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Identifying growth and margin opportunities
In recent years, the e-commerce industry has been responsible for 65% of growth in the consumer industry. The COVID-19 crisis has changed the nature of the e-commerce industry, forcing consumers to change the way they buy. This trend has created a number of new "microchannels", several of which are likely to survive regardless of the pandemic.
Despite the dynamic development of the e-commerce industry, traditional channels still have the largest share in sales on the consumer market. Consumer firms have invested heavily in technology, but service levels have still not improved. In this area, they face a number of persistent challenges: increasing personalization, greater complexity in the product portfolio, shortage or excess inventory, and lost revenue. All of these aspects contribute to a negative customer experience. Recent events have put resilience under the microscope as well. Over the past 20 years, value chains have become more global, prompting leading companies to develop business continuity plans. In the second quarter of 2020, we surveyed 60 senior supply chain executives across industries and regions. We then discovered that as many as 93% of respondents wanted to increase the resilience of their supply chains. The COVID-19 pandemic has highlighted the need for more transparent supply chains across industries such as retail, pharmaceuticals, and packaged consumer goods. The few players who had the skills, capabilities, and technology to accurately track SKUs throughout the supply chain not only survived the crisis, but also gained an advantage over less advanced competitors.
Companies try to keep costs down and protect margins on several fronts. First, they struggle with higher production and logistics costs due to the proliferation of SKU portfolios. In addition, there is a growing demand for sustainable, organic produce and fresh, locally sourced goods. There was also strong growth in smaller brands, which grew three to four times faster than the big brands. As a result, costs increased due to fewer purchases, production times increased due to longer shifts, and less predictable demand resulted in more waste and discounts. In addition, the increasingly dispersed product portfolio makes comprehensive planning even more important for organizations seeking to maximize growth and profitability across all planning horizons. Organizations cannot make optimal decisions without cutting-edge algorithms that can process massive amounts of live data and provide planners with insight to react quickly to any changes in demand. Finally, most consumer organizations have embarked on ambitious IT transformation plans that improved data consistency and availability, but did not significantly increase planning accuracy and flexibility. Many people struggle with generating insights that could add greater business value or reduce manual planning.
Many companies are investing in their instruments and planning capabilities. Some of them have made progress in one or more areas, but have only recently started to deal with planning with the holistic perspective necessary to significantly increase efficiency and solve a complex set of problems. An efficient scheduling feature can provide consumer firms with the ability to capture the value in both the top and bottom lines.
Royal Oakland Limited