Application of Decision Sciences to Solve Business Problems in the Consumer Packaged Goods (CPG)...

download Application of Decision Sciences to Solve Business Problems in the Consumer Packaged Goods (CPG) Industry

of 24

  • date post

  • Category


  • view

  • download


Embed Size (px)


Application of Decision Sciences to Solve Business Problems in the Consumer Packaged Goods (CPG) Industry

Transcript of Application of Decision Sciences to Solve Business Problems in the Consumer Packaged Goods (CPG)...

  • 1. Application of Decision Sciences to Solve Business Problems CPG Industry

2. Analytics for CPG 3. New Product Launches & Innovation Need Gap Analysis It is an approach to identify the unmet needs of consumers, in which respondents are asked to envisage the ideal brand or product, and then to rate various existing brands or products on key attributes. If there are no existing brands measuring up to the ideal, there exists a need gap which could be a potential for a new product. It provides answers to critical business questions like: What is the consumers perception of the brand/product? What are the consumer needs yet to be catered to and are there competitors providing alternatives? Identify new consumer segments and market potential for a new product. What is the brand image in the consumers mind? If needed, how is it to be re-branded and re-positioned? Needs Satisfaction HighLow HighLow Hygiene needs Unmet needs Satisfied needs Underdevelopedneeds Has enjoyable flavour Cleans thoroughly Provides fresh breath Whitens teeth Has anti-cavity action Has anti- bacterial action Soothes gum irritation, inflammationand bleedingRelieves teeth sensitivity Controls tartar Strengthens enamel 4. Product & Concept Testing PI Believability Uniqueness Value Disclose technical formula DEL DEL MNB MB Sensory ingredients IND DEL IND DEL Natural ingredients IND DEL IND DEL Easy to apply IND HYG DEL = Delight IND = Indifferent TRNF = Turnoff MNB = Must not be MB = Must be HYG = Hygiene New Product Launches & Innovation Product & Concept Testing Estimate the market potential of an idea or a concept, before actually developing the product based on consumer response on multiple metrics like: uniqueness, believability, feasibility, price, desirability, advantages, disadvantages, etc. Only successful concepts pass to the next phase, thereby minimizing R&D and marketing costs. Apart from estimating the market potential, it also helps: Identify critical success factors for a new product/service Estimate price sensitivity and purchase likelihood Bundle product/service features Identify potential consumer segments and assess competition Understand the purchase process and decision making Optimize advertising messages and improve promotional offers Statistical techniques (like Conjoint analysis, Discrete choice modeling, KANO analysis) are applied on the consumer responses collected. 5. Supply Chain SKU rationalization exercise is usually supplemented with an impact study to answer questions like: What is the revenue impact associated and how can it be minimized? What is the inventory carrying impact and overall savings? Will it result in consumer dissatisfaction? What is the consumer reactivation rate on rationalized SKUs? Is the product seasonal? What is the time frame to rationalize the category? What are the substitute products that the consumer can be offered? CumulativeRevenue 85% Top Selling CumulativeRevenue SKU in order of decreasing Revenue Contribution 100% 98% 80% Top Mid Bottom Recommended for Rationalization 80% Mid Selling CumulativeRevenue SKU Rationalization The objective of SKU rationalization is to reduce the business complexities arising from a burgeoning product portfolio, from managing too many items, product life cycles, consumer preferences, etc., while ensuring consumer satisfaction. It is the process of re-looking at the product portfolio and optimizing it. It starts with the parameters that form the basisidentifying and retaining high margin SKUs, high volume SKUs, SKUs that have a higher shelf life and those which are in tune with consumer preferences. After analyzing the cost drivers for each SKU, the portfolio can be assorted and rejected products can be re- evaluated for further action (merge, sell, milk or kill). 6. Pricing: Competitive pricing (comparable to other vendors), stability (low variance), accuracy, advance notice of price changes. Quality: Compliance with purchase order, conformity to specifications, reliability (rate of product failures), durability, support, warranty. Delivery: Time, quantity, lead time, packaging, emergency delivery and technical support. Partner Strategic Fit Brand Equity Financial Health Ability to operationalize Final Score Status Vendor 1 9 8 10 7.4 8.75 Pass Vendor 3 10 9 8 7.4 9.00 Pass Vendor 3 10 7 6 7.4 7.50 Pass Vendor 4 10 10 8 10.0 9.50 Underleveraged Vendor 5 9 7 8 7.4 7.75 Pass Vendor 6 2 7 6 8.2 5.50 Risky Partner Filtration Methodology & Process Flow Supply Chain Vendor Management It enables organizations to control costs, strive towards service excellence and mitigate risks to gain increased value from their vendor by: Minimizing potential business disruption Avoiding deal and delivery failure Improving operational efficiencies, controlling costs and planning of workforce and labor It includes vendor identification, recruitment, monitoring, tracking and evaluating vendors on certain KPIs: 7. INSOURCE High Demand Flexibility? Low High OUTSOURCE Low Competitive advantage? Capability of supplier Process maturity of supplier Strategic risk with supplier IMPLEMENT OUTSOURCE High High Low Low Establish norms for product quality, process for transferring knowledge& monitor quality tracking measures Establish process monitoring measures, plans to continuously improveprocess and knowledgesharing across teams Actions Actions Low High Ensure flexibility and penalty clauses are established for product delivery, establish alternatesourceof activity and divulgeas littleproprietary information as possible. Actions Establish control need based on three secondary factors, develop appropriate contracting relationship type and negotiatecontract Supply Chain Sourcing Strategy & Production Planning Strategic sourcing continuously improves and re-evaluates the purchasing activities of a company. Sourcing optimization helps evaluate different procurement inputs by considering supply market, specific supply chain conditions, individual supplier conditions and offers alternatives to address the buyers sourcing goals. It helps in: Assessing the supply market, the companys spending and identifying suitable suppliers Optimizing production related sourcing decisions, concerning where to produce or source products, based on a total supply chain cost analysis Selecting a suitable manufacturing site, optimal capacity utilization of plants and product allocation among the different plants and distribution centers Strategic planning for manufacturing and inventory optimization Increasing manufacturing and distribution asset utilization 8. Project Area Identified Savings (to date) Transportation 16% Warehouse 12% Supply Chain 3% Total 15% Supply Chain Network Optimization Network optimization helps in designing the optimal supply chain network with the lowest total cost structure, given operational constraints. It uses statistical modeling to describe the transport network to be followed. It helps senior management in making the most efficient use of resources while identifying the most economical routes. It aids in: Reducing transportation overheads and ensuring that the right product reaches the right location on time Improving transportation mode selection, load consolidation and resource utilization Quantifying operational, financial costs of alternative networks and identifying scopes of improvement Ensuring reduced freight costs and increased operating efficiency Streamlining warehouse activities, thereby reducing time to dispatch and optimizing productivity levels 9. Lead time : It is the time lag between when the order is placed and the point at which the stocks are available; A lead time of 4 days implies that there should always be stock for 4 days supply to avoid stock-out scenario Safety stock is the buffer quantity to cover any unplanned excess requirement taking into account delivery delays Reorder point is the minimum level of stock at which procurement should be triggered and quantity of warehouse stock should never go below this point If the quantity of warehouse stock is less than re-order point, there is shortfall Stock TimeRelease date Safety Stock Reorder point Availability date Lot size Replenishment lead time Supply Chain Inventory Management Optimal inventory management is an indispensable function to ensure un-interrupted product supply to meet the changing demand. Stock out analysis helps in: Optimizing inventory and service levels by streamlining ordering processes Minimizing stock outstock out can lead to loss of sales Handling overstockoverstock leads to increased inventory costs and costs to liquidate excess inventory Maximizing warehouse space utilization Lead time is the time lag between when the order is placed, and the point at which stocks are available. The buffer quantity to cover any unplanned excess requirement, taking into account delivery delays, is referred to as safety stock. Providing for safety stock on top of lead time demand, will give the re-order point, which is the minimal level of stock at which procurement should be triggered. Warehouse stock should never go below the re-order point. Re-order point will assist in deciding what would be the best optimal order quantity and when to place an order. 10. States States States States Zones YTD MOM Salience Brand share YOY States Zones States Zone Increase in brand share Decrease in brand share No change in brand share 25.6,61.3 6.5,56.54.4,78.1 16.8,79.7 12.3,73.3 8.3,76.0 1.0,66.7 10.9,84.8 0.3,82.7 3.0,50.5 2.5,60.0 0.2,65.2 1.0,33.9 1.0,61.9 0.2,68.7 % Salience, %Brand Share Sales & Channel Planning Sales Tracker Constant monitoring and tracking provides the sales team with accurate information related to market dynamics, so that they can have an action plan before the next sales cycle starts. Also, it serves as the base for formulating sales strategies. It: Identifies which products