Why Consumer Packaged Goods Companies Love Big Data

March 27, 2012 by admin

If I could sum up “success” in the consumer packaged goods, or CPG, industry in one word, that word would be SPEED — the speed at which the best companies take advantage of the latest consumer trends and defend their market share against the competition.

Quickly changing consumer tastes are just one example. Coffee is good for you, then it’s not, then it is again. Consumers want zero trans-fat foods, no-fat cookies and no-sugar sweets, and then decide to forget it and go back to the “good stuff.” On top of that, companies operate in a fierce marketplace with the need to monitor and respond to competitive promotions and pricing changes, and constantly deliver new product innovations and product line extensions. Few industries exist in such a dynamic environment.

To succeed in any business you must have a good product. But in consumer packaged goods, it is absolutely vital you keep a close eye on consumers and the competition, as well as your own business, to stay on top of your results today and ensure you are positioned to win the battle for the consumer’s business tomorrow, next week and next month.

Many people have been talking about the “velocity” aspect of “Big Data” and how it might help businesses, but if you are wondering who is actually doing it, look to consumer packaged goods companies. They are early innovators who have jumped on the opportunity to use Big Data and analytics tools to accelerate the speed of their businesses.

The War in the Grocery Store
Big Data — and specifically the ability to analyze vast amounts of data instantly — is a key weapon in helping consumer goods companies win the battle for retail shelf space and ultimately customer sales. Accurate sales forecasts from distributors and retailers, as well as actual point-of-sale (POS) data, are critical in helping determine production volumes and distribution, and fine-tuning pricing and promotion strategy.

Consumers can be very price-sensitive and switching costs are virtually zero. If there is incentive for a consumer to switch to another brand — because your price is too high or your product is not in stock — the consumer may discover they prefer the other brand and continue to buy that brand in the future, resulting in lost sales for months, if not years, into the future. The better informed a CPG company is with immediate and up-to-date POS information from every retail outlet, the better positioned they are to crank up production to avoid stock-outs or run additional promotions or incentives in regions with retail chains where volumes are dropping. In addition, a company may find itself in that luxurious situation where it can increase prices and/or reallocate production to improve profit margins in areas where customers are placing strong demand on their product and sales are doing well.

One company that is already delivering unheard of “speed of thought” insight is Nongfu Spring, the largest bottled water company in China. Nongfu used to take two days to collect and produce reports on a very large volume of POS data from all of its retailers. These reports were then used by executives to make their key business decisions. Unfortunately two days is a lifetime in this very competitive market, and Nongfu was looking for a way to provide reports on their business at the speed of their business – essentially up-to-date analytics on every transaction as it is happening. By working with SAP and leveraging new innovations like SAP HANA, Nongfu was able to dramatically reduce the lag time in producing insight on the retail data they collected. Preparing and loading the data that used to take a day is now happening in real time. Reports and queries run 200 to 300 times faster. For example, one business process that took 24 hours to complete is now are available in 37 seconds.

Nongfu’s executives and sales force now have the immediate insight to make smarter decisions in response to the dynamics of the market. This has allowed them to do a much better job of serving their retailers with the right inventory, and their consumers can be assured of finding their favorite products on the shelf. To learn more about Nongfu, check out this video.

Vision, Powered by Innovation, Reaps the Biggest Rewards
So how did Nongfu make these significant shifts in speed? Technology such as in-memory computing and analytics software certainly plays an important role. But so does the vision of their executives in understanding how to apply these innovations to the business and to prioritize what business areas will reap the biggest rewards from the investment in these new solutions.

Furthermore, once you are in a position to provide the line-of-business organizations throughout the company with these breakthroughs – like instant access to accurate sales data – then business leaders must also be prepared to empower the end users to explore data, synthesize information and make decisions such as distribution or production scheduling to dramatically increase the speed and effectiveness of the business. In this way, Big Data can potentially change not only the technology landscape of a company but also its business model, and ultimately its results.

Byron Banks is vice president of Business Analytics Marketing at SAP.

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