Q&A: Behind the Consumer Industry Pulse Check
It’s often said that we’re operating in a new normal, but that doesn’t mean we’ve yet determined an ideal way to adapt. These unprecedented times have, however, unlocked a moment of extreme experimentation and innovation in business — as well as new opportunities for the quick-thinking and quick-moving companies.
With consumer goods navigating this historic period of abrupt disruption, a recent snapshot survey takes the temperature of the reactions and responses from across the industry. Prompted by a desire to help CG companies benchmark their progress against their peers, the SAP-Deloitte Consumer Industry Pulse Check explores the impact COVID-19 has had on businesses.
It also delves into the myriad ways firms are planning their recoveries and growth strategies, and the technology they’re leveraging to succeed.
We emailed with Harris Fogel, SAP global VP, consumer products, and Joe Lucca, Deloitte Consulting LLP managing director, consumer business transformation, for greater context around the numbers, including some actionable takeaways.
CGT: What prompted you to conduct the research?
Fogel: As the pandemic has progressed, we noticed that the majority of the surveys in the market were focused on consumer behavior. SAP and Deloitte saw a need in the industry to help CP [consumer products] companies to benchmark their response to Covid-19 against their peers and to gain understanding as to how different business functions were responding to the pandemic.
Covid-19 has had, and continues to have, rippling effects across the ecosystem of CP companies. From sourcing through consumer purchase, companies are identifying and reacting to stressed or broken business models and strategies — many that never considered the lasting effects of a pandemic. Key business areas like employee health and wellness, supply chain agility, sales and marketing, and procurement have been significantly disrupted.
We wanted to know what our customers are going through, what are their thoughts and frustrations, how are they adapting — what does the next normal look like to them?
CGT: What accounts for the gap between where CGs find themselves in their e-commerce strategies and where they’d like to be?
Lucca: The shift in selling channels for CP companies was dramatic. The away-from-home channel (e.g., restaurants, hospitality, travel), a mainstay for many CP companies, dried up overnight. Companies that had a strong B2B commerce business still struggled with implementing direct-to-consumer technologies and strategies.
As companies rushed to stand up DTC commerce sites, they faced additional conversion challenges in developing and delivering effective targeted messaging to consumers as well as customer service teams. Many also faced technological challenges such as creating user-friendly websites and utilizing data and analytics capabilities to understand consumer behavior and respond.
Retailers are also facing disruption across e-commerce, with many seeing 10x or more increase in e-commerce sales. Standing up a DTC commerce site is just one pillar a CP company must invest in to create a resilient and scalable customer engagement platform. As an example, as online sales accelerate, cracks in the fulfilment ecosystem will be amplified and may drive consumers to alternate channels or brands.
CGT: What are some of the strategies CGs are employing to create a healthy workplace environment? Are these here to stay?
Fogel: From manufacturing to office workers, safety is a huge concern. Although many employees can be productive working from home, most CP companies are creating healthy workplace environments for the employees that need to be in close contact.
Safety of office workers can be accomplished by implementing social distance and safety protocols that exist across most industries. In business areas where employees need to work close together by definition — such as manufacturing — companies are reconfiguring workplaces. From plexiglass shields between workstations to self-service temperature checking stations and PPE gear, CP companies have seen the negative effects to their workers and their brands that can be caused by ignoring safety protocols.
All these safety measures are absolutely here to stay, at least until a vaccine is widely available. One trend that we expect to see continue after the pandemic is the remote work practices for the non-critical workforce. CP organizations were successfully able to leverage their shared IT services and support their remote workforce effectively.
CGT: What’s powering the 40% of companies that are above average when it comes to balancing demand and supply? How are they ahead of the pack?
Lucca: The CP companies who were leading the pack on demand and supply chain efficiency also demonstrated a proactive approach across many aspects of their business. They accelerated their e-commerce strategy, they actively pursued alternate customer channels and routes to market, and they had extended visibility into at-risk suppliers. A majority reported very few supply chain disruptions. Even so, they also developed alternative sourcing arrangements to deliver parts or ingredients needed to avoid shortages.
These companies are ahead of the pack as they are practicing some of the best practices in the industry, including prioritizing their relationship with their vendors and their customers and quickly adapting to changing environments.
CGT: Beyond robotics, what are some of the other technologies that consumer goods companies are embracing to enhance safety and efficiency?
Fogel: CP organizations are embracing advanced data and analytics capabilities like AI, ML, IoT and sensors to increase safety and efficiency across their organization. These advanced technologies not only improve efficiency, they free up staff time from performing simple, repetitive tasks, to focus on strategic initiatives that can improve productivity and business value.
In the manufacturing environment, advanced technologies like IoT and sensor data are used for field service and maintenance. The IoT and sensor data are fed into ERP systems to optimize logistics and resource planning and digitize production.
Predictive analytics capabilities, along with image and sensor data, are utilized for real-time analysis of quality issues during manufacturing process, which can drastically cut cost and improve efficiency. Sensor data can predict equipment failure, engaging the right people at the right time and place to keep production lines and employees executing at peak performance.
Finally, having a data platform that can leverage a real time 360-degree view of the organization, act as a single point of truth and extend and innovate existing business processes can have multiplying effect on the bottom line.
CGT: What are some of the factors contributing to the effectiveness of supplier relationships right now?
Lucca: As the pandemic continues, leading suppliers are realizing efficiencies from procure to pay. By collaborating with their suppliers with full transparency, they can automate processes and drive accuracy across the transaction.
CP companies are driving increased visibility to their supplier base, increasing the assurance of components. By effectively using collaboration tools to exchange demand forecast with their suppliers, they are improving responsiveness to demand increases and/or decreases.
CP companies are also mining supply chain performance data and risk factors that provide insight for overall supplier health. This is possible due to suppliers and CP companies driving stronger relationships during these disruptive times.
CGT: Where are CGs reallocating their trade promotional spend at this time?
Fogel: Trade promotion isn’t going away at the store level — even if there are less trips, brands can’t afford the risk of not including the store in their spend. What began as a conservation of cash at the start of the pandemic has morphed into investments across digital channels to drive share of voice.
Whether in support of a retailer’s loyalty program or the company’s own direct-to-consumer efforts, brands need to reach the consumer across the multiple channels they choose to initiate and/or complete their transaction. CP companies need to be analyzing and reacting to new trends — like social media-initiated transactions — to ensure that their promotional spend is allocated for the best ROI.
As CP companies engage in marketplaces and evolving digital channels, they need to stay on top of distributed order management processes that may need to be tweaked (or created) to support their brand across new selling channels.
CGT: What kinds of technologies are CGs relying on to gain visibility into their suppliers?
Lucca: CP companies are moving to business networks as a platform to engage, collaborate and transact with all suppliers (large, small, direct, indirect, etc.). Leveraging a Procure-to-Pay platform can enhance interaction between a CP company’s supply chain capabilities, buying capabilities and sourcing capabilities, and can identify suppliers with high risk factors and make meaningful insights to take necessary actions.