Jim Shannon of Accenture on Becoming Demand Driven
It is no secret that success in the consumer products (CP) industry hinges on having highly relevant products supported by targeted marketing and merchandising in the right stores at the right time. Understanding this is one thing; doing it is another. Adopting a demand-driven operating model is a major factor in realizing this vision.
Market Research Shows...
Accenture recently coordinated a research effort with select CP manufacturers to learn what they are doing to become more demand driven versus "push"-oriented. A key finding was that companies will need to refocus their organizations, from marketing to supply chain processes, around a demand-based model to more effectively capture buying preferences, reduce operating costs and increase margins. The research identified six measures companies should adopt.
First, becoming demand driven is not a "one size fits all" proposition; different consumers, retailers, channels and products have different opportunities and needs. A targeted supply chain strategy is needed, where multiple supply chains are established to support varying consumer needs and channels. These supply chains require in-depth customer and consumer insights, such as which products or channels require high on-shelf availability; how supply of volatile products can be improved; and which products can be eliminated because they're not relevant to specific retailers or consumers.
Another key insight needed to support a targeted supply chain is thoroughly understanding cost-to-serve or the total end-to-end costs associated with serving customers, from raw materials to trade funds to retailer checkout costs. Any demand-driven operating model must be optimized to balance cost to serve with the upside opportunity for specific customers and customer segments.
Increased market demand for specialized products also makes the transition to a demand-driven model important. Not only should manufacturers be more proactive in comprehensively managing product lifecycles from launch to promotions to retirement, but they should also more actively collaborate with customers and suppliers to determine the relevance of new product innovations before development.
Learning and reacting to demand signals requires a focused approach. Manufacturers must collaborate with retailers to actively manage issues in areas where demand-driven efforts are most likely to achieve the best results, like assortment, point of sale and on-shelf availability.
Effectively communicating demand information simultaneously within a manufacturer and outside suppliers is also critical. Establishing a demand-driven command center that digests and effectively communicates the data throughout the internal organization as well as to external partners is critical for understanding and delivering against consumer demand.
The final measure is to enable a consumer-centric, cross-process organization to reduce barriers between functions that can inhibit information exchange and conflicting metrics that can sub-optimize results. Assemble cross-functional management teams, including representatives from sales, marketing, CPFR, demand and supply chain execution, that typically meet at the retailer's site to share information and collaborate on plans.
Reaping the Rewards
These six measures will help CP companies move toward a more demand-driven organization that is connected from suppliers and distributors to retailers, and revolves around consumers. As part of the journey, companies will drive high performance through reduced costs and increased sales of products that better meet consumer demand.
Market Research Shows...
Accenture recently coordinated a research effort with select CP manufacturers to learn what they are doing to become more demand driven versus "push"-oriented. A key finding was that companies will need to refocus their organizations, from marketing to supply chain processes, around a demand-based model to more effectively capture buying preferences, reduce operating costs and increase margins. The research identified six measures companies should adopt.
First, becoming demand driven is not a "one size fits all" proposition; different consumers, retailers, channels and products have different opportunities and needs. A targeted supply chain strategy is needed, where multiple supply chains are established to support varying consumer needs and channels. These supply chains require in-depth customer and consumer insights, such as which products or channels require high on-shelf availability; how supply of volatile products can be improved; and which products can be eliminated because they're not relevant to specific retailers or consumers.
Another key insight needed to support a targeted supply chain is thoroughly understanding cost-to-serve or the total end-to-end costs associated with serving customers, from raw materials to trade funds to retailer checkout costs. Any demand-driven operating model must be optimized to balance cost to serve with the upside opportunity for specific customers and customer segments.
Increased market demand for specialized products also makes the transition to a demand-driven model important. Not only should manufacturers be more proactive in comprehensively managing product lifecycles from launch to promotions to retirement, but they should also more actively collaborate with customers and suppliers to determine the relevance of new product innovations before development.
Learning and reacting to demand signals requires a focused approach. Manufacturers must collaborate with retailers to actively manage issues in areas where demand-driven efforts are most likely to achieve the best results, like assortment, point of sale and on-shelf availability.
Effectively communicating demand information simultaneously within a manufacturer and outside suppliers is also critical. Establishing a demand-driven command center that digests and effectively communicates the data throughout the internal organization as well as to external partners is critical for understanding and delivering against consumer demand.
The final measure is to enable a consumer-centric, cross-process organization to reduce barriers between functions that can inhibit information exchange and conflicting metrics that can sub-optimize results. Assemble cross-functional management teams, including representatives from sales, marketing, CPFR, demand and supply chain execution, that typically meet at the retailer's site to share information and collaborate on plans.
Reaping the Rewards
These six measures will help CP companies move toward a more demand-driven organization that is connected from suppliers and distributors to retailers, and revolves around consumers. As part of the journey, companies will drive high performance through reduced costs and increased sales of products that better meet consumer demand.