CPG Must Collaborate with Consumers: IBM
By Dan Alaimo
Packaged goods companies have a new boss: consumers, says an IBM executive. The problem is, many haven’t recognized the value of collaborating with them yet.
In the past, manufacturers saw the balance of supply chain power shift to retailers. But now, because shoppers have greater access to more and better technology, the control is in the hands of consumers. They have more information to inform their buying decisions and preferences, and they use it.
The good news, according to Cynthia Coulbourne, global retail portfolio leader of IBM, is that they are willing to collaborate and share that information. She spoke at the recent the U-Connect conference in San Antonio. Her presentation was based, in part, on research IBM conducted with 32,000 consumers in five different countries and 400 supply chains around the world in 29 different industries.
The research said consumers are willing to provide input and feedback on product development and service offerings. “So they are willing to share. It’s a matter of us asking, and then being able to interpret that information in appropriate organizations. That’s great news. It’s a great, huge opportunity. I think there is going to be a lot of development for our supply networks rethinking how we operate and how we work together to meet the needs and demands of our boss. Because if we don’t, our competition will,” she said.
“If we recognize that the customer is the boss, that means we have to be centered and focused on how we see the demands of the customers so I can keep competitive advantage,” Coulbourne said.
The key is doing it in a fast, efficient manner, starting with flexible data capture, she added. “So I need to look at new ways to capture data.”
IBM’s research into corporate integration and collaboration priorities found “Collaboration with customers” last on a list, following “Sales and operations planning,” “Integrated demand and supply planning applications,” and “Collaboration with suppliers.” Leading companies, as determined by AMR Research, did a slightly better job of recognizing the importance of consumers, Coulbourne noted (AMR was acquired by Gartner Research, Stamford, Conn., last year).
“Leaders integrate and collaborate more, and do a much better job of sales and operations planning,” she said.
The companies studied by IBM also undervalued rising customer demands as a supply chain challenge, she said, but understanding consumers’ needs efficiently and effectively can help companies understand the unpredictability of demand.
“There’s this hunger for new products,” she said. “The product life cycle is reduced, so how do I reduce my lead times to market to enable me to reduce my inventories to support that demand. Customers continue to have aggressive demands for differentiated products and services.
The key to understanding this increasing consumer demand, and their growing control in the marketplace, is to recognize their use of technology and information. “Customers are changing the way they are shopping.” Referring to both CPG companies and retailers, she added: “If we are not getting in touch with how the changing buying behaviors of our customers, we are missing out on a huge opportunity.
“They have lots of access to information, anywhere and in multiple different forms and formats. They are interconnected. They talk to each other. And they are willing to tell you what they want, and how they want it, if you are willing to listen,” Coulbourne noted.
Customers are shopping less frequently, and they are shopping for sales. When asked what is most important to them, they say, “product and price, or price and product,” she said.
“So nothing has changed in some ways, and everything has changed in others, especially when we start looking at consumers’ use of, and comfort with, technology.”
These consumers will seek out peers online for ratings and information. “They are more trusting in this unknown person on the Internet than they are in the CPG company or the retailers that they’ve known for years,” she said.
Asked how to become more customer centric, Coulbourne said that while retailers primarily use point-of-sale data as a signal for understanding demand, that recreates the past. “Based on the last two years, you definitely don’t want to do that,” so there’s a need to recreate the POS history. That is, go back and look at causes of sales trends, such as, “did I have products in all locations,” she said.
“I don’t want to perpetuate that poor sales history because it just means I’m going to flow few products into the store, and that is going to irritate my customers. So we are using predictive analysis to recreate the forecast. It’s getting into the information so you can start taking prescriptive action,” she noted.
Start with the analytics and work backwards, she advocated. “What information do I need? What insight do I need? If you are customer-focused, it is going to be a matter of what that customer is going to buy tomorrow, not what they bought yesterday.”
Summarizing her presentation, Coulbourne said: “Supply chain leaders need to start taking advantage of this economy, and rethinking how they are operating. That’s in regard to internal collaboration, external collaboration with their eco-system, and thinking about it from a strategic, not just an operational perspective. They need to incorporate customer insight as much as possible, while building the flexibility and the agility to support the changing business models that are needed to support that changing customer demand.”
Market Watch
GMDC Partners with Recall InfoLink
To Communicate Recall Notifications
By Rose Anthony
A new service is underway for rapid and accurate product recall and withdrawal notification communication for suppliers, retailers and wholesalers.
The service, provided by Recall InfoLink for members of the Global Market Development Center (GMDC), includes:
- Unlimited reach across the supply chain
- Real time information sharing
- Multiple communication modes
“Recall InfoLink connects wholesalers, retailers and supplier members together instantaneously to speed up the information flow, eliminate confusion, save money and, most importantly, protect the customer. The right messages are delivered to the right people so recalled products get quickly removed from sale and supply,” said Dave McConnell, GMDC President and CEO.
Using Recall InfoLink assists wholesalers, retailers and suppliers in the following:
- Reduce the cost of each recall by reducing the labor required to process recalls
- Provide outstanding service and support to customers
- Protect product supply by expediting the process of getting recalled items out the system
- Simplify fulfilling regulatory compliance requirements
- Document the actions taken and inventory amounts impacted to facilitate the credit and resupply processes.
“Recall InfoLink’s step-by-step Process Wizards simplifies the many steps it takes to process a recall. By sharing targeted information with stakeholders and providing outstanding customer service, Recall InfoLink eases the stress of recalls and helps protect what is most valuable,” explained Roger Hancock, Retail InfoLInk Founder & CEO. “The Recall InfoLink system helps each segment of the product supply chain make better, faster decisions to protect their brand, their customers and their business partners.”
Recall InfoLink will also guide wholesalers, retailers and suppliers through Mock Recalls, which aim to make sure that people, processes and systems are ready to respond effectively to a recall when it occurs.
Recall InfoLink is designed to ensure that all customers and stores are notified about the recall, and can respond with their actions even if they have not signed up or used the system before. The system is a straightforward, user-friendly system and is web-based to ensure that information about potentially harmful recalls is shared immediately.
Recall InfoLink’s real-time score card, progress e-mails and reports give users a continual flow of information about how the recall is progressing, how much product is being recovered, and who still needs to get the message and take action.
Recall InfoLink also offers alternative communication processes, including automated phone calls to give alerts about recalls. In addition, a fax system is available for users not currently linked to the internet. Recall InfoLink uses e-mail, phone, text and fax communications to make sure everyone gets the message in the form that is best for them.
Wholesalers, retailers and suppliers can sign up to view a personalized demonstration of the Recall InfoLink web-based system by signing up at: http://recallinfolink.com/wizard_training.php. GMDC Members receive a 33% discount on the start-up fee.
GMDC is a global trade association dedicated to serving general merchandise and health-beauty-wellness retailers, wholesalers and suppliers.
GMA Urges Food Safety
The Grocery Manufacturers Association (GMA) has urged the Senate to schedule a vote on the FDA Food Safety Modernization Act. The act aims to enhance public health and safety by: requiring all food companies to develop a food safety plan, adopt a risk-based approach to inspection, and improve the safety of imported food and food ingredients.
“The food and beverage industry is committed to partnering with Congress, the Obama Administration and the FDA to strengthen and modernize our nation’s food safety system,” said GMA President and CEO Pamela G. Bailey. “The FDA Food Safety Modernization Act will provide the U.S. Food and Drug Administration with the resources and authorities the agency needs to help strengthen our nation’s food safety system by making prevention the focus of our food safety strategies.”
AUGUST 2010
Kraft Foods Pushes Global Data Synchronization
By Dan Alaimo
Implementing global data standards is a tough challenge that can pay big dividends, according to Kraft Foods.
From 1995 to the present, the food giant saw the use of Electronic Data Interchange (EDI) grow from 15% of customers to 98%; now it hopes to accomplish the same thing with global data synchronization, said Philippe Lambotte, senior vice president, global customer service and logistics of the Northfield, Ill.-based firm.
“As of today, we only have 28 customers in the U.S. that are on board with global data synchronization. That’s not enough. We believe that as we raise the bar, and create an incentive to use it, that will drive more adoption, which we believe the industry needs to do,” he said.
The way to do that is by incentivizing retailers and suppliers, by reaching out to upper management, and by preaching the gospel of standards.
“It’s a bit like a religion: You have to believe in it. You have to walk the talk, and that’s why we try to measure standards usage, and try to make sure we increase that usage over the years with many of our customers,” Lambotte said, speaking on a panel at the U-Connect conference recently in San Antonio.
Both the information technology department and the larger business need to participate, according to Lambotte. “The overall system is as good as the weakest link. IT needs to be aligned with the business, but sometimes we need to create capabilities ahead of the curve.”
Kraft is investing about $10 million to create a global master data match, he pointed out. “We are putting customer master data and product master data across the whole world, not because it is required today, but because we believe it will be a must-do in the future, and it will enable transparency. So we need IT to design the solution ahead of the curve with the proper standards.”
As an example of global data synchronization, he noted that today Kraft is able to exchange worldwide about 135 different characteristic fields describing products.
“I believe very passionately that on top of that capability, which is more process oriented, you also need the willingness from a commercial point of view to drive implementation. Clearly, the implementation of standards is something that the industry has not been very good at,” he said.
Getting retailers on board is not easy. “When we started to talk about global data synchronization just 18 months ago, a customer told us, ‘I though GDS was dead.’ We had to go back and explain why it makes sense.” That can be as simple as citing an example like, if a customer doesn’t have the correct dimensions for a product, the trucks sent to the distribution center will be the wrong size for the load.
To get more acceptance, “we try to measure the utilization and incentivize our customers to use the standards. At the end of the day, the business process becomes enabled only if there is mutual interest,” he said.
For most in the industry, efficiency means getting the best price. “So we have incentivized our customers by having a bracket pricing system that will get you the best price from Kraft if you are using EDI.”
Efficiency is one of the biggest reasons Kraft is pushing ahead with standards. “In our business, standards are an enabler,” he said, and the company realized benefits in the past from getting in front of standards implementation. “We saw the value of being focused and doing the work during hard times.”
There’s a benefit to sharing efficiencies with customers, according to Lambotte. “We have created an overall alternate currency to drive efficiencies in the supply chain. At Kraft, we are trying to raise the bar to act almost as a consultant for our customer – to help them find those efficiencies in their own P&Ls.”
For example, “if you start to talk about new item introduction, speed-to-market, and elimination of waste, if you can value that waste, then suddenly people start listening. As an industry, we need to move there through better collaboration, to be open and honest about when we have that challenge,” he added.
Lambotte said the industry needs to start using standards to drive growth, not only to drive efficiencies. For example, when Kraft decides on a price change because of a change in commodity costs, retailers can take up to six months to reflect that price change on the shelf.
“If our industry could be much more active so that you could introduce products and reflect price changes on the shelf a lot faster, that would drive a lot more growth,” he said.
Meanwhile, top management at Kraft appreciates the value of standards, which are here
to stay.
“Use them to enable your business process, or I guarantee your business will be left behind,” he said. “We talked about the inefficiency in our industry, and the bar is rising. The consumers are demanding more transparency, they demand it now, they demand visibility on all products. What used to be nice to have before is going to be New Normal. Clearly, without standards, we will not be able to do that; we would have to reinvent the wheel and we would be slow. Whether it is efficiency or visibility or flexibility or growth, we need standards for our business practice,” Lambotte concluded.
