Consumer goods companies are continually trying to spot the next trend and turn it into a marketable product. They innovate packaging and labeling to help a brand stand out and differentiate it from the competition. At the same time, they are working hard to meet country-specific variants and become more environmentally sustainable.
Take green product innovation. The FMCG industry – covering food and beverage, personal care, household goods and clothing – has a high impact on our carbon footprint. But millennials prefer to buy from companies that create positive change, according to research by Deloitte. By carefully analyzing customer needs and creating a highly-engaged social media community, Boxed Water has spotted this trend and established itself in the water market in a very short space of time as a sustainable alternative to plastic bottles. It processes water locally and bottles it in cartons made from paper from sustainably-managed forests.
Big data analytics
The big challenge for FMCGs is how to innovate faster, while aligning production lines and supply chains to cope with demand. Consumer goods firms need to be agile enough to jump on trends and change strategies where they are not working or could perform better. Big data analytics can identify market nuances to open up new opportunities, for example, while supporting innovation roadmaps. It also provides knowledge on what competitors are doing for data-driven competitor and pricing strategies.
In today’s world of hyperconnected consumers, mass customization is a reality. Our attitudes to giving away our personal data has changed and so have our expectations. According to a study by Deloitte, one in five consumers is happy for businesses to use their personal information to get more personalized products or services. Among 16-24 year olds, this rises to one in four.
This data can enable brands to provide unique value propositions. Absolut Vodka, for example, used data about customer preferences to create its Absolut Unique campaign, in which four million bottles were labeled with a slightly different design by tweaking its production line. It maintained Absolut’s brand value to the customer and gave them something they could appreciate that was individualized.
FMCGs need the data insights and agility to jump on trends and enable mass customization through predictive supply chains.
Graze is another data-driven example. The company sells healthy snacks in stores and online. It exploits an artificial intelligence (AI) algorithm dubbed DARWIN (Decision Algorithm Rating What Ingredient’s Next) to customize snack boxes based on customers’ preferences. This, Graze claims, makes it possible to get nearly five million combinations in snack boxes. To decide which ingredients go into the box, the algorithm studies variables including past purchases, likes, dislikes and nutritional value.
Customizing the supply chain
Customization is also impacting the supply chain. FMCGs face major challenges here, including increasing transport and labor costs, shifts in customer demand and pressure from competitors.
Digitization is leading to a "supply chain 4.0" in consumer goods, according to McKinsey. Data analytics can provide advanced forecasting internally in areas such as demand, while externally this intelligence can track market trends and the weather, for example. Amazon even has a patent on predictive shipping, which predicts what buyers want before they buy it. Products will effectively sit in limbo in the logistics system until required, cutting down on fulfillment time.
McKinsey maintains that “ad-hoc, real-time planning” can enable supply-chain companies to respond rapidly to changing demand, reducing planning cycles. This will enable them to minimize risk, reduce inventory costs and increase margins.
The "uberization of transport" will also have a major impact, according to McKinsey. App-based technologies, for example, could make the most of empty space in trucks. The European Commission estimates that a quarter of the trucks running on roads in Europe are empty.
Big data is also making asset tracking easier. Orange Business Datavenue and Live Objects are being used by one multinational cosmetics company to transform data into actionable business intelligence. As well as tracking assets throughout production to delivery, the solution has helped to improve productivity and control costs by tracing goods through every stage of its journey from the production line to the store.
The innovation game
FMCGs are acutely aware that innovation is the road to growth. Many are turning to collaboration to speed up the process. Supermarket chain Tesco, for example, is reaching out to a new generation of start-ups to embed innovation in its business strategies via a partnership with Founders Forum, a community of global entrepreneurs set up by the co-founder of Lastminute.com, Brent Hoberman. At the same time, the Unilever Foundry is providing a platform for start-ups and innovators to explore business opportunities with the consumer goods giant and Unilever’s 400+ brands.
Unilever is actively using big data analytics to accelerate customer understanding. The company has industrialized its data analytics, infrastructure and resources into one platform, avoiding data silos and added complexity. Unilever has already started experimenting with cognitive computing and machine learning as a way of personalizing and continually adjusting what is served up to the customer.
The future is blockchain
Blockchain’s distributed ledger infrastructure, which can be used to securely record transactions, is one of the many technologies that will help FMCG’s in areas such as food safety and product traceability. FMCGs will need to invest in such technologies to improve transparency and customer insight.
With a proliferation of customization and personalization, together with consumers wanting to know more about where products come from and how they are made, FMCGs need big data more than ever to win and retain the trust of a new generation of digital customers.
How can FMCG production lines respond to the challenge of customer demand for mass customization and greater environmental sustainability? Find out how to inject agility into your operations with our The journey to smart manufacturing ebook.