Deeper AI integration critical for Consumer Packaged Goods companies

[devikad]

Deeper AI integration critical for Consumer Packaged Goods companies

The last ten months of living with the COVID-19 pandemic have demonstrated just how critical agility, change management and dealing with ambiguity are for the survival of businesses. The Consumer Packaged Goods (CPG) industry can certainly vouch for this. Since the onset of the pandemic, customer sentiment, spending and behaviour have changed drastically.

With an unprecedented focus on virtual experiences, the pandemic has not only accelerated the pace of digital transformation but has also presented a compelling scenario for CPGs to invest in artificial intelligence (AI) and a data-driven strategy to offset uncertainties and build resilience for the future. Intelligent technologies such as AI and machine learning are providing companies with new capabilities to harness the power of data-led insights to make timely and informed decisions – both strategic and tactical. Given below is a perspective on some key areas where AI is serving as an enabler and a vital differentiator for CPGs:

AI-led demand sensing

Demand sensing plays a critical role in ensuring that a CPG is equipped to cater to consumer demand in an optimal way and realize its sales and market share objectives. Traditionally, demand sensing has heavily relied upon on trends derived from historical sales data. However, black swan events such as the pandemic can render past benchmarks irrelevant.

Over the past months, CPGs have had to swiftly alter their production, supply chain and inventory capabilities to keep up with new consumer preferences and product segments catalysed by the pandemic– such as a heightened focus on the health and wellness segment and locally sourced products as well as new modes of buying such as an exponential increase in e-commerce purchases. In doing so, CPGs that had invested in building AI-powered demand forecasting systems were able to come up with more periodic, timely, granular, and accurate projections.

The ability to forecast granular (at a distributor – SKU level) month-end sales basis an algorithm, which is somewhat similar to map navigation estimated time of arrival (ETA) projections, allowed this CPGs to make proactive and sharper product and geographic decisions to minimize sales loss, improve fill rates, and reduce excess inventory and reassess their product portfolios – add new categories and remove products that are no longer relevant.

AI also helps devise more accurate seasonal demand sensing based on real-time data such as the weather, performance of similar product categories and even social media activity. For example, the sale of mosquito repellents typically goes up when it rains – even if it is an unseasonal downpour.

Targeted promotions planning

In order to continually adapt to evolving market dynamics and consumer preferences, CPGs need a granular and flexible promotion and media plan. Moving away from the more traditional high-level national or regional level approach, AI is enabling CPGs to plan TV ads, digital marketing, and consumer and trade inputs at a sharper channel and city level. This allows for optimal allocation of resources as users spend more time online and on OTT channels away from traditional TV and ensures targeted advertising and promotions to micro-segments of customers with similar behavioural traits and preferences. AI is also enabling mid-month course corrections and recommendations on where top-up schemes should be introduced in order to better achieve business goals.

Customer-centric supply chains

AI and automation have already proved their value across the supply chain, enabling much more responsive and predictive ordering that prevents capital being tied up in excess inventory and integrating production and distribution requirements more closely to sales. In the COVID-19 scenario, AI is also helping identify and respond to disruptions and bottlenecks in the supply chain such as an abrupt halt in supply from a virus-hit supplier or potential disruption due to restricted logistics. This enables proactive and dynamic material, production and supply planning in order to minimize the impact of disruptions and unexpected constraints.

What it takes

In order to truly leverage the power of AI, CPGs need to get the following five building blocks in place:

The starting point must be a clearly defined and articulated AI vision and roadmap.
The roadmap needs to be backed by an enterprise-wide and scalable analytics platform.
In order to plan, run, and monitor AI initiatives, they need to develop a resilient operating model along with an empowered centre-of-excellence that owns and drives the transformation agenda.
To ensure AI is being used in the right spirit, change management and adoption needs to be driven and tracked.
Once initiatives are rolled-out, a clearly defined measurement methodology needs to be followed to track the efficacy and ensure continuous improvement of the AI roadmap and its implementation.

Staying relevant, today and beyond

Data and AI-based solutions have become indispensable to CPGs in pivoting to meet changing consumer demand and navigate increasing complexities in all aspects of the business. The right kind of AI investments can help CPGs innovate and scale with speed, precision, and predictability, enable their workforce to work smarter, make data-driven decisions, and better identify and deliver on new growth opportunities. It is inevitable that CPGs will continue to become more AI and data led as they shape plans for the future.

Source: https://cio.economictimes.indiatimes.com/news/next-gen-technologies/deeper-ai-integration-critical-for-consumer-packaged-goods-companies/80003040