Connected Decisions: How CG Companies Can Dramatically Improve Results
While there have always been issues with isolated decisions, they were built upon decades of practice, and most problems that arose were manageable. In a steady state, there is little incentive to adapt; shortcomings often go unrecognized or are ignored.
Now, the pandemic has changed everything. And returning to normal is, frankly, not going to happen. It's not only the disruptions from the pandemic but other trends that are factoring in — increased regional frays, severe weather issues, specialized production, changing regulatory policies, sustainability measures and consumer preference alterations such as fragmented diet types, new life and work models, health and safety concerns and increased competition from disruptor brands and private labels.
Smart, well-intentioned people do their best with the information that they have. Yet, isolated decisions cost companies financially and psychologically, creating frustrated customers and animosity between different departments. Managers can debate whether any action taken was the right decision; however, that changes depending on the perspective and the information available at the time.
So, how do managers improve the information without increasing the administrative overhead or the decision timeframe? And ideally, how can this be accomplished while enhancing communication?
One of the key strategies an organization can rely on to connect decisions is a unified demand signal. A unified demand signal provides one version of the truth throughout critical decision points and is subsequently updated by each decision. This bi-directional, multi-level relationship aligns organizations throughout the entire process with an accurate forecast and demand signal.
It’s true that demand and demand influencers fluctuate at a moment's notice. What was important one week might not mean anything the next. Or what influences a consumer to buy is different on what sways consumers on where to buy.
Forecasts must recognize and decipher these impactful indicators to ensure product is in the right place, at the right time to avoid lost sales and, more importantly, take advantage of new opportunities.
A unified demand signal, plus the ability to do “what-if” scenarios, enables business users to simulate different outcomes while understanding the cross-organizational effects. On a practical level, connected decisions deliver information back and forth across groups. For example:
- A unified demand signal generates a baseline and demand drivers to forecast for planning, shaping and execution. This is used in generation of the consumption forecast across the organization to coordinate everyone around the same starting point.
- The demand signal and consumption forecast are used in Revenue Growth Management (RGM) for promotional planning, shelf pricing and assortment decisions.
- Within RGM, as the demand is shaped, it is shared across different processes. If prices are raised to capture more profit at the expense of market share, that is shared with sales and marketing, updating their baseline for making and negotiating trade promotion decisions.
- After pricing, promotion planning and calendar creation, there are predicted ROI's, uplift and growth rates. These are provided back into consumption planning where the demand signal and consumption forecast are updated to reflect the trade insights and growth drivers.
- Finance leverages the updated unified demand signal and consumption forecast to refresh financial forecasts and projections. Finance and key account managers then perform sales performance analysis and P/L review of key accounts using the same data.
- The consumption plan is provided to demand planning to derive shipment forecast, drive supply planning and allocate inventory for customer orders to meet the fill rate by account to satisfy demand and sales activation goals.
- Finally, key account managers perform monthly reconciliation using the actual consumption plan to ensure account growth, financial performance and customer benefits.
The benefits of this approach are substantial. According to a recent McKinsey study, connecting critical supply chain operations of a $10B consumer products company can yield up to two percentage point in earnings, $200 million in sales, $500 million cash release and $100 million in cost reductions.
Economies of scale are not enough to ensure success and survival. Large, multi-national corporations must be agile and responsive to the market, partners and consumers or risk having their market share taken by their competition. The good news is that the technology, through AI, machine learning and cloud computing, has matured. What was once only an idea can now be realized — seamlessly connecting decisions across the organization.
Patrick Smith is the chief customer officer, responsible for the global sales organization at antuit.ai.