Consumer goods companies control technology · PDF fileTech Trends repor T 2014 | cgt | TT3 edit note Welcome to the 2014 Tech Trends report, produced by CGT and our valued research

a supplement to

c o n s u m e r g o o d s t e c h n o l o g y m a g a z i n e

Consumer goods companies control technology investments to meet impressive growth goals

• SupplyChain Analytics and Visibility

•S&OPTechnology•DigitalMarketing

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Tech Trends reporT 2014 | cgt | T T 3

edit noteWelcome to the 2014 Tech Trends report, produced by CGT and our valued

research partner, Gartner, Inc. This year, the report tells the consumer goods

industry’s coming of age story. IT spending is stagnant, but the dollars that

consumer goods companies do have are being allocated to the right areas in

order to nurture aggressive growth initiatives. deeper analytics, stronger vis-

ibility and enhanced decision-making capabilities, all

enabled by smarter technology choices, are propel-

ling organizations to reach heightened levels of matu-

rity. Together, we’ve selected seven topics that must

be evaluated as change initiatives within an organiza-

tion’s maturity progression. survey results benchmark

your process and technology maturity levels against

industry averages, while Gartner analysts offer strate-

gic advice and predictions for accelerating your orga-

nization’s transformation into a stronger more capable

competitor. enjoy!

04 it Spending

12 Supply chain analyticS

16 the product portfolio

20 S&op technology

24 digital Marketing

26 Supply chain ViSibility

30 the retail perSpectiVe

c o n T e n T s

kara romanowExecutive Editor

Tech Trends reporT 2014 | cgt | T T 3

publiSheralbert Guffanti [email protected]

editorialExecutive Editor: Kara Romanow [email protected]: Ali Ackerman Orr [email protected] Editor: Alarice Padilla [email protected]

SaleSassociate Publisher: Diana Masurack Mann [email protected] account manager: Bill Little [email protected] to Publisher: Jen Johnson [email protected]

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Founder: Douglas C. Edgell, 1951-1998

corporate officeEdgell Communications 4 Middlebury Boulevard Randolph, NJ 07869-1111 (973) 607-1300 • Fax (973) 607-1395 www.consumergoods.com

mEmbEr

PrInTED In ThE u.S.a.

mEmbEr

T T 4 | cgt | Tech Trends reporT 2014

The consumer goods industry still strives for growth and productivity in an environment of continued volatile demand and expanding portfolios. With more options to choose from, demand is spread thinner across the larger number of possible selections and brand loyalty is not what it used to be. Con-sumers continue their cautious and frugal buying habits from the economic downturn but are now more influenced by the increase in digital technology and online options. And, now, growth in emerging markets is slowing down. Through all of this, leading consumer products companies are transforming their supply chains to support revenue growth goals while reducing cost. They are looking to technology to support them on this journey with greater visibility, stronger data analytics and better decision-making capability. For example, Unilever is well underway in achieving its goal of doubling revenues and halving its environmental footprint in this decade. The Procter & Gamble Company is hard at work leveraging its scale while

improving its capability to orchestrate its end-to-end trading networks and redesigning its U.S. distribution network as part of its “one face to the customer” initiative. And The Coca-Cola Company’s growth agenda is all about delivering profitable top-line growth as part of its “2020” vision while managing complexity across its network. These examples show that despite challenging times, consumer goods leaders are con-sciously forging ahead to become stronger and more capable in supporting their impressive growth goals.

the 2014 tech trends report reveals three key themes:

1 IT spend remains flat, but budget increases are expected over time. Industry average IT spending as a percent of revenue in the consumer products vertical for the past several years

has hovered right around 2% with 2013 coming in at 1.9%. Cur-

Expect significant decrease

Expect slight decrease

No change

Expect slight increase

Expect significant increase

Expect significant decrease

Expect slight decrease

No change

Expect slight increase

Expect significant increase

BY YEAR-END 2014

Source: Gartner, Inc.

511304312

41084335

BY YEAR-END 2017

5%11%12%

43% 30%

4%10%

35%

43%

8%

0 2 4 6 8 10

3.28%3.77%

2015 2016

1.57%1.9%

8.95%8.78%

3.98%4.42%

0.84%1.81%

2.52%2.39%

0.90%1.66%

Total Growth

Internal Services

Software

External IT Services

Telecom Services

Data Center

Devices

AREA OF SPEND

Source: Gartner Worldwide Verticals Forecast – 2014 Q2 Update, Consumer Goods Vertical

3.28 3.77

1.57 1.9

8.95 8.78

3.98 4.42

0.84 1.81

2.52 2.39

0.90 1.66

IT Spending overviewBudGeTs remaIn FlaT, BuT spendInG chanGes To FIT TransFormaTIon Goals by Jan kohler, gartner Supply chain reSearch director

figure 1: expected change in Supply chain Management investments figure 2: it Spending breakdown forecast


IT Spending

rent Gartner projections expect 2014 to remain the same. Results from this year’s technology study revealed that just more than half of those surveyed expected a slight or significant increase in spending for this year and expect that increase to grow to 78% by 2017 (see Figure 1). Though the budgets are forecast to remain flat as a percent of revenue, dollar spend is expected to increase slightly over the next few years in several areas (see Figure 2). Soft-ware is projected to have the largest increase followed by external IT services.

2 Supply chain technology adoption trends continue. Technology adoption profiles have not changed since 2010. Per Gartner’s recent technology study, most companies continue to fall in the conservative (proven

technology only) and mainstream (maturing technology with manageable risk) profile for supply chain applications and technologies (see Figure 3). Emphasis on internal transformation drives consumer goods companies to balance risk with opportunity from technology and applications to support

Aggressive

Mainstream

Conservative

ADOPTION PROFILE


94546

46%

9%

45%

figure 3: Supply chain technology adoption profile

0 10 20 30 40 50 60 70 80

Functionality

Total cost of ownership

ROI or payback period

Integration with other applications

Services, support and maintenance

Technical architecture

Application platform

CRITERION

Vendor innovation/thought leadership

Application deployment model

Systems integrator ecosystem


38 16 13 12

14 18 12 15

15 14 13 13

13 19 22 0

3 6 11 22

4 12 11 12

6 4 7 6

2 5 5 7

3 2 4 4

1 3 1 4

38% 16% 13% 12%

14% 18% 12% 15%

15% 14% 13% 13%

13% 19% 22% 0%

3% 6% 11% 22%

4% 12% 12%11%

6% 6%4% 7%

2% 5% 5% 7%

1% 1%3% 4%

3%2% 4% 4%

1st most important 2nd most important 3rd most important 4th most important

figure 4: Supply chain Management application Selection criteria


IT Spending

their vision. The projected increase in external IT services spending, which includes product sup-port, consulting and implementation services, could be the cushion needed to minimize risk. This study also revealed that functionality is the most important supply chain management ap-plication selection criteria followed by cost, ROI and ease of integration (see Figure 4). We see that technical architecture and vendor innovation/thought leadership come in as lower priority. This is consistent with the mainstream and con-servative adoption profiles. When the focus is on transforming and growing the business these two criteria may need to rise in importance over time.

3 Investment decisions are expected to change over the next few years. The results of the technology study show more money is ex-

pected to be spent on transforming and growing the business and less on just running the busi-ness as it is today (see Figure 5). This is consistent with the transformation journeys and impressive growth goals we see in place with the consumer goods leaders. Visibility tops the list of most important key supply chain initiatives planned for the next 12 months followed closely by en-hanced business intelligence. This is expected in the world of uncertainty that consumer goods companies face. Integrated Business Planning (IBP) or advanced Sales & Operations Planning (S&OP) comes in third. Companies that success-fully reached Stage 3 S&OP maturity are begin-ning to use the process as a decision-making forum to deliver on their business strategy and achieve their financial goals. At this stage, they need more advanced technology to support what-if scenario modeling and interactive deci-sion support. Key investment drivers for supply chain focus on reducing operating and support costs (see Figure 6). In support of transformation, it is not unexpected that adding or upgrading func-tionality and increasing flexibility and adaptabil-ity of existing applications are high on the list. Managing technology investments to support transformations will be critical in supporting business growth goals for the rest of the decade.

17%

21%

Transform the Business

Grow The Business

Run the Business

FY 2013


24%

48%

28%

BY FY 2017

242848

172161

62%

figure 5: expected change in Supply chain it budget allocation

Reduce operating and support costs

Add new functionality

Upgrade existing functionality

Insufficient flexibility and adaptabilityin current applications

Change in business requirements

Need for better user experience

Technical obsolescence

DRIVER

Need to focus more ontransformational investments

Application portfolio rationalizationand consolidation

61%

55%

53%

46%

39%

33%

31%

27%

25%

6%

17%Change in application deployment model

Other


61

55

53

46

39

33

31

27

25

17

60 10 20 30 40 50 60 70 80

figure 6: key investment drivers in Supply chainnote: multiple responses allowed

T T 1 0 | cgt | Tech Trends reporT 2014

richard DavisVP, Business Planning,

Kellogg Company

“as technologies around big data and

predictive analytics start to become more robust and defined, and clear technology leaders emerge, I would expect successful companies would begin to leverage them and invest more discretionary funding in these areas, as we all seek to be-come more insight driven.”

Dan Woo Director of e-Business, Nestlé uSA“I believe con-

sumer goods companies should

prioritize IT invest-ments in consumer and customer insights to enable top-line growth. If you think about delivering value, the operational costs should be minimized and the impact to sales growth should be maximized.”

Scott Hendrick SVP, Chief Transfor-mation

Officer & CiO, Scotts

Miracle-gro“consumer goods

companies should consider bal-ancing discretionary spend in two areas: Growth and Information security. In both cases, because technology and business models in most sectors continue to evolve, if a company does not proactively fo-cus in these areas, they are at risk of losing market share or relevancy.”

Jerry Wolfe CiO, McCormick & Company

“They should focus on col-

laborating with commercial teams to

create services that support growth — analytics, digital shopper mar-keting solutions, support for the consumer information transpar-ency initiative (cITI).”

Jon Harding global CiO, Conair “The lion’s share of discretionary

IT spending in 2014-15 should

be spent on big data projects to enable

the business to take advantage of all the revenue growth, customer retention, customer engagement and digital path-to-purchase op-portunities that the new technology revolution is making possible for the first time. By ‘big data’ I mean all types of analytics on all sources of external and internal data about the business.”

Steve Sigrist VP Customer Development Operations,

Newell rubbermaid

“I suggest the spend to be for systems for

supporting the rapid deployment of omnichannel solutions and relation business evaluation tools. utilize funds to unlock the power within the existing distribution network systems as well as to quickly en-hance and enable consumer pack-aged goods firms to be stronger omnichannel support to retailers.”

From ThE FronT LInESCgT ASKeD… how should consumer goods companies spend the lion’s share of their discretionary IT budgets over the next 12-14 months?

CONSuMer gOODS iT AND BuSiNeSS leADerS ANSWereD…A:Q:


Supply chain strategists as well as heads of sup-ply chain centers of excellence are tasked with a non-trivial charter: build an analytics compe-tency that can support the current and future needs of the supply chain. This goal is becoming more and more imminent with the advent of the digital business.

A recent Gartner study examined the cur-rent needs for supply chain analytics, and the future plans for additional investments to satisfy those needs. The study was conducted with 449 respondents in various supply chain roles, span-ning numerous industries, including high tech, consumer products, chemicals and industrial manufacturing.

When asked about the importance of different supply chain initiatives to the organization in the next year, companies chose building end-to-end visibility and enhancing decision making with analytics as the top two initiatives (see Figure 7).

figure 7: importance of initiatives to the Supply chain organization

Supply Chain analyticsWhy analyTIcs Is noW a requIremenT To compeTe In consumer Goodsby noha tohaMy, gartner Supply chain reSearch Vice preSident

InITIaTIVE mEan

Facilitating improved supply chain visibility and transparency 5.7

Enhancing decision making with business intelligence and analytics 5.6

Integrated business planning 5.4

Compliance with government mandated regulations 5.1

Supply chain/network redesign 4.9

Globalization initiatives 4.6

Sku rationalization 4.4

Supply chain segmentation programs 4.3

Supplier rationalization 4.3

Strategically outsourcing processes and activities to third parties 4.2Source: Gartner, Inc.

“When making investments,

supply chain strategists should

pursue cross-functional analytics

that will ultimately improve end-

to-end supply chain performance.”


software-as-a-service analytics market, and 58% of the survey respondents have moved or are likely to move their analytics and performance management applications to the cloud. With decreasing security concerns, increasing aware-ness of the benefits of a cloud solution in terms of speed of implementation and less reliance on scarce IT resources, companies’ willingness to move supply chain applications to the cloud will continue to grow.

Supply chain strategists must understand their company’s overall cloud strategy and choose the supply chain analytics solutions ac-cordingly. They need to work with current ana-lytics vendors to understand their cloud capabili-ties and strategy for future capabilities.

Meanwhile, dissatisfaction with embedded analytics in supply chain management (SCM) tools will drive supply chain organizations to invest in more end-to-end capabilities. The ma-jority of respondents (71%) indicate that there needs to be more analytics capabilities embedded in their supply chain management application. Furthermore, only 12% of the respondents said that they are fully utilizing the analytics function-ality in their SCM tools.

One explanation for this underutilization is that as companies mature, they look for analyt-ics solutions to manage the overall supply chain performance. Currently, most SCM tools now offer analytics aligned with one functional area, making it challenging to provide the company with the ability to analyze and make the right trade-offs across the extended supply chain.

Supply chain strategists must investigate the reasons for the underutilization of current analytical capabilities in SCM tools. Is it due to limitations in the tools or due to user resistance and the need for change management? If it is the latter, realize that additional investments in analytics applications will unlikely provide ad-ditional value unless the required change man-agement is conducted to ensure user buy-in or further automation. And, when investing in new analytics solutions, focus on the tools’ ability to offer end-to-end supply chain capabilities.

Supply Chain analytics

Supply Chain Performance Management

Demand Planning

Inventory Optimization

Sales & Operations Planning

Supply Chain Visibility

Production Planning and Scheduling

Product and Distribution Planning

APPLICATION

Network Design

Supply Chain Risk Management

50.4%

41.4%

41.4%

38.3%

36.1%

32.3%

18%

15%

13.5%

11.3%Pricing Optimization


50.4

41.4

41.4

38.3

36.1

32.3

18

15

13.5

11.3

0 10 20 30 40 50 60

figure 8: investment in analytics applications note: multiple responses allowed

Furthermore, analytics is the most important investment that companies will make in the next three years.

This emphasis on analytics is not unexpected. With a deluge of data from both inside and outside the enterprise, with demand for faster response time to customer requests and with limited pool of analytics skillsets, analytics has become a requirement for most companies to remain competitive.

When making investments, supply chain strategists should pursue cross-functional analytics that will ultimately improve end-to-end supply chain performance. Supply chain strategists should also guide the business in identifying the most critical needs. For example, while some business users might be currently enamored with advanced big data analytics, the most critical need for the business might be leveraging analytics for end-to-end supply chain reporting and visibility (see Figure 8).

A willingness to deploy analytics solutions in the cloud will boost the


Consumer goods companies excel at identify-ing market opportunities and creating new products or revising existing products to attack those opportunities. Those same companies, however, often struggle with slimming down product portfolios to focus on the most valu-able items and make room for innovative new products. As product portfolios grow, supply chain complexity increases and the impact is felt in inventory, cost and service levels. Bloated portfolios also generate very real lack of capac-ity in product development, marketing, sales and supply chain teams to support new prod-ucts; they are too busy sustaining the existing ones. With CEOs prioritizing innovation to drive business growth (see Figure 9), the real-ity of resource and asset constraints is forcing companies to make hard trade-off decisions between the risk of trimming products out to make room for new ones and the risk that fail-ure to do so will threaten the financial health of the company.

What’s needed is a scalable, repeatable, dis-ciplined product phase-out process. Similar to the way that consumer goods companies have improved the alignment of new product devel-opment processes to merchandising, inventory and operations execution activities to improve the success rate of new product launches, com-panies are looking at how to align resources for deciding which products are failing to meet financial and strategic metrics. This decision is step one of a two-step process.

The second step, one that companies that excel at the decision-making step may or may not do well, is executing the product phase out. Failure to execute the phase-out causes prod-ucts to linger well after a company knows they should be retired. Emotions come into play as teams or individuals rally to support favorite products and salespeople resist the loss of rev-enue from discontinuing the product. Some companies have struggled to reduce portfolios

The Product PortfolioelImInaTInG underperFormInG ITems To make Way For neW producTsby Janet SuleSki, Supply chain reSearch director, gartner, inc.

figure 9: the ceo’s top Strategic business priorities

“as product portfolios grow, supply chain complexity increases and the impact is felt in inventory, cost and service levels.”

STraTEGIC PrIorITy ToP SEConD ThIrD

Growth 38% 15% 10%

Cost management 8% 11% 6%

IT-related 6% 10% 7%

Profit Improvement 5% 8% 9%

workforce 2% 2% 10%

Product Improvements 5% 4% 4%

Customer 4% 3% 5%

Efficiency and Productivity 1% 7% 3%

Financial 2% 3% 5%

Innovation, r&D 4% 4% 2%

Governance, risk and Compliance 1% 4% 3%

Culture Change 1% 3% 4%

Quality Improvement 1% 5% 1%Source: Gartner, Inc.


figure 10: product phase-out decision tree example Source: Gartner, Inc.

The Product Portfolio

only to see them rise again and sometimes even exceed the previous size. Product discontinuation decisions need to take emotion out of the process, look quantitatively at the value the item is creating for the company, and choose whether it should stay, be discontinued, or undergo a “renovation” process to try to get the item healthy again (see Figure 10). Best practice is to measure a product’s health against multiple criteria, including product economics, complexity impact, strategic importance and item substitutability, before making a decision. Follow-ing stage gate processes to manage timing, raw and finished goods draw-down, and final disposal and setting timetables for consistent execution, help companies scale and repeat the process across portfolios.

Establishing the importance of active portfolio manage-ment that includes rigorous product phase-out planning and execution is the first step, and usually requires C-level sponsorship. Building consensus about the right metrics to

measure product health takes time, and the decision to test products against proposed health scorecards requires the support of upper management. With proposed metrics in place, most companies undertake an initial round of data collection, which can take a considerable amount of time and effort. Successful companies pilot the proposed phase-out process from beginning to end on as few as five products to fine tune it before rolling out to other products. Ownership of the discontinue decision sometimes shift as companies seek to reduce the amount of bias and emotion that may arise in early rounds. And, although it can be hard to find time to do this, conducting post-phase-out reviews to identify improve-ment opportunities is essential to continuous improvement. Get executive buy-in, start small and be prepared to tweak the phase-out process, one that growing numbers of con-sumer goods companies are realizing is just as important to portfolio health as the new product introduction process.

DECISIon CrITErIaHealthy?

No DECISIon CrITErIa

Yes

Phase-Out

New Formula/Design

New Advertising

New Packaging

Pricing/Trade Funds

Discontinue

Refresh

Keep

Monitor and Re-evaluate


It is imperative to understand your company’s definition of S&OP before looking at the different technology options to sup-port your versions of the process. A useful way to think about your specific definition of S&OP is to think about the maturity stages of a typical S&OP process. These maturity stages rep-resent the key “milestones” that a process would go through from being a more locally deployed, simple process to one that is more broadly implemented, more sophisticated and deliv-ering more value to the organization. As can be expected, the type of technology required to support a lower stage process is not going to be the same as the technology that is required to support a higher stage process. This is certainly true of S&OP. Also, a company does not want to implement technology to support early stages of maturity only to rip this out when it is ready to move to higher stages. There should be a layering of technology to support the business as it moves along its S&OP maturity journey (see Figure 12). This idea of process maturity and technology layering is useful to help focus in on what type of technology and associated capabilities are really needed at each maturity stage and to ensure that when we look at the market we are comparing “apples with apples”.

Operational planning solutions (aka supply chain planning solutions) and some form of presentation capability typically enable lower stages of S&OP maturity. Up to mid-maturity S&OP, a company will typically focus on getting a demand/supply balance across its internal supply chain over a more tactical time horizon. Once it is ready to move on, then S&OP needs to be more strategic in nature, have a longer time horizon, be more broadly deployed internally and externally, have a stronger scenario planning dimension, and be more financial and business planning-oriented. These later requirements need additional technology support, such as:

1. Collaboration Support – S&OP is highly collaborative and takes on an external dimension as maturity increases.

2. hierarchy management – The ability to flexibly aggregate/disaggregate into groups that make sense to different parts of the business along with the ability to translate between units of measure.

3. Process management – S&OP is a process after all, and needs to be managed as such.

4. Supply Chain modeling – As maturity increases, S&OP be-comes an exercise in scenarios, and modeling capability is required to help generate these scenarios.

5. Scenario management – Socializing, versioning, controlling and approving scenarios is key.

6. Financial Impact analysis – The financial evaluation of plans and scenarios is increasingly important as S&OP maturity rises.

7. Performance management – Good dashboarding, scorecard-ing and root-cause analysis becomes important.

8. Project Planning – Not a high-level requirement yet, but as S&OP matures, some basic ability to manage key projects (new product launch, new capacity) becomes important.The architecture of the S&OP solution must “play nicely”

with the operational planning solutions; the data it requires resides in the operational planning layer and the decisions it produces need to be passed back to be operationalized in the supply chain planning layer. This speaks to the necessary layer-ing effect of the different technology components.

As can be seen in Figure 11, many obstacles that impede the S&OP journeys have a technology dimension to them. These challenges can be significantly diminished if the planning technology roadmap is built up in appropriate “layers” to ensure the right enablement is in place for the S&OP process as it increases in maturity.

S&oP TechnologyhoW process maTurITy should ImpacT TechnoloGy adopTIonby tiM payne, gartner Supply chain reSearch Vice preSident

21%

13%

11%

10%

8%

6%

Connecting the S&OP plan and decisionsto the operational plan/execution

Data availability, integrity andstakeholders agreement

Implementing a global S&OP process

Move from demand and supply matchingto engaging profitability as a key goal

Connect strategic initiativesto the S&OP process

Recording volume and financial plans

CHALLENGE

Source: Gartner S&OP Maturity Study, 2013

21

13

11

10

8

6

0 5 10 15 20 25

figure 11: top S&op challenges note: Top rank only


Stage 1: react Stage 2: anticipate Stage 3: Integrate Stage 4: Collaborate Stage 5: orchestrate

outcome Preventing supply shortages and maximizing revenue.

Creating a volume-based operational plan, using sales forecast and constrained supply capability.

Balancing supply and demand volume across the end-to-end supply chain and establishing stronger cost-based financial and supply chain alignment.

Creating a demand-driven, profitable supply response across the extended supply chain.

Coordinated decision making across the enterprise and network to create value across the full planning horizon.

Process Focus

“S” reflects sales; “OP” reflects local supply capabilities.

“S” reflects sales and marketing plans; “OP” reflects supply plans.

“S” equals sales and marketing plans, with input from supply chain group; “OP” represents integrated supply chain capabilities across plan, source, make, deliver.

“S” expands to reflect go-to-market plans;“OP” reflects extended supply chain capabilities for profitable response.

“S” reflects network strategies and solutions, aimed at creating new value; “OP” reflects orchestrated network strategies to fulfill demand.

organization The S&OP process is led by supply chain and lacks sponsorship from business executives.

The S&OP process is coordinated, owned and sponsored by supply chain.

S&OP is still owned and sponsored by the supply chain group, with increasing involvement from other functions.

The S&OP process is coordinated by the supply chain, but owned and sponsored by busi-ness unit/P&L owners.

S&OP is coordinated by supply chain or finance, owned by P&L leaders and sponsored by C-level executives.

metrics Business unit metrics are generated from varied sources.

The metrics are function-specific and often competing.

The metrics are defined to measure integrated supply chain perfor-mance.

Metrics are consistent and both internally/ex-ternally focused across the extended supply chain.

Metrics are value-based and aligned across network and enterprise to measure trade-offs.

Time horizon

S&OP focus is on firefighting to resolve current operational imbalances in supply and demand.

S&OP is mostly short-term and operationally focused (e.g., zero to three months).

S&OP seeks to expand its focus to the mid-term planning horizon, be-yond the current quarter with mixed results.

S&OP process cov-ers the three- to 12/18/24-month term, depending on the industry.

S&OP manages long-term trade-offs in the two- to five-year time horizon.

Technology Extensive, but inconsis-tent, use of spread-sheets and in-house systems to support S&OP and disparate transactional systems.

Transactional systems become the system of record for the S&OP process, with limited functional solutions to support supply and demand planning.

Building unified planning platforms to support balancing supply and demand across the end-to-end supply chain and an emphasis on the accuracy and avail-ability of supply chain master data.

Reliance on the supply chain planning platform to improve internal and external trade-offs, with functional capabilities translating volume plans into revenue and profit projections.

Deployment of technol-ogy enables scenario modeling to support trade-offs and demand shaping across time horizons and across network.


figure 12: 5-Stage S&op Maturity Model

S&oP Technology


“By 2016, Gartner predicts a consumer goods manufacturer will be able to leverage comprehensive individual profiles for their top one million consumers.”

1360217

529,364

Technology is making it easier for consumer goods companies to have more direct relationships with their end consumers. The advent of digital marketing, complete with social and mobile platforms, is providing consumer goods firms with even more options to build that relationship. While there are many ways to do this, below are three key trends we are seeing at Gartner and confirmed by numerous interactions with our clients globally.

1. Crowdsourcing: We predict that by 2017, more than half of consumer goods manufacturers will employ crowdsourcing to achieve fully 75% of their consumer innovation and R&D capabilities. We see evidence today in consumer goods com-panies growing use of crowdsourcing technologies for such applications as advertising, new product development, process improvement, packaging development and scientific problem solving. For example, platforms such as Quirky and Betterific can help consumer goods manufacturers tap into interested con-sumers — whether it is to generate new ideas or turn ideas into products. Consumer goods manufacturers spend more than $20 billion annually on innovation and R&D, yet the new product introduction success rate is still only 3%. While crowdsourcing may not change the success rate, the vast array of new tools and technologies will make it easier and less costly to engage crowds and establish on-demand, high-value connections.

2. building a 360-Degree Consumer Data hub: Today, consumer goods manufacturers hold consumer data in disparate data-

bases, managed by different departments and different outside agencies. This makes a comprehensive view of a single con-sumer difficult. While proprietary consumer insight has been a central force in consumer goods marketing, technology has the power to accelerate the quality and timeliness of a consumer goods company’s insights. We see technology vendors, like Oracle, Teradata and SAP, actively working with consumer goods clients to seize this opportunity. These insights, and their correct application, will likely be as important as a consumer goods manufacturer’s products. By 2016, Gartner predicts con-sumer goods manufacturers will be able to leverage compre-hensive individual profiles for their top one million consumers. This type of a database sets up consumer goods companies for true lifetime 1:1 marketing, so long as they carefully navigate the balance of privacy with transparency and delivery of real value in exchange for trustworthy, personal information.

3. Direct-to-Consumer E-Commerce: Consumer goods man-ufacturers have begun to change their expectations for e-commerce, viewing it as a viable means of responding to market shifts, generating revenue and developing a direct relationship with their consumers. As we reported last year, direct-to-consumer e-commerce was seen as the No. 1 chan-nel investment priority for consumer goods manufacturers in the U.S. and the U.K. In fact, Gartner predicts by 2018, up to 10% of consumer goods manufacturers’ revenue will come

Digital marketingThree Ways To BuIld more dIrecT consumer relaTIonshIpsby don Scheibenreif, gartner reSearch Vice preSident


Today, supply chain visibility is one of the top priorities for supply chain managers. But there are several defini-tions that describe visibility — from “multi-tier supply chain visibility” (MTSCV) mainly from the view point of supply, to “control tower” used in logistic execution, to “end-to-end supply chain visibility” (E2ESCV), a descrip-tion spanning the whole extended value chain. Hereby, E2ESCV aims for the following: “providing controlled access and transparency to accurate, timely and complete plans, events and data within and across organizations and services operating supply chains”.

In order to gain this E2ESCV, different views, use cases, data elements, time horizons and business part-ners need to be considered with two main activities necessary: 1) the capturing and analysis of data and 2) responding in a timely manner if necessary.

The main drivers for gaining visibility are a higher order fulfillment rate, better service levels and higher profitability together with reduced risk. Once having implemented visibility capabilities, companies have achieved the following benefits: less inventory, better on-time performance, reduced viability in lead times or optimized freight. Examples state 20% reduced inven-tory, significant reduction in returns or 5% less freight cost. Those are all facts that speak for themselves, and are valid across industries.

Of course there are always three pillars necessary to achieve this: People, process and technology. And, hereby, we do not speak about classical ERP applica-tions; it’s really a new application layer on top, which allows connectivity, interoperability and data evalua-tion and presentation to gain visibility, an “information hub” so to say. With this visibility gained, then value-add capabilities can be applied to supply chain plan-ning and execution domains, leveraging the insight. Such platforms allow the interaction between business partners and the reach of true E2ESCV. On the market, we currently see many software providers offering such

from direct-to-consumer e-commerce. We see an increasing number of consumer goods manufac-turers joining firms such as Procter & Gamble, Kraft Foods, Nestlé, L’Oreal, Clorox and Diageo in opening direct-to-consumer e-commerce sites or participating in e-commerce marketplaces such as Ocado in the U.K. and Taobao in China. These sites often include proprietary content to complement the convenience of ordering online. Vendors, like Hybris, Digital River, PFS Web and Ebay, are helping consumer goods companies build their expertise as online retailers.

Whether you agree or disagree with our pre-dictions, the message is clear: Consumer goods companies are investing more in direct relation-ships. One of our consumer goods clients put it aptly: “We have a right to these relationships.” As retailers exercise their market power by charging more for trade promotions, increasing private label shelf space and slowing growth of retail square footage, we believe consumer goods com-panies have to pursue more technology-driven direct relationships with consumers, including direct routes to market. We continue to recom-mend that consumer goods CIOs evaluate the technologies that will garner them increased share of sales in the short term, or will position them as more agile and stronger players as the market improves (see Figure 13).

Supply Chain VisibilityhoW does your company deFIne ThIs crITIcal prIorITy?by chriStian titze, gartner Supply chain reSearch director

Digital marketing


Consumer Goods Manufacturers

Retailers Consumers

figure 13: digital Marketing in consumer goods


Supply Chain Visibility

solutions, mainly as a service in the cloud, on the basis of subscriptions, and based on a multi-tenancy architecture.

Let’s recap. E2ESCV is a critical enabler for companies on their journey to becoming demand driven, reaching a higher degree of maturity in sup-ply chain (see Figure 14). It’s all about multi-enterprise – it’s about processes spanning not only within your company but also including external business partners of any kind. It’s the improvement from initially departmental/func-tional visibility to enterprise supply chain visibility and then going further to true multi-enterprise network visibility.

“e2escV is a critical enabler

for companies on their journey

to becoming demand driven,

reaching a higher degree of

maturity in supply chain.”

Visibility Enablement: Maturity Stages

figure 14: Supply chain Visibility enablement Source: Gartner, Inc.

“InTErnaL” FoCuS “EXTErnaL” FoCuS

Standardize & Integrate

Extend & Communicate

Scale & Collaborate

Partner & optimize

S T a G E 2

S T a G E 4

S T a G E 1

S T a G E 3

S T a G E 5

multi-enterprise network + SCP & SCE

Convergencemulti-enterprise

Supply ChainEnterprise Supply Chain

Functional

Departmental

consumergoods.com | october 2014 | cgt 2 9

until recently, it seemed many companies viewed digital marketing as separate

from or incremental to an existing foundation in traditional marketing channels

and tactics. Lately, though, the conversation seems to have shifted. companies

are referring less and less to traditional marketing and digital marketing, and

more and more to “marketing” as a holistic function that combines the best as-

pects of both disciplines to deliver a consistent, compelling and relevant brand

experience for consumers across channels.

marketers are now considering strategies and tactics in both realms as part

of a larger portfolio of investment options that they can adjust up or down based

on different variables, like media consumption by consumer segments, to create new

opportunities for reach and engagement. For example, recent findings highlighted

in the Kleiner Perkins caufield Byers Internet trends 2014 report showed that while

consumers today spend 5% of their time consuming print media and 20% of their time

consuming digital media via mobile devices, 19% of media spend is on print, while only

4% of spend is on mobile content. these were just two of several examples all pointing

to clear opportunities for marketers to drive better investments and targeting across all

channels – traditional and digital.

there are several key considerations for marketers to monitor when it comes to

consumer engagement. First, digital and social are no longer low cost alternatives to

traditional marketing investments, but instead need to be considered part of a compre-

hensive and integrated cross-channel marketing strategy.

next, consumers value the journey as much as, if not more than, they value the

destination. How companies engage consumers along the path to purchase is as criti-

cal a consideration for developing direct to consumer relationships as is the influence

that can be exerted at the consumer’s point of decision.

And, along that journey, experience trumps access. consumers are in control of

where and how they move along the path to purchase. compelling experiences, deliv-

ered consistently across channels and tailored to a consumer’s needs, are perceived as

far more valuable than simple access to information, offers, and commerce.

Finally, agility is increasingly becoming more important than scale. engaging con-

sumers at the right place, at the right time and in the right way requires companies to

transform marketing execution. teams must develop the capacity to test, iterate and

adapt on smaller scales, in faster cycles and to more targeted segments to optimize

marketing performance and spend effectiveness.

The Digital Marketing OpportunityClOsing The gap BeTween TraDiTiOnal anD DigiTal MeDia

a d v e r t o r i a l

“Consumers are in control of where and how they move along the path to purchase. Compelling experiences, delivered consistently across channels and tailored to a consumer’s needs, are perceived as far more valuable than simple access to information, offers, and commerce.”

Marco trezzi

global director, Brand management solutions, consumer Products Industry Business solutions

SaP

tecH trends rePort 2014 | cgt | 2 9


“most retailers lack a cost-efficient returns process to manage todays’ volume of returns, and so they must make process and technological improvements in their reverse logistics capabilities.”

The retail Perspective hoW producT reTurns WIll ImpacT consumer producTs companIes by toM enright, gartner Supply chain reSearch director

Across the retail sector, the volume and complexity of returns are increasing as retailers pursue growth through their online business. However, most retailers lack a cost-efficient returns process to manage today’s volume of returns, and so they must make process and technological improvements in their reverse logistics capabilities. By doing so, this could impact their consumer goods suppliers.

The main challenges facing retailers are:•A historical under-investment in how they manage returns •A poor record of re-selling returned product at full price•Excessive inventory resulting from a disconnect between their buying

and inventory management processesA new Gartner global research study into the ‘Multichannel Fulfillment

and Returns’ practices of 300 Multichannel Companies, across a wide variety of retail sectors will soon be published. Among many insights gained, these companies told us that they only resold at full price 48% of the products re-turned by consumers (see Figure 15), indicating some significant deficiencies within the supply chain operations of those companies. Furthermore, 70% believed that returns would grow in the next three years.

When asked how well their buying and inventory management processes were integrated, only 32% had suitable automated integration (see Figure 16), leaving the majority open to buying excessive stock by not considering returned volumes within their supply chain.

Retailers will have to address the issues that returns present to them today, and will continue to do so in the future, especially as they agree returns will increase. This will, in many cases, also have an effect of increased returns to their consumer product suppliers.

Retailers will also need to more closely integrate their buying and inven-tory management processes to reduce excessive stock. This change will result in less being bought from their suppliers.

Improved management of product returns by retailers will therefore have an upstream effect on their consumer goods companies.

Do not measure

Less than 25%

25% to 49%

50% to 69%

70% to 89%

More than 90%

PRODUCT


7%

17%

10%

14%

22%

30%

73017221410

Mean = 48%

Fully Integrated

Manual Integration

No Integration

PRODUCT


32%

13%

55%

325513

figure 15: percent of product resold at full price

figure 16: degree of buying and inventory integration


ThankS To our SPonSorS:

preSented by

reSearch partner

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Consumer goods companies control technology · PDF fileTech Trends repor T 2014 | cgt | TT3 edit note Welcome to the 2014 Tech Trends report, produced by CGT and our valued research