Supply Chain Brain - February 2012

CPG
Demand-Driven Enterprise
Sees Maximized Revenue

Consumer packaged goods manufacturers are being squeezed by trends in customer purchasing and technology, coupled with pricing pressures, higher input costs, and fluctuating commodity prices. In today’s market, CPG companies have to integrate and collaborate with trading partners and better manage retail shelf space. Growing recognition that failure to innovate will result in poor performance, acquisition, or worse, is driving leading CPG companies to transform their operating models.

—Ben Pivar, vice president, Supply
Chain Technologies Practice,
Capgemini North America Applications
Services

emand-Driven Enterprise integrates planning and execution more collaboratively across manufacturers and retailers. This drives revenue and margin increases by better supporting assortment optimization, space optimization, trade funds management and demand planning while streamlining the supply chain. Although it requires alignment with the overall value chain—Sales, Marketing, Product Development and Finance—the power lies in five core concepts:

• Collaborative Category Management—CPG companies have dedicated account teams that work with specific retailers to research consumer behavior, shopper affinity, and new product introductions. By leveraging this data, account management teams can embed category strategies into improved assortment and store-level plan-o-gram recommendations.

• Demand Planning Synchronization—Most CPG companies forecast distribution center shipments rather than actual consumption data at the shelf, causing discrepancies between true demand and available supply. By tapping into POS data directly from the retailer, accurate analytics can be performed to analyze promotion effectiveness.

• Trade Promotion Management and Optimization—The Demand-Driven Enterprise drives accurate sales planning, measurably increasing sales through promotion optimization. CPG manufacturers can model the impact of different types of trade promotions to better understand the ROI associated with each trade instrument and better collaborate with retailers for future promotions.

• Inventory Planning Synchronization—Improved forecast accuracy is combined with other key data points from the retailer to calculate time-phased net inventory requirements for each node within the supply chain. By synchronizing inventory strategy and logistics with retail partners, CPG companies better understand true inventory requirements and thereby minimize inventory buffers across the network. Identifying and prioritizing different types of demand signals, and deploying inventory from the most cost-effective supply location becomes simple.

• Supply Chain Execution Collaboration—Retailers and CPG companies must collaborate on-demand and shipment plans within the execution window. Visibility into the retailer’s inventory strategy and POS data enables CPG companies to manage inventory and resource constraints and to produce an executable deployment plan to meet projected consumer demand.