Four Strategies to Boost Collaboration and Reduce Friction Between CPGs and Retailers
Consumer packaged goods (CPG) companies and retailers have a symbiotic relationship. CPG companies manufacture and deliver products that retailers sell to consumers. For these partnerships to be successful for both sides, they must align processes, data, and expectations—and throw in a good deal of collaboration and trust. However, despite the best efforts of everyone involved, many CPG organizations and retailers still struggle to align on these key functional areas:
- Joint planning—This is where the collaboration begins as CPG companies and retailers come together to co-develop a strategy and roadmap to grow the business that is a win for both parties. The joint business plan holds both CPGs and retailers accountable to do their part to win in the market. Each organization needs to come to the table with insightful data to help define target consumer personas and buyer journeys, and a holistic view of consumer data can be difficult to produce and analyze.
- Category management—This is one area where retailers and CPG partners come together to define, analyze, and jointly recommend the category strategy and execution tactics. Here, retailers and CPG companies need to work closely together to analyze mountains of data to plan the retail offering at a granular level for things like which product SKUs will be offered at which store locations, and in what sizes, flavors, and colors—all in an effort to best serve local consumers.
- Trade promotions—One of the biggest investments for many CPGs is trade funds to support in-store marketing and promotional activities with the intent of reaching shoppers and driving demand. This complex effort involves trade funds from the CPG to design eye-catching retail displays and create coordinated advertising and awareness campaigns to attract shopper attention. It also involves demand shaping efforts from CPG companies to entice buyers with price incentives, discounts, rebates, and other tactics—all of which is heavily data-driven.
- In-store compliance—Once marketing strategies have been defined, retailer execution is very important to ensure products and displays comply with merchandising specifications and promotional timelines to drive product consumption. Some CPG companies will ship displays and verify compliance on the back end, while other companies employ a team of people who merchandise products and set up displays.
- Order management—This behind-the-scenes function is an ongoing activity that occurs on a daily, and sometimes hourly, basis to ensure that retailers have the right products available on shelves for consumers to buy. At the same times, CPG companies pay close attention to order data so they have raw materials to produce inventory to meet retailer needs. This ebb and flow is a balancing act between manufacturers and retailers so they both have just the right amount of inventory to meet consumer demand with as little leftover product as possible, and to do it right, both organizations need access to accurate order information.
- Metrics and measurement—This is usually the most challenging area of collaboration for CPG companies and retailers. In my experience, I find that the most successful partnerships are driven by a clearly aligned joint business plan that covers precise strategies, like a specific number of promotions, detailed investments for trade fund allocations, etc.—all pointing to previously agreed upon sales and revenue goals.
Reducing Friction Between CPG Organizations and Retailers
So, just how can CPGs and retailers reduce—or eliminate—friction to collaborate more easily? And, now that online shopping has become the norm via traditional websites, social media platforms, and apps, the typical brick-and-mortar functions I mentioned above have become much more complex, making collaboration that much more challenging and critical to mutual success. CPG companies need to incorporate into their plans with retailers how to win in the traditional retail channels as well as new digital channels. Processes like category management and trade promotions are different for online vs. offline and require new ways of enabling collaboration for growth. Let’s examine some of the ways technology can streamline collaboration.
- Enable agility by migrating to a modern cloud IT infrastructure—Whether you’re a CPG company or a retailer, seamless collaboration begins with a resilient IT architecture. Cloud-based infrastructure solutions, like Amazon Elastic Compute Cloud (Amazon EC2) and Amazon Simple Storage Service (Amazon S3), can help you transform your operations to eliminate rigid, expensive on-premises data centers and gain flexible, scalable, cost-effective operations to facilitate much easier data sharing and lay the foundation for innovative technologies, like artificial intelligence (AI), machine learning (ML), and computer vision.
- Accelerate business outcomes via speed to insights on an advanced data architecture—Whether you go with a data lake, a Lake House, or a data mesh approach, these cloud-based solutions can consolidate siloed data from across CPG and retail enterprises, like in-house and third-party marketing data, inventory, and enterprise shipping data, as well as point-of-sale (PoS) data from physical and online stores. Advanced data solutions democratize data for your internal teams and external partners so everyone can access the data they need to make insightful decisions to drive product consumption.
- Automate complex processes by implementing AI, ML, and advanced analytics capabilities—These powerful solutions can help CPG companies and retailers drive collaboration and eliminate friction with functions like:
- Predictive analytics—By analyzing petabytes of data and making recommendations for things like trade fund optimization and dynamic pricing much faster and with greater insight than humans can accomplish alone.
- Automations—To speed up and eliminate the human error of manual processes, like demand forecasting, and replace repetitive tasks, such as receiving and storing inventory or picking, packing, and shipping items to consumers.
- Reinvent the old way of doing things, like using computer vision solutions—Here, I’m talking about the use of intelligent cameras so both retailers and CPG companies can have “eyes” where people can’t always be, like on shelves to validate promotional display compliance, automatically notify store employees when shelves need to be straightened or restocked, and analyze back-of-store stock levels to signal CPG companies about product reorders.
If you want to explore how you can better collaborate with your retail partners, contact AWS to get started today.