Survival Lessons Learned from the Pandemic Stress Test
As global conditions gyrated in unimaged ways during the pandemic, consumer goods companies discovered their manufacturing, product portfolios and supply chains had become stressed to the breaking point.
This was a shock to many CG companies, but there was a silver lining: By exposing blind spots and hidden limitations during the unexpected stress test, a clear picture emerged about how to improve established processes that had become too rigid to adapt to today’s fast-moving changes.
A new study, the SAP-Deloitte Consumer Industry Pulse Check, sheds light on key marketplace and consumer trends that suddenly became critical for CG companies to use as they create game plans to respond, recover and thrive beyond the pandemic.
Top takeaways from the study show the pandemic has dramatically accelerated ongoing disruptions within the industry. Consumers are seeking greater convenience and personalization, demanding sustainable goods, and embracing insurgent brands and private labels. These shifts have fundamentally changed strategies toward consumer demand and the integrated supply chain that service it.
Respond, Recover and Thrive
There is little doubt the pandemic has dramatically accelerated disruption within the industry and highlighted the need for CGs to focus their efforts on areas immediate concern, many of which have been previously overlooked.
However, it is also important for CGs to keep their eye on the larger picture and create a comprehensive game plan that extends beyond immediate triage. A complete game plan should include three major phases: respond, recover and thrive.
Here are key study findings to help guide CGs in successfully creating these plans:
- The No. 1 priority for CGs today is employee health and wellness followed by Post COVID-19 recovery, financial liquidity, and supply chain resilience. These priorities are the same for all CG companies irrespective of revenue size, region or segment they operate in.
- The downward impact on revenue has been felt by 48% of CG companies, which gives urgency to the task of creating a comprehensive game plan. The largest group experiencing a revenue decrease (60%) fall into the large company category.
- Product portfolios have taken a big hit for CGs during the pandemic, especially in the health and personal care segment, of which 90% reported high-to-moderate disruption.
- Interestingly, CGs have adjusted well to virtual work practices with 66% reporting an above average experience.
- Today, the majority of CGs have reopened their workspaces (53%); however, 41% say their companies are still working on a reopening strategy, which indicates safety policies for workplaces are still fluid and many are likely to be influenced by geographic and governmental concerns.
- In a clear shift of business objectives, 61% say they are pursuing alternate customer channels and routes to market. A huge majority (80%) of CGs are focusing on e-commerce as an alternate route to market. However, only 33% have significantly accelerated their e-commerce strategy, where sales are currently booming.
- Lack of speed and urgency to adapt is also evident in the finding that 96% of respondents foresee moderate to significant changes in their go-to-market strategy compared to the low 33% who say their organizations are making adequate changes to their consumer interaction model.
- A majority (54%) of CGs believe their organization’s ability to balance demand and supply is average, which indicates a lack of agility to adapt to demand volatility.
- One area of change currently taking place is in trade promotional spending where 36% plan to decrease spending and only 12% plan an increase. The majority (56%) plan to use the reallocation for cash conservation while only 33% plan to use it to increase direct-to-consumer channels.
- Many CG companies (46%) believe one way to increase agility in manufacturing is by using modern technologies, such as robotics, to enhance safety and efficiency.
- While a majority (54%) of CGs believe their relationship with the top 10% of their strategic suppliers is extremely effective, an overwhelming majority (84%) report experiencing some level of disruption in their supply of raw materials or packaging materials.
- Part of the reason for the disruption in the supply of raw materials or packaging materials was caused by a lack of visibility into supplier’s manufacturing plants or into country regulations and compliance issues. Only 18% of CGs report full visibility with their suppliers with the rest reporting some visibility (68%) or no visibility at all (14%).
- The impact of the pandemic has pushed suppliers to request financial or operational assistance, according to 36% of CGs. To combat future disruptions, 85% of CG organizations have established alternate sourcing arrangements or are in the process of establishing them.
The SAP-Deloitte Consumer Industry Pulse Check study provides data-based insights into the key marketplace and consumer trends that are critical for CG companies to use as they create game plans to respond, recover and reimagine their brands beyond pandemic.