has indeed set the standards way

high for immediate or same-day delivery, pushing US

retailer giants like Target to make one of their largest

acquisitions when they bought Shipt - a same-day delivery

company, into their fold. Target then gets to service online

orders placed for groceries and household essentials on the

same day via the Shipt app.

A recent Capgemini survey of consumers and supply chain

executives in large consumer product and retail firms spread

across 9 countries shows that 55% of the consumers would

switch to a competitor on the grounds of faster delivery,

stressing the need of giving a superior last-mile experience

for a competitive edge over peers. However, the good news

is that once satisfied, 74% of the consumers tend to

increase their purchase levels by 12%, and these satisfied

customers also add to brand loyalty, higher grocery spend,

and frequent purchases which maximize opportunities for

the CPG brand.

All said and done, the last mile stands as the costliest link in

the supply chain with the delivery arm contributing a

significant amount to the total cost of the product. The same

study predicts that a company’s net profit could fall by 26%

if the current last-mile delivery capabilities are not

strengthened. With fulfillment centers for last-mile deliveries

spread across a mix of storefronts, warehouses, retail

backrooms, and dark stores, sorting through orders and

transporting them efficiently is paramount.

While faster and same-day deliveries may not be attainable

by all CPGs, delivering at nominated time slots is of higher

preference for 48% of consumers. Companies then need to

make their transport network more transparent and collect

up-to-date order information to meet high service levels.

Live tracking of orders in transit using high-precision

geopositioning systems would give accurate time windows

that can be pushed as customer notifications which would

keep them informed and aware of their order status.

Choosing the right mix of vehicle types, optimizing their

loading, clubbing the orders intelligently, and routing the

vehicles in cost-effective lanes will prove more efficient than

randomly stacking orders and dashing through last-mile with

deficits and damages. Implementing ePOD (Electronic Proof

of deliveries) enables faster payments and in-app signatures

ease order handovers.

Equally important as delivering goods on time is the

provision to return orders either due to usability issues or the

scope to be recycled after use. High margin products like

electronic gadgets could add much value to manufacturers

when they are reversed efficiently. Extracting value out of

every asset in the value chain ensures zero wastage while

meeting customer expectations and sustainability goals of

the organization.


an Indian

chemicals manufacturing giant, used

specialized packaging cylinders to transport

chemical-based industrial and specialty

intermediates to their customers. Though these

packaging cylinders had the potential to be

reused, once delivered there was no means of

tracking the cylinders, and customers disposed

them at the drop-off points. This incurred not

just dead haul charges but also additional

costs for building new packaging cylinders. To

avoid the wastage of materials, Pando

executed barcode scanning of the packaging

cylinders which facilitated the tracking of the

cylinders from the point of manufacture to

delivery and back to the place of origin to be

reused for future deliveries.

, SRF Limited


4


16


17

Having integrated and instilled planning intelligence at every step of the CPG supply chain, the natural progression is to

monitor and have a consolidated view of the entire supply chain function to make it more competent and risk-tolerant. Seated

in Poland, Unilever’s transport control tower manages operations across Europe which includes over 60 factories and 100

distribution centers. The digital control tower allows the coordination of countless transport movements and maximizes

efficiency, saving €50 million in 5 years.

Taking the example of a US consumer goods company, a study by Accenture reveals that setting up a control tower could

improve their on-time delivery performance by 5−10% and reduce distribution costs by 10−20%.

As both Accenture and Gartner reports agree, the three fundamental purposes of a control tower include providing -


End-to-end visibility: Dashboards configured to take inputs

from ERP systems, shipment orders, vehicle or order

tracking software, payment processes, and transportation

partners give a comprehensive view of the company’s

network. Alerts and notifications are then triggered to send

frequent updates to the supply chain executives managing

the value chain.

Analytics (predictive): Beyond just visibility, control towers

should have the capability of identifying network bottlenecks

and provide detailed analytics on the performance of every

link in the chain. For instance, by measuring past and

current KPIs of transporters a prediction on the projected

service levels of a transport partner can be determined.

Next best actions (prescriptive): Looking at the estimated

service levels, an AI-powered control tower will also be able

to shoot alternatives for the transport partner which paves

the way to dynamic decision making.

that houses popular brands like Tetley, Tata

salt, and Tata tea took on a digital supply chain

initiative to better handle the variety of products

and the merging of brands. They had different

systems for procurement, optimization,

warehouse management, and payment

processes that called for a central visibility

platform on which their entire supply chain

could converge. We set up a central control

tower that integrated the data from all these

systems and mined high-value insights on

network performance apart from giving the

ability to simulate “What-if” scenarios and take

decisions on subsequent actions.

Tata Consumer

Product Ltd.


Yes, consumer demands are escalating and yes, the market volatility stands unparalleled to what we’ve all seen before.

Shifting shopping habits and large-scale disruptions make OTIF demand fulfillment a tough nut to crack. Yet, these are the

same drivers of business growth and avenues to exhibit differentiated value to target segments.

Though digital technologies were sort after as firefighting measures in the light of the pandemic by many companies, the

long-term implications of these digital solutions will clear value leakages and result in a more efficient and resilient value

chain.

The consumer packaged goods industry has always been at the forefront of digital innovation in the supply chain division,

pioneering the adoption of many new-age technologies. The CPG sector continues to lead in bringing the agility of

cloud-based solutions to resolve traditional enterprise challenges and intelligent demand fulfillment is no exception. Utilizing

the wealth of data and investing judiciously in technologies that assist in fulfilling the demands of consumers will deliver

delightful experiences that your brand would be cherished for.

18

© PandoCorp Private Limited

Innovate and invest in smart demand fulfillment

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