Driving efficiency and sustainability in consumer goods
It’s time to make waste in the consumer goods industry a thing of the past.
The razor-thin profit margins that are common across retailers and consumer packaged goods (CPG) companies mean that every increase in efficiency has the possibility to be a major differentiator. But furthermore, cutting down waste is a priority for many companies in the retail sphere that have committed to fighting for environmental sustainability. There is still a long way to go in the effort to cut down the manufacturing energy, transportation, and food waste that result from the sale of consumer goods. Companies are aware of these problems, and are taking seriously their responsibilities to the environment.
Sixty-three percent of consumer goods CEOs, compared to the global average of 54 percent, believe that sustainability issues are “very important” to their future success. And groups like the Consumer Goods Forum are bringing together these globally-conscious retailers, manufacturers, service
ce providers, and other stakeholders around the world that have made commitments to best practices that will drive efficiency and sustainability across the industry. The accountability and commitments that come from groups such as the Consumer Goods Forum is key to the industry’s movement toward environmental sustainability. But additionally, the advent of new technologies puts increased efficiency and sustainability clearly in reach. Let’s look at some of the problems in the status quo of retail and CPG today, and what moves CPG companies and retailers can make – with the help of new technology – to optimize for efficiency and environmental sustainability.
Optimizing inventory management
Today, retailers and CPG companies are facing new dynamics in the market, and average product life cycles are shorter than ever. Companies are rapidly launching new products – and they are up against intense odds, as only 15% of new consumer packaged goods go on to succeed in the market. The cost of stocking excess products, particularly unsuccessful ones, cuts drastically into retailers’ budgets: the average cost of stocking excess inventory is 20-25% the value of their goods. This competitive environment poses a significant challenge for inventory management. Companies have to gather data on product performance with greater speed and granularity than ever before in order to quickly recognize overstocked or understocked products, and then adjust their inventory accordingly. The risk of running out of stock of high-performing items, or having shelves full of slow-moving products that eventually must be sold on clearance or disposed of, is costly.
A sub-optimal inventory mix doesn’t just drag down the profits of retailers and CPG companies: it also contributes to harmful food waste. Roughly one-third of the food produced in the world for human consumption every year — approximately 1.3 billion tons — gets lost or wasted. Ten percent of that food waste occurs at the retail stage. Wholesome food that could help feed families becomes the single largest contributor to landfills instead, and also comes with wasteful transportation and energy expenditures along the way. When overstocked food items sit on retailers’ shelves until they expire, it contributes to this waste. Everyone throughout the food supply chain, from producer to consumer, has a part to play in reducing waste. For retailers and CPG companies, this means having a more precise understanding of product demand and adjusting their inventory accordingly. When companies prioritize an optimized inventory, the result is less financial and environmental waste.
Contributing to a more efficient workforce
For CPG companies, retail execution is a critical activity that tends to be personnel-heavy and inefficient (EKN Outlook, 2016). From route-planning at the beginning of the day, to data collection at stores, to manual compliance checks, employees on retail execution teams spend much of their time on activities that should be automated. When CPG companies free up the time of their retail execution professionals, it ensures that they can focus on the most important part of their job: building and maintaining relationships with retailers.
The environmental benefit of increasing efficiency in the mobile workforce is significant as well. Having their days optimally planned could be the difference between five days of circuitous, fuel-wasting driving and four days of more efficient routes. Empowering employees with digital tools frees them from pen and paper while checking up on their stores, ultimately saving them time. Automated planogram checks save retail execution professionals time as well – and are closer to the possibility of having on-site, robotic planogram checks, rather than requiring a trip from an employee. Together, these increases in efficiency mean less time spent on the road, less fuel consumption, and fewer emissions. When implemented across a large CPG organization, all those miles saved add up.
Optimize for efficiency and sustainability with Microsoft
To help make these goals a reality, retailers and CPG companies need faster insights from the data they have and the data they collect to empower change in habits. At Microsoft, we have seen the ongoing digital transformation of the retail and CPG industries empowering companies to achieve their business and sustainability goals, thanks to effective use of all data available to brands. This allows them to remove the guesswork from everyday processes and make more effective decisions.
You can learn more about Microsoft’s ongoing sustainability efforts, and about some of Microsoft’s SaaS and cloud solutions for the retail and CPG industries such as Neal Analytics’ Inventory Optimization solution and AFS’ Retail Execution solutions at AppSource.com.
LinkedIn: Nina Lund
Twitter: @lund_nina
