Seamless Synchronization: Managing Inventory in Today’s CG Industry

Ambeshwar Nath

8/19/2020

If you live in the U.S., online shopping is probably part of your everyday life. The Total Consumer Report 2019 by Nielsen finds that an average American is spending over 24% more online than they did a couple years ago. Per the report, the CPG industry registered online sales of over $70 billion in 2018 and that figure is predicted to double in the next five years.

These numbers reveal the underlying changes in the consumer behavior driven by technological disruptions that are compelling the consumer goods industry to transform with digital capabilities as a path to building a consumer-centric approach for success. In late 2019, we conducted a survey where 33% of our respondents said they expected a rise in pure e-commerce firms that will have no physical presence, thus demonstrating the industry’s willingness to move with the times.

In more recent times, the COVID-19 pandemic has brought about a pervasive change in consumer behavior, with online shopping getting a sudden fillip. According to another Nielson study, in the two weeks ended March 21, there was a 35% jump in the number of people who shopped online in the U.S. for CPG items, as compared with a typical week.

Considering past trends, one can assume online shopping is likely to continue even post-pandemic. It will become critical for consumer goods companies to use digital technologies such as AI and automation to bring together offline and online operations to better manage their inventory and thereby propel growth.

Ensuring product availability in a dynamic environment

Whether a consumer goods company chooses to open its own branded store, sell via the digital marketplace or even have its own e-commerce site, a consistent challenge in an omnichannel environment is managing the right inventory and a robust supply chain. Thirty percent of the respondents in our report agreed that a dynamic inventory management across different channels to respond to changing demands is the need of the hour.

The reach of almost every consumer goods company is now global. Shorter product lifecycles, multiple warehousing, and longer lead times make inventory optimization a challenging exercise. With the rise of e-commerce, high rates of returns are adding to inventory holding costs. Same-day delivery, click and collect are new delivery options that add to the complexity of maintaining the right inventory.

We have customers who browse online before stepping into a store to make a purchase, or while at the store, they check other brands on their smartphones. They may buy a product online but walk in to a store to return it. Companies have to synchronize the two channels seamlessly to ensure that sales, returns, inventory, and other elements are tracked accurately irrespective of the channel and the customer experience remains consistent.

Technology can serve the need of the hour by delivering an inventory management system that’s dynamic. It is essential to have an end to end visibility into operations through real-time AI-enabled dashboards that can give a breakdown of inventory at the store, region as well as category or product level. This also helps with better campaign management.

A case in point is a sportswear manufacturer and retailer that wanted to engage more directly with its customers and decided to transform its business through an omnichannel platform. The platform supported intelligent and efficient back-office processes such as better inventory turnover and single inventory view, which contribute to fewer cancellations and increased product availability.

The number of registered online users jumped 21 times in a period of five years. This large user base enables the company to launch targeted campaigns to ensure a repeat footprint and increased cross-selling.

Image analytics can prevent pilferage and assist in inventory counting. Automated robotic solutions can scan, sort inventory, improve shelf layout, and automate operations and the storage function to enhance efficiency and access. Predictive modeling can optimize inventory by aligning inventory with customer demand. Blockchain can tie together the documentation between multi-warehouses.

A U.S.-based packaged food company consolidated its inventory systems and created an RPA-led automation project to coordinate all processes to ensure error-free, timely deliveries. Everything from stock levels to delivery scheduling — even availability of loading bays — was handled automatically. This resulted in a 50% reduction in scheduling turnaround time, a 90% reduction in errors and elimination of 80% of the human effort involved.

The scope of transformation that is possible in the consumer goods industry extends beyond inventory management and is much wider than this article can possibly cover. In short, the industry can expect digital technologies, particularly AI and automation, to offer the best solutions to help them solve their challenges and propel their growth in the rapidly changing environment.

Ambeshwar Nath is senior VP, retail, CPG and logistics at Infosys.

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