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A world of hyper-customization, in which every product or service is customized to address the requirements of billions of individual consumers. Cloud makes it possible for companies to process enormous volumes of data that pinpoint the requirements of individual customers.
A world of clairvoyance, in which companies can predict—with remarkable accuracy—the products consumers want, where (and how) they will buy, and how much they will spend. Again, cloud allows companies to perform the analytics that pinpoint sales opportunities like never before.
A world of engagement, in which “middle-men” like retailers and distributors no longer stand in the way of a direct manufacturer-consumer relationship. Cloud makes it possible for consumer goods companies to sell directly to their consumers. Investments in traditional distribution channels can be used to establish home-grown logistics capabilities.
A world of enchantment, in which consumer goods companies offer not only the goods and services customers want, but unexpected experiences that can make their lives easier, richer, better. Cloud underpins entirely new types of services, such as geo-spatial mapping, with which companies can delight their customers with customized offers, based on where they are in a given moment.
Several years ago, Accenture identified 4 trends we believed would shape cloud adoption in the industry. Specifically, we envisioned cloud helping CPG companies:
Serve their digital customers by supercharging customer-facing processes Win the “war in the store” by master analytics Drive growth in emerging markets Boost performance of their core processes
These trends still hold, but have not yet brought about the changes we expected.
At the time, Accenture also proposed a cloud maturity model for CPG companies.
Level 1 Maturity: companies use cloud as a cheaper source for IT solutions, particularly in terms of storage, e-mail and collaboration. Level 2 Maturity: companies migrate functional applications to the cloud… things like analytics, customer support, and mobile infrastructures. Level 3 Maturity: companies use the cloud to re-imagine their core business applications—from social CRM to finance.
It was our contention at the time that companies would, by now, have moved to the third stage of maturity. We assumed their cloud objectives would mature in lock-step—moving from a focus on cost containment to true strategic enablement.
That has not happened—despite the fact that CPG companies are now focused on investing in growth and agility. They fail to recognize that cloud can play an integral role in driving the growth and agility they claim to now need.
Industry trends are transforming CPG operations. These trends include: The rise of the connected, digitally enabled consumers. With more information and access channels at their disposal, consumers are less loyal than they used to be. In response, companies need to personalize the consumer experience and operate in a more flexible, responsive and engaging manner. Innovation has taken on new importance. Growing channel complexity. In today’s “always-connected” environment, multi-channel consumer interactions are required. These multi-channel interactions must be seamless. Mobility is a big driver of change. Information security. With unprecedented volumes of data at their disposal, CPG companies are recognizing the need to improve their data management and security. Increasing margin and cost pressures. Cost reduction is a driver of change (although less important than in recent years). Moving from a Capex to an Opex service model is an attractive option. Increasing competition. Competition now comes from all directions (particularly via more nimble online channels). Supply chain volatility. Speed-to-market is becoming a priority. This calls for highly efficient and resilient supply chains and partner networks. The need for resilient IT. Large CPG companies tend to have reactive IT infrastructures, which is no longer adequate. They require agile solutions that allow them to respond more effectively (and quickly) to changing markets and volumes. Risk mitigation is key. The rise of emerging markets. In the coming years, emerging markets will dominate. CPG companies need to scale quickly to address the needs of local consumers. But they must balance that growth with the requirements of their developed market consumers.
SaaS-based CRM and HR systems are particularly attractive. As an industry, CPG is one of the biggest spenders on such solutions. As CPG companies refresh their technologies, they now consider cloud as their first option (especially in HR and CRM). Reports from Forbes show that, in 2012, 40% of all CRM software sold worldwide was SaaS-based. Communications, media and IT services were the biggest spenders on CRM due to their call center requirements. Manufacturing (including Consumer Packaged Goods) was second, and banking & securities were third. (Source: Louis Columbus, "2013 CRM Market Share Update: 40% Of CRM Systems Sold Are SaaS-Based," Forbes, April 26, 2013. Retrieved on February 15, 2015 from http://www.forbes.com/sites/louiscolumbus/2015/02/08/glassdoors-25-best-jobs-in-america-for-2015-includes-data-scientists-and-software-engineers/
Cloud strategies are increasingly business-driven, indicating that executives in both front- and back-office areas are more confident in the cloud’s ability to drive growth and help optimize operations. They are particularly drawn to the speed with which cloud solutions can be implemented (e.g., 2 months versus 10x as long for on-premise solution), the flexibility cloud provides, and the cost advantage (Opex vs Capex).
Unplanned network shutdowns have impacted customer service and loyalty. Executives realize that having an enterprise running on a single on-premise system poses risk (They now want something more agile.
Volumes of data available to CG&S companies is growing, and moving to the cloud is becoming more necessary (cloud can accommodate data fluctuations and reduces the need to accurately predict data flows).
Accenture sees acceleration of cloud uptake occurring in two main areas: IaaS (larger clients are moving portions of their infrastructure to hybrid clouds; many are now considering what portions of their infrastructure they are comfortable sending to public clouds) SaaS and PaaS (dramatic change here; the expectation is now that providers will offer these solutions via the cloud; providers are responding by making changes to their software layers to accommodate multi-tenant solutions).
Imagine the possibilities that forward-thinking CG&S companies could pursue across the value chain:
New product/process innovation: A company could use the cloud: As an “innovation management” platform that helps to underpins a new (and faster and cheaper) product-testing environment To build a differentiating “test and learn” culture across an ecosystem of players—all focused on building a direct consumer relationship. Forecasting & planning: A company could use the cloud to: Host granular levels of store intelligence that pinpoint the nature of variances in sales and consumer preferences. Combine data from the enterprise, business partners and social media to create a fuller understanding of customer preferences and behaviors than ever thought possible. Manufacturing & supply chain: A company could use the cloud to: Automate field-manufacturing processes or build mobile solutions for distribution. Capture and manage social media and online feedback to not only capture trends, but to help customize products to the individual level. Build new logistics capabilities that would, in effect, eliminate middlemen (e.g., retailers). This gets to the heart of engaging more directly with consumers. Sales, marketing & advertising: A company could use cloud to: Build geo-spatial capabilities, with which it could deliver targeted offers based on an individual user’s location at any time. Achieve true “many-to-many” connectivity—thereby enabling seamless, omni-channel customer experiences. Consumers could order online and pick up at the store, or order in the store and have delivered home. All boundaries would fall. When consumer touch points, sales force apps and CRM all interact and share data in real-time, a completely different consumer experience would emerge.
Sources: Accenture interviews Gigwalk press release, “Retail Solutions partners with Gigwalk To Bring Real-Time Actionable Intelligence To In-Store Execution,” June 14, 2014. Retrieved on February 4, 2015 from http://gigwalk.com/press/retail-solutions-partners-with-gigwalk.php buzz Solutions (website), “Retail Execution for the Consumer Goods Industry.” Undated. Retrieved on February 15, 2015 from http://buzzsolutions.com/industries/consumer-products
Cloud enables transformation of innovative ideas into reality, overcoming scalability challenges. Examples of cloud used in new product & process innovation include:
As part of “The World’s Cup” campaign, Coca-Cola invited fans from around the world to share photos that would be used to create the Happiness Flag. Leveraging the Google Cloud platform, Coca-Cola had a scalable architecture capable of managing millions of images. The result? Coca-Cola was able to create the world’s largest mosaic flag out of thousands of crowd sourced images submitted by people in more than 200 countries. (Source: David ViVeiros, “CI&T uses Google Cloud Platform to power the Coca-Cola ‘Happiness Flag’ unveiled on the pitch at the opening match of the 2014 FIFA World Cup™,” Google Cloud Platform Blog, June 14, 2014. Retrieved on February 15, 2015 from http://googlecloudplatform.blogspot.in/2014/06/cit-uses-google-cloud-platform-to-power-the-coca-cola-happiness-flag-unveiled-on-the-pitch-at-the-opening-match-of-the-2014-fifa-world-cup.html )
In recognition of Father’s Day, Diageo assigned individual codes that created unique identities for its whiskey brands in Brazil. Consumers scanned the code on the bottle using a smartphone, which allowed them to personalize a film template to their dads. In delivering this personalized campaign, Diageo only paid for the cloud service and the ongoing management of the data collected. (Source: Emma Hall, “Diageo Personalizes Whiskeys With Videos From Gift-Givers,” Advertising Age, October 29, 2012. Retrieved on February 15, 2015 from http://adage.com/article/global-news/diageo-personalizes-whiskeys-videos-gift-givers/238015/ )
Cloud-based solutions can enable customer forecasting and demand analysis, and drive increased insights into emerging markets. Examples include:
To be more responsive to customer and supply chain changes, Bayer Healthcare deployed NeoGrid’s newly developed NeoTPM (Trade Promotion Management) and NeoS&OP (Sales & Operations Planning), along with other NeoGrid’s cloud-based solutions for VMI and Retail Intelligence. Now, within the single NeoTPM system, Bayer can not only manage its complete trade promotion process, but also make its TPM data available for S&OP. NeoS&OP, which utilizes actual demand signals and more granular data analysis, provides greater forecasting accuracy for short- and long-term planning horizons. Data from NeoTPM and NeoS&OP is made available to Bayer via NeoGrid’s integrated cloud-based platform to enable functions such as marketing, sales, finance and demand planning to work with the same information. "We no longer have to implement different solutions for different customer needs. NeoGrid allows us significant flexibility across the Bayer enterprise globally.” (Source: (No author listed) “Bayer HealthCare Enhances Demand Planning,” Consumer Goods Technology, May 20, 2014. Retrieved on February 15, 2015 from http://consumergoods.edgl.com/news/Bayer-HealthCare-Enhances-Demand-Planning92885 )
CG&S companies are just beginning to realize the value of cloud in manufacturing. Leading companies such as P&G have entered into multi-year agreements with cloud providers to develop and maintain private-cloud operating models that simplify a number of processes, from product manufacturing to shelf placement. (Source: (No author listed), “P&G signs HP cloud infrastructure deal,” Retail Technology, June 19, 2012. Retrieved on February 15, 2015 from http://www.retailtechnology.co.uk/news/3677/pg-signs-hp-cloud-infrastructure-deal/ )
The majority of cloud solutions in the manufacturing & supply chain segment are designed to improve supply chain . Supply chain management is, in fact, the second most cloud-enabled segment of the value chain among CPG companies..
Abercrombie & Fitch has expanded its cloud supply chain strategy by using GT Nexus. The solution also helps Abercrombie & Fitch transact more efficiently with suppliers around the world, freeing up resources to focus on strategic initiatives to support its growth. Since its launch, the platform has allowed the retailer to grow its number of stores overseas without adding new staff or resources to its supplier-facing team. (Source: (No author listed), “Abercrombie & Fitch Expands Cloud Supply Chain,” Consumer Goods Technology, September 12, 2013. Retrieved on February 15, 2015 from http://consumergoods.edgl.com/news/Abercrombie---Fitch-Expands-Cloud-Supply-Chain88296 )
L’Oréal wanted to achieve complete end-to-end supply chain visibility (from its factories to its end users) and also enable real-time collaboration with its partners. To meet these goals, L’Oreal expanded its relationship with E2open, a provider of cloud-based solutions for collaborative execution across global trading networks. With E2open technologies, L’Oréal integrated and automated its supply chain planning and execution strategies in North America, while also improving its responsiveness and service levels with supply-side segmentation and cost control. L’Oréal and its trading partners gained a consolidated (and shared) view of global operations, plus the ability to collaboratively make decisions and resolve disruptions. (Source: Bridget McCrea, “L’Oréal: Cultivating Operational Excellence Across the Supply Chain,” In Centers of Excellence: Driving Supply Chain Innovation, Michael A. Levans (ed), E2open, undated. Retrieved on February 15, 2015 from http://www.e2open.com/assets/pdf/papers-and-reports/E2open_Centers_of_Excellence_Driving_Supply_Chain_Innovation_Report.pdf )
Cloud use in the areas of sales, marketing & advertising is most mature. Accenture’s 2014 CMO Insights survey indicates that digital is a marketing priority for CG&S companies. 45% of CG&S CMOs surveyed say their digital budgets will account for more than 75 percent of their marketing budget in the next five years. Yet, 26% of CMOs think their company lacks the technology or tools to transform into a digital business. (Source: Baiju Shah, Glen Hartman and Brian Whipple, “CMOs: Time for digital transformation,” Accenture, 2014. Retrieved on February 15, 2015 from http://www.accenture.com/SiteCollectionDocuments/us-en/insight-cmo-digital-transformation-summary/Accenture-CMO-Insights-2014-pdf.pdf#zoom=50 )
Examples of how CPG companies are using cloud include: P&G partnered with Samsung and the Samsung Wallet app to enable searches for P&G BrandSaver coupons. With this solution, consumers can pick the offers that they want to add to their digital wallet and store them to be used at the point-of-sale inside stores. (Source: Lauren Johnson, “Procter & Gamble drives mobile wallet adoption via print ad,” Mobile Commerce Daily, January 2, 2014. Retrieved on February 15, 2015 from http://www.mobilecommercedaily.com/procter-gamble-drives-mobile-wallet-adoption-via-print-ad )
Chocolatier Lindt & Sprungli has used cloud to create a personalized connection with its consumers. Specifically, it introduced a new commerce site, built on IBM WebSphere Commerce platform and CrossView’s Aurora Plus Commerce on Cloud offering, as a premium storefront where consumers could experience the Lindt brand. Through the solution’s microsites, Lindt quickly built and executed highly personalized seasonal promotions and highly targeted offerings. For mobile device users, Lindt saw conversion rates increase 200 percent and revenues grow by 300 percent. (Source: Alliston Ackerman, “Lindt & Sprungli Masters Personalized E-Commerce,” Consumer Goods Technology, May 9, 2014. Retrieved on February 15, 2015 from http://consumergoods.edgl.com/news/Lindt---Sprungli-Masters-Personalized-E-Commerce92569 )
Accenture helped a major grocery chain establish a “personalization platform” that made its customer data more relevant and specific to a customer’s context and needs at any given time. The new solution recognizes customers no matter what channel they use—and adjusts its offers to meet their requirements at that time. This allows entirely new capabilities in 1-to-1 personalization and the launch of full-blown loyalty and digital marketing programs. The pilot, while only active in 12 stores has reached 152,000 active cards and 64000 registered users in only a few months. Accenture designed and deployed this solution in four months. Without the cloud, deployment of such a solution could conceivably have taken longer than 18 months.
CG&S companies are much more likely to move their non-core, back-office applications to the cloud. HR and information management are moving quickly to the cloud, as more and more providers offer such solutions in the cloud.
ERP systems are also being sourced from the cloud. Cloud-based ERPs have many advantages beyond cost and scalability. They, for example, eliminate the role of location. CG&S companies can run cloud-based systems from anywhere—and serve customers anywhere else.
Examples of CPG companies using cloud to drive back-office transformations include: Abercrombie & Fitch has leveraged GT Nexus to gain complete visibility into the movement of orders, payments and goods. Since implementing the new solution, the company automated its procure-to-pay process in the cloud and created a transparent workflow environment for purchase orders, invoices, amendments and settlements. (Source: (No author listed), “Abercrombie & Fitch Expands Cloud Supply Chain,” Consumer Goods Technology, September 12, 2013. Retrieved on February 15, 2015 from http://consumergoods.edgl.com/news/Abercrombie---Fitch-Expands-Cloud-Supply-Chain88296 )
For the purposes of a cloud discussion, it makes sense to focus on two sets of emerging markets. They differ in terms of the maturity of their consumer markets and, most notably, in the extent to which the Internet and digital technologies are available.
Set 1: Brazil, Russia, India and China (BRIC) have Internet infrastructures in place to support cloud solutions. China, in particular, has a strong digital consumer base.
Set 2: Mexico, Indonesia, Nigeria and Turkey (MINT) are the “new” emerging markets (despite the fact that they have been strong regional players already). All but Nigeria are members of the G-20. And all but Turkey are commodity producers, with strong trade partnerships with developed markets. Goldman Sachs and the World Bank both note that all four are in the top 40 countries based on 2012 GDP numbers. Both further estimate that, barring sweeping changes in the economic landscape, all four will be in the top 15 by 2050 (with further growth expected after that). This means large multinationals and leading local companies will invest to participate in this growth. Given that there are minimal infrastructures in place today, they will look to adopt cloud capabilities that offer the best cost of ownership. That means technology companies will develop capabilities to support this demand.
Sources: (No author listed), “GDP Ranking-2013.” World Bank. Retrieved on February 15, 2015 from http://data.worldbank.org/data-catalog/GDP-ranking-table (No author listed) “The World order in 2050,” Carnegie Endowment for International Peace, April 2010. Retrieved on February 15, 2015 from http://carnegieendowment.org/files/World_Order_in_2050.pdf (No author listed), “Goldman's world GDP projection for 2050,” SoberLook, November 9, 2012. Retrieved on February 15, 2015 fromhttp://soberlook.com/2012/11/goldmans-gdp-projection-for-2050.html
According to Gartner, the Indian e-commerce market will reach $6 billion in 2015, a 70% increase over 2014 revenue of $3.5 billion. Though digital commerce is at a nascent stage in India, it is one of the fastest-growing e-commerce markets in Asia/Pacific.
Unilever has begun selling online via eCommerce portals in Pakistan, recognizing that: “Globally there has been a clear shift from a brick and mortar store to a click store and consumers are now shopping anywhere and anytime for anything. They want variety and they are also looking for discounts . . . We have to move with the moving consumer; as an FMCG organisation we cannot live in the past.” -- Amir Paracha, VP – Customer Development, Unilever Pakistan, http://aurora.dawn.com/2014/09/23/as-an-fmcg-organisation-we-cannot-live-in-the-past/
Sources: Arvind Singhal, “E-commerce boom: Why it is increasingly important for physical retailers to upgrade themselves,” The Economic Times, November 2, 2014. Retrieved on February 15, 2015 from http://articles.economictimes.indiatimes.com/2014-11-02/news/55682514_1_urban-india-retail-spending-rural-india Gartner press release, “Gartner Says India eCommerce Market To Reach $6 Billion in 2015,” October 16, 2014. Retrieved on February 15, 2015 from http://www.gartner.com/newsroom/id/2876517 )
Examples of CG&S companies taking advantage of cloud to build their brands in emerging markets include:
In India, SAP Labs has developed “Ganges,” a solution designed to generate business intelligence across the value chain. Based on the SAP HANA Cloud Platform, Ganges’ in-memory cloud platform enables CG&S companies to perform real-time analytics, and develop and deploy real-time applications. Since its launch, SAP has connected 12 large Indian CG&S companies (including P&G, Hindustan Unilever, Nestle, Marico) to its Ganges network. (Source: Ivor Soans, “SAP aims to transform $37 bn Indian FMCG biz with Ganges,” FirstPost, December 11, 2013. Retrieved on February 15, 2015 from http://www.firstpost.com/business/sap-aims-to-transform-36-8-bn-indian-fmcg-biz-with-ganges-1282095.html)
In India, P&G is using the cloud to generate insights across its global brand portfolio and across the demand chain, from distributors to consumers. The new TradeEdge platform is expected to deliver insights that will assist brands in accurately sensing and fulfilling consumer demands in emerging markets. (Source: Dan Berthiaume, “Infosys, P&G co-develop brand sales platform,” Chain Store Age, December 9, 2013. Retrieved on February 15, 2015 from http://www.chainstoreage.com/article/infosys-pg-co-develop-brand-sales-platform# )
eBay uses the cloud for a robust, scalable, agile infrastructure that can support the IT demands of all its brands, including its payment gateways and eBay websites. With the OpenStack private cloud platform, eBay has the in-house multi-tenant, multi-region, self-service cloud solution that helps to hosts the company’s customer-facing business-critical applications and the platforms its developers use. Approximately 95% of eBay marketplace traffic is powered by its OpenStack cloud. The transition to the cloud brought down eBay’s app-provisioning time from 4 weeks to 30 minutes. It helped reduce lowered rack onboarding time from 45 days to just 3. And it has delivered operational efficiencies that have allowed eBay to save double-digit million dollars on hardware expenses. (Source: Archana Venkatraman, “Case study: How eBay uses its own OpenStack private cloud,” ComputerWeekly.com, June 18, 2014. Retrieved on February 15, 2015 from http://www.computerweekly.com/news/2240222899/Case-study-How-eBay-uses-its-own-OpenStack-private-cloud )
Divestiture management. When a company plans to divest certain brands, it often wants to stand up services (HR, finance, IT, etc.) for those brands to make those assets more attractive. BPaaS could help those companies by enabling the fast set-up of these business processes. Greenfield startup support (joint ventures). Two Accenture clients are in the process of spinning off parts of the business into new, stand-alone companies. Both of these are effectively “green-field” technology opportunities that seek to run on cloud based technologies. Application management/Cloud brokerage. At Accenture, we believe the need for cloud brokerage will rise as the adoption of cloud solutions rises. Big data compilation/data discovery. Pulling terabytes of data is hard for most to envision. It can be stored in an unstructured way, but pulling it out in a usable format is very difficult. CPG companies can follow the lead of Amazon and travel sites with cloud-enabled data discovery platforms that enable data to be staged very quickly. Crowdsourcing business activities. Mobility can transform how work is carried out. A cloud-enabled crowdsourcing model will compete with the ERP model, which precisely defines how things are done. Mobility fragments everything and may ultimately lead to more creative ways of working. Brand asset management. A multi-brand company spends huge amounts creating and managing assets (e.g., imagery) that are often not shared across brand lines. By leveraging cloud, the company could create, store and manage its thousands of brand assets/images. It could therefore consistently leverage what it has—and not need to recreate imagery from scratch.
We have seen the following factors hamper cloud adoption:
Reluctance on the part of companies to give up control of data (or have it housed offsite) A lack of understanding regarding which services or functions can benefit most from a move to the cloud. Additionally, while many CG&S companies appreciate the need to build their digital capabilities, they fail to understand that cloud computing is the platform upon which digital exists. Resistance to the complexity involved in integrating on-premise systems with cloud (especially when high data volumes are present) A desire to secure more benefits from the years (and millions) invested in on-premise solutions The perception of risk associated with transitioning huge data loads to the cloud A shortage of cloud talent (particularly data scientists) The inability of existing networks (or processes) to accommodate cloud integration A lack of willingness of brand “owners” to consolidate data and systems In emerging markets, a lack of standardized marketing data sets from which to glean insights. Security (while still an issue, it’s no longer the barrier it once was)
Most of the cloud solutions adopted thus far in the CG&S industry are focused on improving operational efficiencies; only modest solutions have been envisioned to help drive growth and agility. While certainly worthwhile, the solutions implemented to date are delivering incremental improvements. It is time for CG&S companies to think more boldly about how cloud can deliver the step-change transformations that would will create competitive advantage.
The decision to move to the cloud in exciting new ways is not an “all or nothing” decision. The beauty of the cloud is that it allows CPG companies to experiment with new ideas and new ways of working—with reduced risk and upfront investment.
In our opinion, CPG companies have a lot to gain by taking a bold step now.
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