Insight to Action
One of the most undeniable challenges facing consumer goods (CG) companies today is leveraging the large volume of data that they have access to. This month, CGT catches up with Paul Strzelec, senior director of intelligent supply chain services for VeriSign, to get some perspective on this topic. Paul draws from his vast experience in the consumer goods and supply chain space to discuss the challenges that companies have in accessing market and retail data; provide tips on how to best leverage this data throughout the organization; and explain how to best realize value from faster, better demand signals.
How does access to various types of data change the way consumer goods (CG) companies run their business?
Consumer goods companies accessing multiple types of data are typically focused on improving visibility into market trends and customer demands. Today, more retailers share product sales data, by day and store than they did only a few years ago. This can be attributed, to a large degree, to the increase in collaborative processes requiring timely demand signals. What we've found is that leading CG companies have enhanced key processes to take advantage of this increased timeliness of demand signals. Specifically, CG manufacturers are leveraging this new level of insight to improve new products launches, better manage promotions (some of which are even more targeted toward certain consumer demographics) and support store-level, supply chain initiatives in order to reduce the amount of working capital tied up in the physical supply chain.
Historically, point-of-sale data has only been used by sales and marketing. How are different functions within CG firms now able to leverage this data across the enterprise?
Traditionally, market-level data has been leveraged by market research teams within a CG company and, to a lesser degree, throughout the organization. Field sales have really been begging for more access to information that is useable in operational processes. So across the landscape of retailers, the traditional, relationship-oriented sales model is changing to become a more fact-based model. In this new model, field sales teams access key metrics for a critical mass of retailers, including store sales and inventory data. Customer-facing teams have grown to include analytical resources and supply chain personnel who are customer-focused, with all the proper interfaces to the rest of the company's operations.
As far as point-of-sale data is concerned...the use of it within sales and marketing has moved beyond traditional forensic analysis --- such as share of category calculations or promotional post-mortems. Today, the leading CG manufacturers have integrated more detailed views of the data with demand forecasting and promotions planning processes to proactively set expectations with customers and immediately turn to monitoring their supply flow to ensure the highest possible service level to the customer.
What challenges do CG executives face when managing downstream data?
If you segment the market into the more traditional landscape of market data and retail data, the challenge has primarily centered on coverage -- which retailers provide data, at what level and in which formats. So, an executive's first key challenge is how to get comprehensive coverage of operational demand signals across key retail partners. Once this challenge is addressed, the next challenge is learning how to apply the data to key processes, such as new product introductions and specialized customer-focused marketing programs.
That's really just a view of near-term challenges. Companies that are really thinking strategically about demand-driven business models have plans that include other sources of downstream data. For example, several CG manufacturers are working with EPC data and working on an architecture to handle massive amounts of data, such as retailers capturing the movement of product or promotional merchandise from the backroom to the sales floor.
And beyond that -- there are other types of data that some organizations consider critical to their demand forecasting process. For instance, companies may look to causal data such as weather, pollen indices or flu indices to shape demand plans. All these demand signals need to be organized before a company can effectively use the signals to gain more visibility and drive results.
Are specific segments of retail more open to data sharing than others?
Most people are familiar with mass merchandiser programs that support retail data exchange, such as Wal-Mart's Retail Link or Target's PartnersOnline. There are several things that those systems do very well. However, the key to improving collaboration beyond the customer-focused team, which is dedicated to one retailer, is to make it easy for manufacturers to integrate this data back into their core systems and processes. It's really about supplementing the customer team by leveraging the infrastructure that backs the complete organization, including the supplier network. If you don't synchronize the entire picture, one constraint can cause an extended out-of-stock for even the largest customer -- no matter how many people you have co-located.
Some retailers have virtualized co-location -- really using information to their advantage. Chain drug retailers have done a great job combining sophisticated merchandising and marketing programs with a data exchange model that has their suppliers fully engaged. CVS' merchandising concept is a great example, where they have established three key customer profiles, named Caroline, Vanessa and Sophie. Each profile helps the store satisfy the shopper's expectations and needs, and also aims to make an enduring connection that evolves with the customer at every stage of her life. Sharing relevant information with suppliers in a timely manner brings scale to the business model with everyone in the supply chain embracing Caroline, Vanessa and Sophie as the focal point of new product introductions, marketing initiatives and everyday performance.
Not every retailer is this sophisticated, yet. Many are focused on the basics of retailing without fully extending their business model into a clearly articulated consumer experience and have not involved suppliers across key processes as extensively. Of course, there are pockets of excellence in other channels, but I would say no other segment as a whole is as effective as Mass Merchandise and Chain Drug right now. Regardless of the channel, leading retailers have become more focused on targeting specific consumer experiences through sophisticated merchandising and marketing strategies, combined with a level of execution excellence that's only possible with suppliers fully engaged.
What do retailers expect in return for sharing valuable data?
It is all about deriving insights with retailers and delivering value to the retailer's customer. The manufacturer needs to spend time looking at the data, not just at an aggregate level, but at the level of detail that the retailer is providing. In addition, the data needs to be reviewed frequently so that insights and performance issues are managed on a routine basis, not just periodically (for example, once a year for category review). Like everyone else, a retailer wants differentiation in the eyes of the consumer. To make that happen, they expect suppliers will help them scale their demand-driven business models by paying attention to the detail -- how products are performing in various store environments with specifically targeted consumer segments, every day.