Speed to Customer:Being Right, Being Fast and
Being Efficient
9th October 2012
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• The Business Need for Speed to Customer
• Being “Right” - Insight-driven Fast Innovation
• Being “Fast” - Agile Supply Chain
• Being “Efficient” - Lean Supply Chain
• Summary
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Product Innovation is a Top Priority for FMCG Companies
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Responsive andFlexible Supply Chain
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Lean EfficientSupply Chain
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Concept & Planning
LogisticsPost-Sale Service
& Support
Consumer Insights / Concept Development•Lack of definition•Disconnected from consumer needs•Sharpen brand positioning •Raise brand awareness in emerging markets
Product Development•Low hit rates & reusability; slow time to market •Lacking in private label penetration and overall assortment ownership •New agendas to drive with supplier brands
Distribution & Transportation•Offshore slow cycle time•Lack of visibility and flexibility•Excess inventory•Excess mark-downs & obsolescence
Post-Sale Service and Feedback•Typically ignored or not timely •Often disconnected
Category Strategy& Line Planning
•Lack of Process Rigor•Slow to Move to Next Generation•Disconnected plans
Sourcing•Inflexible Sourcing Strategy•Lack of Purchasing Power•Disconnected from Retail Strategy•Lack of supplier integration
Manufacturing•Fragmented supplier base•Disconnected planning from merchandising to space to supply •Slow response time
In-Store Merchandising•Costly last mile of supply chain•Not built for speed; built for efficiency•Difficult / costly to change in store set-up
Sourcing & Manufacturing
ProductDevelopment
Merchandizing
Manufacturer / Retailer Levers• Bringing the right
products to the right customers
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• ↑ Market Share by being first to market with exclusive products
• ↑ Revenues through trend-right, innovative, customer-centric items and assortments
• ↑ Margin by offering the differential products that are always in stock
• ↑ OSA (On Shelf Availability) with supply chain speed and responsiveness
• ↓ Returns and Obsoletes by increasing promotion effectiveness and closeness to market
• ↓ Costs by streamlining processes and eliminating inefficiencies
• ↑ Loyalty by being Right and Fast, excellence in customer service and issue responsiveness
• Operating in the leanest, most efficient manner possible
• Delivering the right products to customers when they want it and faster than the competition
Being Right
Being Fast
Being Efficient
Speed to the
Customer
8Copyright © 2012 Accenture All rights reserved.
• The Business Need for Speed to Customer
• Being “Right” - Insight-driven Fast Innovation
• Being “Fast” - Agile Supply Chain
• Being “Efficient” - Lean Supply Chain
• Summary
9
Being Right
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• With increasing focus on greater ownership or influence of their product portfolios, retailers need to develop actionable segmentation and identify the features and functions across their assortments (both private and branded) that drive the right value proposition that each segment is willing to pay for.
• Product development must be built on the premise of fast innovation to ensure being first to market with what customer will want to buy.
• Retailers should leverage their network of partners to continuously consolidate their product ideas and ensure viability based on their development cycles.
Customer Insight Led
Fast Innovation Powered
Network Enabled
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Capturing VoC : Reckitt Benckiser
• Uses consumer insights to extend product usage into other parts of the home
• NPD strategy aims at consumer needs for convenient & time saving cleaning products
• Leverages local R&D centers to gather local ideas, demographic, social trends
• Launched innovative products like Dettol fast mop, Air Wick, etc ignored by competitors
Voice vs. Heart of customer : Del Monte
• Del Monte sent anthropologists to observe mothers at home, making meals in the kitchen.
• VoC - 'I really want to prepare healthy food for my family’
• HoC - Insights obtained from observation –Mothers face challenges like kids pulling on their legs, less time available to prepare meals than planned for.
• Conclusion – Del Monte develop healthy, convenient products, like easy-to-open packaged fruit and frozen fruit desserts to cater to the trade-offs & shortcuts adopted by Moms.
VoC for product extension: Heinz VoC for market extension: Danone
• Result – “The upside down ketchup bottle”
• A consumer survey found that 25% stick a "knife in the bottle to start the ketchup flow, and 15% actually store it upside down.” Heinz integrated this insight into product innovation.
• Launched its ‘affordability initiative’ to expand its market share to the low-income consumers in Asia, Latin America and the Africa/ Middle East region
• Used consumer insights to develop products with lower price points, enhanced nutritional value and larger SKU sizes, without on compromising high standards for quality and food safety.
• The combination of convenience and affordability has paid off, as now 33 percent of Danone’s sales are generated in developing countries.
Converting the right set of market and customer relevant ideas through a repeatable innovation process supported by the right operating model, people and tools
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Right Idea
Quality and richness of insights,
ideas and pipelinesRight
Innovation
Process
Processes to rapidly convert ideas into viable
products
• Identify the right growth opportunities• Spotting market trends and
understanding customer needs• Ensuring the product meets the
consumer needs• Customizing products as per local needs
• Identify the right growth opportunities• Spotting market trends and understanding customer
needs• Ensuring the product meets the consumer needs• Customizing products as per local needs
Right
Operating
Model
Optimize Global R&D operations
around a regional / local footprint
Right
People
and Tools
People, Tools & Infrastructure to foster
systematic execution
• Create distributed network of Innovation Centres and Innovation Shared Services
• Allocate skills base across geographies• Balance Global - Local strengths and
“power of small entrepreneurs• Structure process for global transmission
• Maximize returns from the investment on innovation/R&D
• Fostering a culture of innovation• Increasing pool of ideas• Improve receptivity and success rate of product
innovations
Effectiveness SpeedRight & Timely
Products
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Open Innovation programs allow you to accelerate the commercialization of new products/services by incorporating the capabilities of external resources
• P&G’s “Connect + Develop” enables them to share R&D with worldwide partners and bring great ideas to market.
• P&G has established 1000+ active agreements with innovation partners
• 50% of product initiatives at P&G involve significant collaborationwith outside innovators.
• Identification of strategic partners• Program governance model• Determine levels of access to network
for security• Identification of key innovation metrics• Legal considerations/IP control• Cloud based networking• Technology infrastructure and training• Effective framing of challenges• Participation incentives and
mechanics• Change management to help embed
open innovation in company culture
… to Open Innovation & Value Delivery System
From TraditionalInnovation R&D Model…
… to Open Innovation & Value Delivery System
Key Considerations
In the next generation of Collaboration, companies will engage in Product Innovation but also in faster product introduction, shortening process cycles and time-to-market
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Opera
tional F
ar
Sig
hte
d
Innovate Product Generate Demand Manage Supply Assure Execution
Joint Strategic Business Planning
Product Lifecycle Management Tools
Integrated Planning Tools
Analytical EnginesRetailer-CGS Data Repositories
Collaborative Platform
Org
aniza
tional A
gility
Joint Product Development
Widening the innovation funnel, and accelerating products through the funnel more quickly (succeed or fail quickly)
Greater volume of better targeted new products, faster in consumer’s hands
Collaborative Customer Insights / PromotionsDriving a “single view of the consumer” and leveraging the power of analytics via detailed customer segmentation to drive assortment and promotion decisions
Localized assortments, better promotional offers / bundles / targeted communications, and optimized trade funds
Cross-Enterprise Integrated PlanningReducing operating and working capital expense through a “virtually vertical” mindset with regard to base and promo forecasting of POS and time phased replenishment
In-stock with just the right inventory levels and reduced markdowns
In-Store Compliance / Demand SensingGrowing the business efficiently through last mile in-store execution driven through demand signal sensing and digital merchandising technology
Store and shelf accurately reflects joint retailer-supplier plans, with lowest labor costs
Poin t o fSale
ShelfDigita l camera /
Smar tphone KPI ext raction Analytics
CG&S & Retail
ADMS
14Copyright © 2012 Accenture All rights reserved.
• The Business Need for Speed to Customer
• Being “Right” - Insight-driven Fast Innovation
• Being “Fast” - Agile Supply Chain
• Being “Efficient” - Lean Supply Chain
• Summary
15
Being Fast
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• Demand-Driven planning integrated to “one version of the truth” Operational
Capabilities
• Moving from seasonal-based, sequential assortment, category
management and product development activities to iterative, dynamic processes to rapidly bring new branded and private label products to market
• Visibility and Flexibility to monitor and course-correct effectively and
efficiently in an ever changing world. Stock-less product flow (flow thru) and Supplier Integration.
Integrated Planning Perpetual Sessions Agile Supply Chain
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Key Tenets of Integrated Planning
• One Plan to which the company is executing….
• Tailored to distinctive supply/ demand characteristics…
• Responsive to evolving demand signals…
• Leveraging inventory management processes
that are flexible and….
• Work from a common planning model and platform…
• Driving accountability to results across the enterprise
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Assortment Planning
Forecasting & Replenishment
Rolling Forecast
Company Financial Planning
In Season & Exit Management
Space Planning
Operating Unit Planning
Category Performance Reviews
Strategic Intent
Store Operations
Merchandising
Stock Accuracy
Supplier Management
Distribution
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Enabling Speed Though an Optimized Network• Ensure optimal product availability
• Integrate recently acquired companies and/or locations
• Decide lease renewal plans for existing facilities
• Support pull- versus push- distribution
• Meet or improve customer service levels
• Accelerate the flow through the supply chain
• Manage dealer service and/or fixtures
• Support new markets, products and capabilities
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Supply Chain Network Business Considerations• Minimize facility running costs
• Reduce transport logistics costs
• Minimize inventory costs
• Improve distribution capacity utilization
• Forecast cost effective solutions considering future sales growth
Optimal Supply Chain
Locations
Cost/Benefit Analysis
• Optimal product flows:− Optimal flow per product group or
supplier
• Optimal logistic parameters:− Production Costs − Transport and warehouse costs− Inventory Costs
• Required logistic capacities:− How many DCs required− Location of these DCs − Size of these DCs• Required operations (X-Dock
etc.)− Optimal inventory locations:− Centralized vs. decentralized
• Detailed cost/benefit analysis: − Inventory carrying costs− Handling & transport costs− Lost sales
• Detailed business case:− Impacts on P&L, investment
appraisal
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Customer Insights/ Concept Management
Product Development
Category Strategy/ Line Plan
ManufacturingDistribution & Transportation
Post Sales Service & Feedback
In- Store Merchandizing
Sourcing
From Sequential …Linear process steps, typically executed once per season
… To Iterative & Dynamic Process linkages throughout the value chain to respond dynamically to changing
customer needs
Examples:
•Trending colors are added to the assortment next season
•Customer feedback leads to next season adjustments to an accessory or how a collection is displayed
•Slow moving products leave the store only in the arms of customers after being heavily marked down
Examples:
•Trending colors are added to the assortment in the current season •Customer feedback leads to in-season adjustments to an accessory or how a collection is displayed•Slow moving products are cost-effectively transferred to other stores / regions or channels / dot-com and sold at a higher margin
Customer
Post-Sales Service and Feedback
Category Strategy/Line Plan
Concept Development
Product Development
SourcingManufacturing
Distribution and
Transport
In-StoreMerchandising
Integrated Demand and Supply Chain Planning
Segmented SC Planning
Tailored demand planning & replenishment models by category (eg. For fashion short-lifecycles, vs. stable long lifecycles, vs. one-time products,…)
Segmented SC in Fulfillment
Tailored product flows (eg. Direct to store, stocked in supplier DC, in RDC, vs. flow through vs. cross dock,...)
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Strong analytics enable High Performers to ensure that the right decisions are being taken consistently/timely at the point of impact
Being “AGILE” requires both the capabilities and the culture to operate in a fundamentally different way
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21Copyright © 2012 Accenture All rights reserved.
• The Business Need for Speed to Customer
• Being “Right” - Insight-driven Fast Innovation
• Being “Fast” - Agile Supply Chain
• Being “Efficient” - Lean Supply Chain
• Summary
22
Being Efficient
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• Minimizing approval layers, accelerating decision-making, avoiding too many meetings, ensuring true decision making power is not aggregated at too few and too high of levels.
• Awareness and understanding of end-to-end implications of key decisions which may lead to inefficiencies across the value chain
• Avoiding poorly connected processes, information gaps, and operational silos which create waste and re-work and contribute to sub-optimal cost structures.
Results Oriented Culture
Operational Effectiveness
Lean Execution
PerformanceManagement
Performance Management is a critical success factor in creating an Efficient Enterprise. It is the “link” between improvement activities and business performance
Efficient Enterprise has to be Results Oriented and supported byrigorous Performance Management to align leadership and employees on “what really matters”
23
+
Constantly review and enhance the performance
+
Cascade value-focused drivers throughout the organization
Set stretch targets based on known opportunities
Known opportunities
Stretch target
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Business Performance
Operational Improvement
24
After many years of success in manufacturing industries, Lean Six Sigma is finally catching on within the retail and consumer goods industries
Lean Six Sigma (LSS) is a continuous improvement methodology that combines two of the most powerful improvement engines available to business today.
Examples of Lean at Leading Retailers
Excessive Inventory•A large retailer operated a group of stores in urban areas with high sales volume per square foot but little backroom space to hold inventory. The excess inventory squeezed into these space-constrained stores led to multiple
•handling of product, difficult inventory management, inefficient use of labor, frustrated associates and managers as well as negative impact on the customer experience.
•Without negatively impacting in-stock products or sales, the implemented Lean Six Sigma solutions reduced inventory by 8,800 units per store and weeks of inventory supply from 10.7 to 7.8
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Kaizen: New Store Cost Reduction•Over the course of a 1-week Kaizen event, a Lean Six Sigma team discovered more than 30unnecessary components of the original design. They created a new construction process and timeline resulting in more than $5 million in annual savings and increased margin from earlier store upgrade openings.
Accelerated improvement: Weekly insert process•A large US retailer determined the advertising portion of the weekly insert took 14 work days to create. The defect rate with its current process exceeded 90 percent resulting in extensive rework.
•The team implemented solutions that reduced the cycle time from the first touch by advertising was reduced to four days, and the defect rate decreased to less than 5 percent.
26Copyright © 2012 Accenture All rights reserved.
• The Business Need for Speed to Customer
• Being “Right” - Insight-driven Fast Innovation
• Being “Fast” - Agile Supply Chain
• Being “Efficient” - Lean Supply Chain
• Summary
• Customer-insight driven innovation and product development and Customer segment-based products
• Operating models to optimize Global vs. Regional needs
• Social Networking Strategy to capture Voice of the Consumer
• Tight Collaboration with Customers and Suppliers
• Faster innovation cycles and increased share of innovation in revenue growth
• Integrated / Collaborative Retailer - Manufacturer dynamic supply chain planning and execution processes
• Demand-sensing supply chain and segmented product flows
• PoS Sell-out data driven insight for planning and replenishment
• Customer--centric service models and responsive supply chain
• Actively manage the complexity out of the supply chain
• Shared Logistics and Dynamic Networks
• Optimal “downstream” cost to serve driven Routes to Market
• “Upstream“ TCO approach
• Lean Manufacturing and MES / EMI actively managed
• Continuous spend visibility and supplier rationalization
Operational Imperatives
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Being Right
Being Fast
Being Efficient
• Bringing the right products to the right customers
• Delivering the right products to customers when they want it and faster than the competition
• Operating in the leanest, most efficient manner possible
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