Tech advancements in the CPG industry: Why-Where-How?

While CPG is one of the key industries in India, much of it is unorganized. The highly fragmented Indian market is spread between modern retail stores and varied traditional local convenience (Kirana) or mom-&-pop stores, many of which are in faraway locations. Traditional trade continues to hold prominence, yet, its contribution to sales has reduced. Further, modern retail has moved up.

WHY?

Four major industry trends:

• Rise of digital consumer - Increased usage of mobile phones and smartphones has escalated the demand for organized retail. Tier 2 and 3 cities witnessed rapid growth in modern trade over the last year. Many CPG companies work in close partnerships with online retailers. Or they plan to sell directly to consumers through e-commerce on company websites.

• High speed to Market – CPG Industry caters to the daily needs of the consumer. Hence, rapid fulfilment and faster delivery is a must. As large brands use customer data to forecast trends and expand their product range, the presence of multiple options for a single item reduces brand loyalty. Therefore, constant availability and market presence are extremely essential for top-of-mind awareness.

• A Price-sensitive consumer- CPG has always been a value-for-money industry. As consumers remain unsure of the lasting effects of the pandemic, companies need to leverage digital technologies to re-think their front end (consumer interfaces) and backend (supply chain and distribution networks), to minimize inefficiencies, add value to the end consumer for building trust and a loyal customer base.

• Brand consciousness - Increasing awareness on cleanliness and hygiene shifts consumerism towards authentic, clean, known brands, rather than unbranded products, for the safety, health, and well-being of the family.

Indian CPG sector has been slow in assessing the importance of digitization, and Covid raised the alarm. Although brands have a significant market reach, their key challenge is the visibility of data and tracking inefficiencies in the entire value chain.

WHERE?

Three technological advancements can create a difference:

• Getting the data right - We need easy-to-learn and implement tech-platforms to make the end retailer tech-savvy and efficient. Wholesale distributors traditionally fulfil rural needs, which gives them an undue advantage where they can switch brands and loyalty for meagre benefits, influencing the stock movement of one brand over the other. Further, digital solutions and intelligent platforms place brand performance squarely in the hands of the brands and not distributors. Given India’s diverse demographic landscape and region-wise consumer preferences, CPG companies need to adopt a smart distribution system to streamline operations and produce efficiencies of scale to equip each retailer independently.

• Data-Driven Decision-making - Daily sales and inventory are difficult to capture as we go deeper into a region. Currently, there is more manual, than data-driven, decision-making which is time-consuming and highly inaccurate resulting in understocking or overstocking. Analyzing raw data to reshape useful information helps in performance optimization and reducing waste.

• Digitization of Supply Chain - All CPG products have an expiry date; therefore, the companies need to deliver it fresh and clean. Brands rely on an army of distributors, stockists, sub-stockists, and end retailers. They also form multiple linear supply chains and valuable nodes of transaction. Well-connected digitized supply chains help streamline the process to ensure information is easily and effectively passed between nodes to improve order accuracy, faster deliveries, better predictability, and accountability in the system.

Digitization gives companies daily access to valuable customer data to use for rapid reorganization, implementation, and optimization of on-ground service. This is where Increff Iris, an easy plug-&-play solution brings in end-to-end automation, synchronization, and visibility.

HOW?

Two levels of advancements can get you started.

• Synchronization between nodes through automation - Proper communication and seamless interaction between separate nodes and distributors are essential for:

- End-to-end tracking of individual SKU

- Minimizing stockout situation by re-stocking on-time

- Optimizing store space by ensuring no extra or expired stock is left untouched

- Daily recording of incoming and outgoing stock to find fulfilment opportunities.

• Bring efficiency through intelligent decision making - Based on past consumer behaviour, brands can avoid understock and overstock issues by:

- Using intelligent algorithms to accurately predict true demand in a matter of seconds.

- Considering as recent as yesterday’s sales data to forecast buying trends.

Artificial Intelligence may be the future of retail but to realize that dream, we need to start automating now. Companies need to embrace this digital shift and create a new virtuous cycle that fits well with today’s consumer and trade. While technology can take care of digitization and e-commerce, we need government assistance to solve logistical issues. These include poorly maintained roads and lack of a well-connected transportation system, that also thwart efforts to increase efficiency in distribution. Harmonious sync in technology and infrastructure will help CPG companies get their evergreen brands to the right consumer and let small brands scale faster, fuelling the next era of industry growth.