Digital disruption has large-scale implications for the consumer packaged goods (CPG) industry. Today’s consumer is shopping increasingly through diverse channels and demanding real-time information on product traceability and availability. There are increasing instances of new models, for instance manufacturers directly reaching out to consumers (D2C model); leveraging ecosystem for superior customer experience; and providing hyper-personalized products.
On the other hand, technology is opening unprecedented vistas for efficiency improvement, cost savings and growth. To keep pace, CPG businesses need to reimagine their value chain across product development, manufacturing operations, supply chain and logistics, customer and consumer services, and more. Businesses need to ensure workforce and robots work together on the shop floor, harness data from various devices and enterprise systems, cull out insights and use them to achieve agility to meet market demands, improve overall equipment effectiveness (OEE) levels and reduce cost of operations. Similarly, it is important for CPG businesses to use real-time data to gain visibility and traceability, and dynamically respond to supply chain events. This will help reduce demand-supply gaps while optimizing resources.
In a nutshell, CPG businesses need to move to the next level of flexibility, transparency and automation with technology playing a bigger role than ever.
IoT takes the center stage
The TCS 2020 CIO Study indicates that IoT technology ranks high on the priority list for CPG businesses, with 25% respondents saying IoT has ‘extreme impact on businesses’ and 46% voting for ‘medium impact’.
However, for businesses to be truly able to harness value from IoT systems, they need to connect assets, products and processes in context, use IoT system data for predictive analysis, and eventually make things self-aware. In other words, Bringing Life to ThingsTM leveraging the combinatorial power of sensor data, computer vision, analytics, AI, robotics, and other digital technologies.
We believe that there are unique business dimensions and technology constructs that organizations must investigate to discover and realize the value in terms of driving exponential growth, achieving the next level of efficiencies, strengthening relationships with the channel and partners, and improving the quality of life of consumers.
Value through smart and unified business ecosystem
To realize the value of bringing life to things, enterprises need to embed certain business dimensions in their strategy to strengthen positioning in the ecosystem.
Boundaryless: Organizations have the choice to expand and create a network of connected value chains in the ecosystem. For instance, a leading food producer integrated its cold chain containers to the IoT platform of the shipping line. Using insights on the transport condition in combination with the shelf life, the firm started to dynamically re-route shipments to stores. This integration of value chain of shipping-line and food producer into a common ecosystem resulted in business value for all the ecosystem players.
Pervasive: Organizations can develop the capability to respond and serve 24X7, make decisions that are elastic and optimized for demand. For example, a leading CPG player designed IoT-centric systems to be able to use sensor data from the machines and create digital twins of the plants. This is helping the firm take real-time decisions to optimize the output, limit the waste, and more.
Experience rich: Enabling a seamless feedback loop helps select the most efficient path to value with enhanced satisfaction. For example, at the recent Annual Tech Conference in Las Vegas, P&G displayed a connected toothbrush with a feedback loop. To provide hyper-personalized experience to parents, it is providing a baby care system designed around digital diapers and video monitoring. In another instance, an enterprise digital twin was used by a leading enterprise to simulate the real environment of a retailer’s data centers, stores and fulfilment centers, enabling informed decisions to replenish inventory based on actual demand and avoid stock-out scenarios. Shoppers get products every time they walk in, translating into superior customer experience, while manufacturers can keep lost sales situations at bay.
Technical constructs to enable the transformation
To enable these business dimensions, we see enterprises treading the transformation journey along the technology maturity continuum described below.
Connect in context: This essentially means embedding digital sensors and other technologies into products, factories, supply chains, retail points for traceability, performance and experience improvement. A leading FMCG player was facing quality-related challenges owing to manual intervention in the labelling of finished products. It switched to computer vision-based system for detection and rejection which was integrated into the enterprise systems. The solution not only helped in reducing labelling errors and manual effort, but also in identifying opportunities for operational excellence.
Predictive: This involves capabilities to utilize enterprise data and data from IoT devices to generate insights for decision making and performance improvement. Industry segments such as home and personal care and apparel and toys are increasingly focusing on e-commerce, and direct-to-consumer fulfilment, putting additional pressure on the supply chain to be responsive and cost-effective, especially for the last-mile delivery. This calls for predictive insights to be able to dynamically respond and optimize logistics operations for efficiency and cost savings.
Self-aware systems: Enterprise setups that can correct their performance, sometimes without human intervention, is the end game that leading firms are moving towards. For example, warehouse robots equipped with sensors and AI avoid collisions with workers and other robots, improving workplace safety and avoiding downtime.
The way forward
Firms can take different approaches to create exponential value across production, supply chain, channel partners and consumer engagements (see Figure 1).
Figure 1: The guiding path to exponential value for CPG businesses (illustrative)
We believe, bringing life to things is the way to go for enterprises across industries, and in CPG sector in particular. . Companies that deploy agile ways of working, adopt new business models, build futuristic solutions, develop unique capabilities across the value chain, and focus on delivering superior customer experience will be able to sustain profitably. Developing an ecosystem with the right set of the technology partners and nurturing an innovation network would define the pace of this transformation.