The pandemic compelled retail and Consumer Packaged Goods (CPG) companies to galvanize operations and drive financial resilience. There’s now an increasing realization that an omnichannel approach that integrates both physical and digital provides buoyancy. Even if one channel is disrupted, other channels will come into play.
One study shows that omnichannel strategies, complemented with data and analytics, Artificial Intelligence (AI), intelligent automation and Internet of Things (IoT), drive 80 percent higher rate of incremental store visits. Such strategies help CFOs strengthen operations with granular insights. These insights help in better predicting cash flows and allocating budgets, and managing the partner ecosystem of suppliers, distributors, warehouses and logistics players more seamlessly.
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Globally, businesses are relying more and more on digital transformation to reach this level of maturity. The global survey on digital transformation, conducted by WNS and Corinium Intelligence, shows that 97 percent of businesses have started delivering on digital strategies. Some of the key levers for digital transformation that emerged from this study are intelligent enterprise-wide automation, AI, low code / no-code data integration and blockchain.
Re-inventing Business with Digital
McKinsey’s digital quotient survey ranks retail as the highest and the CPG sector as the third-lowest among 11 industries. In analytics, CPG ranks fifth and retail the lowest. Customer expectations have changed — they may stroll into a store to check out a product and order it online to avail discounts or order online and pick up products at the nearest location.
To bring such omnichannel experiences to consumers, a top-down management approach is required. It must be purposeful and strategic, encompassing resource allocations, supply chain re-organization, technology innovation and robust financial planning. All these activities require new digital investments that CFOs must orchestrate while making informed decisions around new operating models and keeping costs under control.
There are some key challenges that CFOs should overcome to reach the point of financial resilience:
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Scarce capital and meager inflow: Strike a balance to keep the cash registers ringing while making adequate budgets available for new initiatives
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Investments in uncharted territories: Forecast investments and make projections on return on capital
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Return on investment calculations: Many of the technology investments are linked to larger outcomes and it is difficult to link an outcome to one specific investment (such as the returns from one channel)
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Unpredictability of new operating models: Decision-making on-the-fly and re-allocating budgets to boost operations, including re-aligning supply chains and fulfillment partners
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Understanding new business dynamics: Establish new operational metrics to drive productivity and cost-efficiencies
Navigating Disruption with Agility
A few game-changing capabilities can help CFOs in the retail and CPG sectors ensure agility, high visibility and manage disruptions more seamlessly:
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Real-time analytics to understand customer needs and preferences, plan and budget finances, and track performance metrics. Analytics is the bulwark to kick-start new strategies and streamline operations. Key areas that can be impacted by analytics include just-in-time inventory, customer fulfillment and sourcing
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Integrated and connected business networks or seamless supply chains, including distribution centers, fulfillment partners and retail outlets. As physical stores turn to digital channels, retailers and CPG companies should optimize their supply chains to ensure that products are available on demand
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IoT solutions drive visibility across shelves, warehouses and inventory in transit. Inventory is the lifeline of retail and CPG industries,and evolving business models are putting a strain on companies’ ability to streamline supply chains. IoT solutions drive cost efficiencies and superior customer experience. They also help reduce incidents of pilferage during transit, which in turn curbs revenue leakage
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Warehouse management solutions for cost-efficient systems that track inventory, shorten order management cycles and optimize throughput
While these capabilities enable CFOs to have a firm grip on the business and provide their organizations better strategic direction, they also help in:
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Improving cash flow management — forecast budgeting, improve cash collections and quantify cash on hand
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Tracking the impact of decisions related to cash flow in real-time
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Eliminating unnecessary expenditure, streamlining unproductive processes and imposing metrics on spending
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Managing supply chains by quickly identifying disruptions and setting up alternate suppliers
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Improving customer service such as facilitating better fit for online purchases and reducing the return of goods with AI-enabled solutions
The transformative effects of digitization will continue to evolve way beyond the pandemic and effect changes in consumer behavior. To keep pace, it’s imperative for retail and CPG industries to aim for financial resilience. Technology investments will be crucial to achieving new priorities, and building more agile and customer-ready operations.