Organizations in the consumer packaged goods (CPG) industry are discovering that high product volume sales come at the expense of extreme data complexity.  Meanwhile, these companies struggle to maintain open lines of communication with their retail customers and distributors in order to manage the upstream flow of product.

1. September, 2009
BI for the CPG Industry - Supply Chain
Visibility Drives Performance Sector Insight
Many organizations in the consumer packaged goods (CPG) industry are Aberdeen’s Sector Insights
experiencing a tradeoff between the benefit of high product volume sales provide strategic perspective
coming at the expense of extreme data complexity. At the same time, these and analysis of primary
companies struggle to maintain open lines of communication with their research results by industry,
retail customers and distributors in order to better manage the upstream market segment, or geography
flow of product. The main challenge however, is that these issues are no
longer specific to the IT department. Line-of-business managers in
marketing, sales, manufacturing, and procurement - to name a few - are now
forced to drive tangible business value from this quagmire of data and
generate a healthy flow of information throughout the value chain. In the
face of these challenges, many CPG organizations are gravitating towards
business intelligence (BI) tools to help create those supply chain linkages and
deliver product more efficiently. Aberdeen’s April 2009 Benchmark Report,
Moving Past Spreadsheets: What You Need to Know about BI Deployment
Strategies, demonstrated that 40% of companies in the CPG industry are
driven towards BI technology in order to address their need to improve
speed of access to relevant business data. This Aberdeen Sector Insight
examines companies in the CPG industry to determine how these
organizations are driving BI into the hands of more business managers in Recommendations
order to better manage fluctuating product demand.
Key recommendations for CPG
companies seeking better
The Value of Timely Information supply chain visibility and
When deployed efficiently, the visibility that BI tools provide can translate overall business performance
to significant business performance improvements. Aberdeen's data shows improvement:
that CPG companies have been successful in leveraging BI to drive marked Expanded on page 6
enhancements in several areas of customer service (Figure 1).
√ Establish a method for
Figure 1: Driving Better Customer Service with BI defining strategic and tactical
KPI
√ Seek ways to deliver BI to
Average Y/Y Change
6.0%
6.0% 5.0% more lines-of-business within
4.0%
3.8% the organization
3.2%
2.5%
√ Create a formal process for
2.0%
0.6% data collection and
0.0% integration
Customer issue Customer satisfaction Customer retention
√ Explore all deployment
resolution speed rate
options for BI
CPG Industry Industry Average n = 285
Source: Aberdeen Group, May 2009
© 2009 Aberdeen Group. Telephone: 617 854 5200
www.aberdeen.com Fax: 617 723 7897

2. BI for the CPG Industry - Supply Chain Visibility Drives Performance
Page 2
“Until now, the cost of BI
With clean, relevant, and timely information at their fingertips, these
solutions has been prohibitive.
companies are able to address customer issues in a shorter time frame, However, as our business has
ultimately leading to a higher degree of customer satisfaction overall grown, our needs have
retention. The ability to access information faster and make quicker increased, resulting in a more
decisions based on that information is a key underpinning of improvement in favorable cost / benefit ratio.
several key areas of the business, including customer service. Because we run lean, timely
information is important, so the
Customer service is a crucial element of every business, but when speed of access to relevant
considering the today's economic uncertainty, coupled with the top-heavy business data is also
concentration of many retail customers, channels and distributors, CPG important.”
companies are in a precarious position with respect to their customers.
~ Finance Director
Retailers are more price sensitive than ever and with the fierce competition
US Food and Beverage
inherent in the CPG world, the ability to resolve customer issues quickly, or
Company
preempt them altogether can mean the difference between retaining or
losing millions of dollars of business. CPG companies recognize the need
for customer visibility and have proficiently leveraged BI tools to help to
understand, instill retention practices, and grow their customer base.
Faster Information, Better Decisions
From a business perspective, what sets CPG companies apart from other
industries and enables heightened customer service is their ability to find
information quicker and make more timely decisions. Aberdeen's March
2008 Benchmark Report, Data Management for Business Intelligence, revealed
that companies of all shapes and sizes are struggling to manage an average of
15 unique data sources. That type of data heterogeneity can wreak havoc
on the most sophisticated of IT departments and lead to incorrect or
irrelevant information delivered to the wrong people at the wrong time. BI
tools offer the ability to sift through mountains of data in order to find that
one tidbit of information that can aid in decision making. The data shows
that companies in the CPG industry have been successful in leveraging BI for
reduced time-to-information and time-to-decision (Figure 2).
Figure 2: CPG Industry Uses BI for Quicker Information Access
Percentage of Respondents
50%
50%
45%
39% 40%
40%
35%
30% 29%
25%
Saw a decrease in "time-to- Saw a decrease in "time-to-
information" decision"
CPG Industry All Other Industries n = 285
Source: Aberdeen Group, May 2009
© 2009 Aberdeen Group. Telephone: 617 854 5200
www.aberdeen.com Fax: 617 723 7897

3. BI for the CPG Industry - Supply Chain Visibility Drives Performance
Page 3
A Foundation of Organizational Maturity
There is a certain chain of competency that leads to improved business "We spent too much time
performance. In this case, superior customer service is supported by the collecting and collating our
ability to gather and act upon information in a shortened timeframe. This data, and not enough time
analyzing what it meant. Moving
improved time-to-information and decision is then underpinned by several
towards a collaborative BI
areas of organizational maturity. The ability to properly leverage a BI approach has centralized
solution goes well beyond just the features and functionality. Companies responsibility for data
need to have a wide portfolio of technical capabilities to help capture, management. The result has
assemble, and deliver the right information to the right people at the right been increased quality of our
time. Aberdeen's research shows that companies in the CPG industry are data, and more importantly it
more organizationally mature when it comes to several areas of process, has re-focused management
knowledge management, organization, and performance measurement attention to enable us to act on
(Figure 3). the intelligence gathered."
~ David Greene
Figure 3: Key Organizational Capabilities for BI Management
Senior Manager - Commercial
Analysis
Genzyme Corporation
Percentage of Respondents
55% 54%
50%
47% 46% 46%
45%
40% 39%
38%
35% 35%
35%
30%
Well defined skill Ability to monitor Enterprise-wide Automation of
sets for BI BI system BI deployment report
utilization procedure generation and
delivery
CPG Industry All Other Industries n = 277
Source: Aberdeen Group, May 2009
First, given the complex nature of their information environments, CPG
companies are more likely than firms in other industries to have developed
or acquired the appropriate technical horsepower to manage the collection,
assembly, and delivery of information to their key stakeholders. Having
these defined BI skill sets helps ensure that the data is accurate and more
relevant to the appropriate stakeholder. From a management standpoint,
CPG companies are also more likely to have the ability to monitor
utilization rates of the BI system. This promotes greater adoption of BI
through the ability to reduce or reallocate underutilized systems.
From a technology standpoint, CPG companies also excel in their ability to
leverage features and functionality in order to get information into the
hands of non-technical users faster. Between order tracking, inventory
management, supplier lead times, promotions management, and many other
information intensive applications, CPG companies consume an
© 2009 Aberdeen Group. Telephone: 617 854 5200
www.aberdeen.com Fax: 617 723 7897

4. BI for the CPG Industry - Supply Chain Visibility Drives Performance
Page 4
overwhelming number of reports on a regular basis. The ability to
automate the generation and delivery of these reports allows companies to "CARFAX is an information
free up IT resources for more technically complex issues, while at the same company. Our continuing
success is directly related to
time delivering and making valuable information pervasive to the many
our ability to fully leverage
business users throughout the enterprise. business intelligence. In the last
12 months, we have made great
Beyond the IT Department strides in using our BI
infrastructure to demonstrate
Perhaps the most notable trend emerging from Aberdeen's fact-based data the tangible value of CARFAX
is the push to bring BI and analytical visibility into the hearts and minds of to our subscribers and
non-technical line-of-business (LoB) managers. On a surface level, many partners. In a tough economy,
think of BI as a strategic tool for planning, budgeting, and forecasting, largely emotional consumption
residing in the financial department. Others may view BI as a tactical tool decisions get usurped by cold
for real-time visibility into business information. The simple fact is that BI rationality. In this environment,
tools have grown in business applicability and improved in ease-of-use, the CARFAX Vehicle History
cultivating an environment in which just about any business function from Report has a growing
HR to procurement can find value in BI. This notion is proved out time and importance to the shrinking
population of active vehicle
again in the research. Aberdeen's June 2009 Benchmark Report, Pervasive
shoppers. Our BI tools helped
BI: Six Steps to Enterprise-wide Business Intelligence, demonstrated that Best-in- us discover and communicate
Class companies were more likely to deliver BI to more roles within the the 10-times ROI of using
organization as well as more LoBs across the company (Figure 3). CARFAX to stock good cars,
build trust in the dealership,
Figure 3: Best-in-Class Deliver BI to More Lines-of-Business and improve inventory
turnover."
Operations 77% ~ Philip Moore
47%
Director of Insights
Sales 67%
33% CARFAX, Inc.
Finance / 58%
Accounting 50%
Customer Service 56%
24%
42% Best-in-Class
Marketing
32% Industry Average
20% 40% 60% 80%
Percentage of Respondents, n = 285
Source: Aberdeen Group, May 2009
The concept of pervasive BI is becoming a priority for more organizations
across many industries, but the tie-in with the CPG world becomes evident
when considering the importance and associated fragility of CPG - retail
relationships. While the market downturn has had a varied impact on the
CPG world - some have seen a predictable slowdown as disposable incomes
have shrunk, while others have seen an influx of business as consumers
migrate to lower priced items - the only real certainty is uncertainty. As
CPG companies look to mitigate that uncertainty to the best of their ability,
many strive to create information linkages to their retail counterparts in
© 2009 Aberdeen Group. Telephone: 617 854 5200
www.aberdeen.com Fax: 617 723 7897

5. BI for the CPG Industry - Supply Chain Visibility Drives Performance
Page 5
order to better manage fluctuating demand and nurture their retail
customer relationships. On the other side of the fence, Retail companies
are also following suit by leveraging BI and analytical tools for better
visibility into supplier activity. Aberdeen's November 2008 Benchmark
Report, Increasing Retail Productivity: Enterprise-Wide Business Intelligence,
showed that the top performing retail organizations were far more likely
than all others to exploit their analytical strategy to help create supplier and
back office information linkages (Figure 4).
Figure 4: Best-in-Class Retail Applications of BI
60%
Percentage of Respondents
56%
53%
50%
45%
40% 37%
32%
30% 26%
20%
Back Office Sourcing Procurement
Best-in-Class Retail Companies Average Retail Companies n = 153
Source: Aberdeen Group, November 2008
With the appropriate usage of tools like BI, the vaunted ground of open
communication and information exchange between CPG and retail
companies is no longer a pipe dream. For their part, CPG companies are
also working to leverage a pervasive BI strategy to bring analytical visibility
across the fence and into their retail partners. The February 2009
benchmark report, Collaborative Business Intelligence: Three Steps Toward
Superior Customer Responsiveness, showed that 38% of CPG companies were
already working toward a collaborative effort with their suppliers and
customers to deliver BI capabilities across their value chain.
Case in Point – Large US Soft Drink Company
The corporate goal at this large manufacturer and distributor of soft drink
products was to automate interactions with customers in order to improve
customer performance, and create business efficiencies and cost savings. In
the food service business, the company owns the end-customer
relationship, but the distributor channel delivers products and dispensers.
As part of its enterprise CRM system, the company has implemented an e-
commerce solution that allows the end-customer to order directly. Delivery
of product is then executed in one of three ways: direct, third-party, or
through the bottler. In its call centers, customer service reps now have a
holistic view of customers – they can see what order activity has taken
place, is still open, and what equipment is in-place at customer sites.
© 2009 Aberdeen Group. Telephone: 617 854 5200
www.aberdeen.com Fax: 617 723 7897

6. BI for the CPG Industry - Supply Chain Visibility Drives Performance
Page 6
The company's CRM system manager states, "This is important right now.
“The pervasiveness of BI at our
We are in the midst of a roll-out of a new food service fountain dispenser. organization has now extended
The device is pre-loaded with software that tracks each and every pour that outward to customer-site
is made, and data is sent back to us so that we can use our BI capabilities to devices, and customer-facing
assess the customer's volume dispensed by product. Collecting data about applications.”
what is served in real-time allows us to do some things that were previously
~ CRM Application Manager
very difficult or impossible." The data generated from the customer-installed
Large US Soft Drink Company
dispensing device enables the customer service team to become far more
predictive and will also reveal dispenser service scheduling intelligence.
"We can now tell the customer how much product they need, and help
them to manage inventory and ordering efficiency. They will end up with
less product aging on the shelf, and we'll save time and money on delivery
charges from our distribution channel. We can also be proactive about
machine replacement and repair by monitoring the devices in real-time. The
pervasiveness of BI at our organization has now extended outward to
customer site devices, and customer-facing applications. We plan to utilize
the data we collect and by the time this project is fully deployed, we'll be
seeing data from literally millions of devices all over the world."
The Challenge of Market Volatility
The outlook for the CPG industry however is not entirely rosy. As
mentioned previously, while some companies experience a counter-
cyclicality in their business wherein sales actually improve during an
economic downturn, the majority are negatively affected by the volatility in
the market. Fluctuating energy costs, exchange rates, and shipping costs –
to name a few – can wreak havoc on these companies. If the overall goal is
to generate sustainable profitability and revenue growth, the various
elements of information management discussed previously are crucial steps
on the road, but typically aren't the end game themselves. As a company
builds competency with their people, processes, and technology, these
capabilities are leveraged to generate improvement in business performance.
Aberdeen’s research shows companies in the CPG industry, while successful
in achieving several intermediate milestones, have not been successful in
achieving the ultimate goal of revenue and profit growth (Figure 4).
Figure 4: CPG Falls Short in Revenue and Profit Growth
Average Y/Y Change
24% 24%
25%
15%
4% 3%
5% 0%
-5% -2%
Organic Revenue Operating Profit
Best-in-Class Industry Average CPG Industry n = 285
© 2009 Aberdeen Group. Telephone: 617 854 5200
www.aberdeen.com Fax: 617 723 7897

7. BI for the CPG Industry - Supply Chain Visibility Drives Performance
Page 7
Source: Aberdeen Group, May 2009
Despite the economic situations, the data shows that Best-in-Class
companies were able to achieve double-digit improvements in organic (non
acquisition-related) revenue and operating profit, compared with slight
improvements for the industry average. The CPG industry on the other
hand has been unsuccessful in translating their improved time-to-
information into top and bottom line business improvements, showing flat
and declining revenue and profitability respectfully.
Key Recommendations
Competing in an industry that sorely needs the business visibility and
analytical capability that BI tools deliver, CPG companies are becoming Sector Definition
more mature and sophisticated in their information management strategy.
Use this space to define the
Despite flat or declining top and bottom line business performance, many
company size, headcount,
CPG companies have put the pieces in place to be successful with a BI industry, or geography sector
implementation. The following recommendations are designed to help CPG in comparison to the overall
companies take their BI strategy to the next level and drive tangible data set from which it stems.
performance improvements:
• Establish a method for defining strategic and tactical KPI
(Key Performance Indicators) to measure business performance.
Efficient inventory management, solid customer service, and skillfully
targeted marketing are all vital elements of a good tactical business
approach. However, without alignment of these factors to the
overall strategic business goals, companies can flounder and
underperform. Best-in-Class companies are more than twice as
likely as all others to have strong alignment between both strategic
and tactical performance metrics, promoting a tighter focus on the
long term vision supported by tactical efficiency.
• Seek methods to deliver BI and analytical capabilities to
more lines-of-business within the organization. As they
move toward a more pervasive deployment of BI within the
organization, Best-in-Class companies have a two pronged approach
to reach this level of widespread BI. First, the Best-in-Class have
been more successful in delivering BI to more business functions
that can benefit from the technology. Second, they are making BI
more usable and applicable to more roles within each business
function. This line-of-business approach is a key underpinning in
Best-in-Class companies' ability to arm non-technical employees
with analytical functionality and drive substantial improvements in
revenue and profitability.
• Create a formal process for data collection and integration.
Companies large and small constantly struggle with the "garbage in,
garbage out" rule of thumb. The more duplication, corruption, and
general dirtiness that exists in their data, the less reliable their
decisions will be when based on that information. Best-in-Class
companies are 85% more likely than all others to have a time-tested
© 2009 Aberdeen Group. Telephone: 617 854 5200
www.aberdeen.com Fax: 617 723 7897

8. BI for the CPG Industry - Supply Chain Visibility Drives Performance
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process for data collection and integration to ensure that their
information is clean and relevant. By delivering better information
to their key decision makers, Best-in-Class companies have infinitely
more confidence in the actions they take based on their data.
• Explore all deployment options for BI (SaaS, Web Server, On-
Premise) to determine the right technical fit for the organization.
Organizations have a wide variety of needs when it comes to BI and
a barrage of questions that support their decision to deploy. How
much data will the system need to access? What is the required
latency of information retrieval? How many users will be
supported? How quickly does this need to be up and running? What
information security issues are in play? These questions and many
others are vital toward understanding what type of BI solution is the
best fit. By leveraging the technical expertise in house, coupled with
a first-hand understanding of the end-user needs for BI, companies
should explore all the various options for BI and tailor their strategy
to best fit their particular needs.
For more information on this or other research topics, please visit
www.aberdeen.com.
Related Research
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Business Intelligence During a Recession; through Actionable Intelligence; July
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2009
Author: Michael Lock, Research Analyst, Business Intelligence
(michael.lock@aberdeen.com)
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9. BI for the CPG Industry - Supply Chain Visibility Drives Performance
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© 2009 Aberdeen Group. Telephone: 617 854 5200
www.aberdeen.com Fax: 617 723 7897