The last three years have been a whirlwind for retailers and CPG companies. Pandemic-driven buying trends led to an explosion of new challenges, from a surge in online returns to the rise of curbside pickup to supply chain delays. Now, the landscape is shifting again, and it’s a mix of good and bad news for retailers and CPGs.
New Macro Trends – and Challenges – on the Horizon
The good news is that the supply chain snarls that plagued both industries in the last three years have finally subsided, leaving an opening for executives to focus on improving supply chain resilience for the long term. However, discretionary spending is expected to drop as the federal student loan pause ends in the fall, leaving consumers with less buying power and putting pressure on revenues.
At the same time, the Federal Reserve continues to raise interest rates in an effort to cool inflation, making it more expensive for companies to borrow and expand. And while the Great Resignation is behind us, ongoing labor shortages in the retail and consumer industries are pushing employers to redesign job roles and improve employee communication.
To succeed in the face of this latest set of macroeconomic challenges, leaders in the retail and CPG industries now need to step back and evaluate what’s next for their business operations.
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Here’s where to start:
Creating Solutions for Permanent Changes in Customer Expectations
As stay-at-home orders drove both retailers and CPG companies to accelerate their adoption of omnichannel strategies, their supply chain processes got significantly more complex. Retailers implemented ad hoc backend solutions for responding to increased demand for in-store pickup and home delivery services, but many of those solutions were band-aids. CPG companies increasingly went the direct-to-consumer route to get closer to customers, but dealing with smaller orders and more returns complicated their logistics processes.
Now that the COVID-19 public health emergency has ended, retailers and CPG companies need to re-examine how their processes have evolved since 2020 and determine whether there are opportunities to optimize them. By analyzing how newer service offerings impact operations across the entire business, leaders can gain unique insights and find and capture tremendous value.
For example, with the growth of omnichannel orders, retail employees have needed to pick and pack items at the store level. This moment presents an opportunity for retailers to consider whether they need to shift their store layout or customer experience strategy to ensure employees are able to support the most value added activities, like spending time with customers in-store. With a more efficient process in place, employees could focus less on picking and packing items and more on customer service, boosting both employee and customer satisfaction.
For CPGs, it’s become clear that there are process and technology gaps involved in servicing D2C demand. To address those gaps, leaders must evaluate where and how they want to invest. By taking a step back and reviewing those process gaps, CPGs may find they want to partner with a third party to better support that demand, or they may determine it makes more sense to build those logistical capabilities in house.
Maximizing Efficiency to Minimize Waste
For retailers and CPG companies operating at scale, small process inefficiencies can quickly add up to millions of dollars in wasted spend. Those dollars matter more than ever with cost pressure ongoing and consumer belt-tightening on the way. In this new environment, leaders who can find ways to reduce waste and increase cash flow will be the heroes of their organizations.
One CPG company that has taken on the challenge of analyzing the efficiency of its sprawling processes is Reckitt, the maker of well-known multinational brands like Durex, Lysol and Clearasil. Reckitt is using process mining technology across the business to optimize more than 40 different processes across five business functions.
With more insight into its order management processes, the company was able to streamline and automate its decision making, giving employees a prioritized list of orders at risk and recommending where, when and how they should take action. This tech-assisted analysis has allowed Reckitt to avoid fines for late deliveries, which impact both customer satisfaction and the bottom line.
Improving People Processes to Drive Productivity
Another key area for retailers and CPG companies to reevaluate is people operations. Both industries are still struggling to fill open roles and are working to better manage the employees they already have on payroll.
Research from Celonis and analyst group Everest found that more than two-thirds (67%) of retailers and 60% of CPG companies are implementing people engagement survey initiatives. Nearly three-quarters (74%) of CPG companies and 64% of retailers are redefining job roles and requirements, and more than 60% of companies in both industries are implementing change management and employee training initiatives.
All of these initiatives are crucial for future-proofing the business but are only scratching the surface, as new technologies like artificial intelligence change the way frontline employees do their jobs. Experienced employees may be resistant to change, but when leaders have deeper process visibility backed up by data, they can better collaborate with employees to ease anxiety about new systems. With a clear view into how their operations are functioning, they can simulate how proposed policy changes will impact the employee experience and make adjustments as needed. When employees and executives are on the same page about how processes should work, they can improve productivity and employee satisfaction.
Final Thoughts
As we enter a new phase of economic volatility, it’s more important than ever for retailers and CPG companies to get a handle on what’s going on under the hood of their business. Better cash flow, cost management and employee productivity will continue to be top priorities for leaders in both industries through the end of the year, and technology can help unlock new value opportunities hidden in their operations.
Equipped with a real-time view of how their processes run, companies can make smarter, data-driven decisions that benefit the bottom line, the top line and the green line. This post-pandemic moment is a great opportunity to take stock of bloated or outdated systems, and retail and CPG leaders should take full advantage to prepare for whatever comes next.
Lindsey Peters is Retail and Consumer Goods Industry Lead at Celonis. She’s been a marketer in the technology space for about a decade.
