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CPG-RETAIL COLLABORATION IN EMERGING MARKETS

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Collaboration – a systematic and conscious effort between two parties in creating a positive synergy by working towards a pre-defined goal. In today’s business world, the term ‘Collaboration’ is gaining even more attention. This is because, none of the three bottom lines – Social, Economic and Environmental, can be achieved by any company working in isolation. In this paper, we will highlight how CPG (Company Packaged Goods) companies and Retailers in emerging markets should work together to create a profitable, sustainable and socially acceptable business environment and in turn, try to reach Nash equilibrium for all the stakeholders.

Need for Collaboration

Fast changing consumer needs and preferences coupled with the explosion of product and channel options challenge CPG and Retailers to retain consumer franchise. Most of these challenges can be addressed by collaborating CPG and Retailers.

The Collaboration Journey:

In emerging markets like India, where organized retail constitutes to less than 15  per cent of the overall market, the journey of collaboration has been slow and has gained momentum only in last decade. In developed markets like the USA, Hong Kong, and the UK, collaboration has reached higher levels of maturity.  The chart below highlights the summary of activities that CPG companies and retailers can jointly conduct and create a win-win situation for all the stakeholders.

Suggestive Tools and Techniques for Collaboration:

  • POS Data Sharing: POS sales data sharing can result in better demand estimation, generation of shopper insights, better understanding of promo effectiveness, SKU rationalization and assortment optimization. Product and shopper behavior understanding of CPG companies and local consumer understanding of retailers can be juxtaposed to arrive at optimized assortment at every retail outlet. Single forecast at retail outlet level based on POS sales data can drive the entire supply chain instead of independent forecasts of CPG and Retail companies.

 

  • Vendor Managed Inventory: Vendor managed inventory will provide greater flexibility to the CPG company to replenish stock. Retailers provide CPG companies with a location to keep the inventory and the CPG company manages display and replenishment of stock on a regular basis.

 

  • Supplier Portal: Supplier portals of retail companies publish information of store level assortments and stock data. Supplier portals facilitate seamless information from retailers to CPG companies. Such information enables better planning on both the sides.

 

  • Demand Driven Supply Network: DDSN enables store level demand to drive the entire supply network so that supply chain can react to the true demand and ensure higher availability levels coupled with lesser supply chain costs.

 

  • CPFR: CPFR facilitates joint planning of promotions, new product launches, and collaborative demand estimation to ensure higher shelf availability.

Industry good practices:

Let us look at activities different industry leaders initiate for better collaboration and creating a profitable business ecosystem:ITC infotech has over a period developed deep expertise in the field of Advanced Analytics. We work closely with customers to deliver superior business performance, with a strategic perspective on business process improvement and IT enablement.

A visual depiction of how ITC Infotech uses data and convert it into intelligence for both CPG companyand Retailers.higher levels of maturity.  The chart below highlights the summary of activities that CPG companies and retailers can jointly conduct and create a win-win situation for all the stakeholders.

Suggestive Tools and Techniques for Collaboration:

POS Data Sharing: POS sales data sharing can result in better demand estimation, generation of shopper insights, better understanding of promo effectiveness, SKU rationalization and assortment optimization. Product and shopper behavior understanding ITC infotech has over a period developed deep expertise in the field of Advanced Analytics. We work closely with customers to deliver superior business performance, with a strategic perspective on business process improvement and IT enablement.

ITC Infotech’s Retailer-CPG collaboration Maturity Framework


Conclusion:

CPG companies and retailers face multitude of challenges to retain consumer franchise. Highly informed customers and rapidly evolving competition challenge these players to work closely to retain competitiveness. Collaboration between CPG and retail companies has reached a high maturity level in western economies like the USA, Europe and in some eastern economies like Hong Kong. In emerging markets, collaboration has just begun and is mainly at the operational level. Learnings from developed markets can be quickly adopted in developing markets to take the collaboration to higher maturity levels to derive better benefits. Collaborative working of retail and CPG companies can result in higher shelf availability, relevant assortment, lower supply chain cost, and lower product obsolescence.

Co-Authored by: Saravana Sastha K, Global Practice Leader; Venkata Krishna Velugubanti, Global Practice Leader and Abhinav Verma, Senior Associate Consultant, Business Consulting Group, ITC Infotech

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