The current Covid-19 pandemic is the type of high profile, hard to predict, rare event that is difficult to quantify beyond the usual realms of expectations in history, finance, technology or science. unexpected outbreak of the pandemic has severely impacted all industries, and more so the companies in retail and consumer goods space, as purchases dwindle.
This event has fundamentally changed the way we buy, consume and interact with brands. The colossal change will necessitate consumer goods and retail companies to revisit the ways they connect with their users and identify the evolving patterns of demand. Considering that the world is anticipating a second and graver wave of the pandemic, companies will need to evolve too, in order to keep up with the rapidly changing consumer behaviour. Demand analysis and planning, as a result, will have to be agile.
Here are a few of my reflections on the anticipated trends in the retail and consumer goods sectors:
Adjusting the supply chain
The supply chain probably took the biggest hit after the Covid-19 outbreak. It will, however, recover to maximise turnover of the companies in the near term, as demand returns. But in the medium-to-long term, companies will need to move from a just-in-time supply chain to cater to what-if scenarios also. This may require the companies to re-look at dependencies on certain countries and suppliers. Companies will have to identify alternatives and pivot to build future resilience and to maintain business continuity.
Reinventing retail and distribution
We could not possibly have imagined waiting in a line at a retail store to shop. But it is a reality today. Retail stores have adjusted to this new normal by allowing a select number of people inside the store at a given time to maintain social distancing. Fearing the pandemic, consumers are staying put inside their homes and ordering online. While retailers had already started to experiment with hybrid, online-to-offline models before the pandemic struck, the changes brought about by the current situation will surely accelerate the transition. Companies will now accelerate their investments in omni-channel models and redesign the future of retail experience.
Cash is king
The lockdown has left several people jobless or furloughed, impacting the purchasing power of consumers. Companies will have to design products and services to suit the current times, while pricing it right, to stay relevant in the evolving scenario. At the same time, companies will need to conserve cash and cut down costs to be able to adjust to the new situation. It is a tight rope to walk on. Companies across sectors are also looking at conserving cash at least in the short-to-medium term.
Variable cost structures
As we go through a cycle of furloughs and downsizing, companies will do well to remember that investing and building capability in people, sustains long-term benefits. However, they will have to take a close look at their operations and services to differentiate their core business from the non-value-adding services. It is time to re-think and build variable cost structures that can sustain unexpected disruptions.
Several companies over time, have built complex operations. This is the time to untangle the web and simplify it. Cut down on complex operational structures by integrating functions that have till now performed in silos. For example, finance as a function must work in tandem with the supply chain. Companies will have to simplify and drive visibility across spend data in procurement, or order data in the supply chain, using digital transformation tools to give visibility to finance functions, in order to follow the flow of money.
Accelerate digital transformation
To achieve the two above, digital transformation tools like RPA, AI, machine learning, and analytics can be highly productive. Use technology to re-design and automate processes wherever necessary. Develop analytics capability to draw insights that can in turn ensure visibility of the entire supply chain. This will enable companies to better identify suppliers and reduce geographical dependency. Use cognitive capability to predict demand patterns to enable agile planning, reducing the response time to rapidly changing buying patterns. This can also help give companies visibility on cash trends and how to conserve it.
Master data strategy
As companies invest and expand their omnichannel presence, re-look at the master data flow from R&D to manufacturing to Product Information Management (PIM). Legacy data flows can hinder a company’s ability to launch products quickly. Use digital capabilities to enhance this space by real-time monitoring of the data value chain. This should enable companies to resolve go-to-market roadblocks.
As consumer goods and retail companies react to the new normal brought about by the pandemic, they will have to be agile and responsive to stay relevant. Embracing transformation led by digital technologies will be key to unlocking the way forward.
The author is AVP, manufacturing, retail and CPG, at Infosys BPM