The challenge of choice in the consumer products world bedevils the companies playing in that field. Short product life cycles, myriad packaging options, ever-changing customer desires, and increasingly global competition all conspire to make management difficult in a consumer-driven world.
The options can be paralyzing in the absence of an organized approach. This is where End-to-End’s experience helps. We know how to help you find insight in the overwhelming amount of data at your disposal. But we also know that business success requires more than the application of the latest new algorithm. We can help you organize for success as well, helping to ensure proper governance, sound decision making, and solid business processes.
We help our consumer products customers address problems like:
Forecasing & Demand Planning
Demand planning in consumer goods can be especially challenging. For example, many products have short lives with little history to lean on for guidance on upcoming demand. And the constant stream of new products has no history at all.
Furthermore, what history does exist is often distorted by the effects of price changes, promotions, weather, competitive actions, and other factors.
End-to-End Analytics has the deep expertise required to:
- Handle products with short lifecycles and new products lacking history.
Quantify the uncertainty in the forecast, which is critical for inventory planning.
Automate all of the above, often for tens or hundreds of thousands of products.
- Remove the effect of past promotions in order to forecast baseline demand.
Create driver-based forecasts that explicitly model the impact of pricing, discounts, in-store display, and advertising.
Incorporate weather, competition, and other external influences on demand.
Strategy & Network Design
Consumer goods companies are adept at streamlining their supply chain operations. But the biggest savings don’t come from just tweaking how the supply chain is operated. They are obtained by optimizing its structure, or network design.
We help consumer goods firms make strategic supply chain decisions by applying analytics to:
- Determine the right number, location, and size of factories and distribution centers.
Choose the right number and location of suppliers.
Evaluate alternative modes of transportation.
- Locate and size inventory buffers.
Assign products to plants, plants to DCs, DCs to customers, etc.
Consumer goods executives increasingly focus on inventory levels. In part this is because stock market analysts often use inventory turns as a proxy for overall supply chain efficiency.
But the best managers also realize that many long-established practices – like ABC inventory policies and arbitrary service level targets – are outdated. This is especially so since the analytics to truly optimize inventory are easily implemented with just a desktop computer.
We work with our consumer-focused clients to:
- Quantify the true cost of inventory and the true cost of stocking out.
Locate inventory at the right place in the supply chain.
Identify the best spot in the supply chain to transition from producing to a forecast to responding to actual demand – the so-called “push-pull boundary.”
- Set inventory policies to minimize total costs, not merely to achieve arbitrary service level goals.
Automate the calculations required for inventory policies to be kept up to date in the face of changing conditions.
Install the processes and metrics required to achieve visibility of and control over inventory levels.
Supply Chain Planning
For many consumer goods companies, supply chain planning has changed little in two decades. Basic MRP logic generates an infeasible plan, then planners make ad hoc changes to live within the material and capacity constraints.
However, more advanced algorithms deployed on modern computers allow better plans to be generated in far less time. And the resulting plans require much less in the way of manual manipulation to produce a truly actionable plan.
We use these modern approaches to:
- Jointly optimize material, production, and distribution plans.
- Balance economies of scale from long production runs against the higher inventories and longer lead times that result.
- Check plan feasibility against material and capacity constraints - and find the minimum-cost adaptation required to restore feasibility.
- Implement constraint-based planning, using powerful optimization techniques to find the minimum total cost feasible plan.
Optimize the use of alternative freight modes as volumes change, accounting for different cost and lead time characteristics.
Pricing & Promotions
Pricing has long been recognized as the single most powerful lever for profit improvement in most companies, consumer goods firms very much included. In addition, according to recent studies, CPG manufacturers now spend around 14% of their revenues – around double their net profits – on trade promotions.
As a result, leveraging analytics for pricing and promotion decisions has become a major opportunity. We work with leading consumer good companies to:
- Forecast the impact of promotions, accounting for discount levels, display & feature ads, competition, cannibalization, and promotion duration and frequency.
Quantify the ROI on past – and anticipated future – promotions.
Reallocate funds from low-ROI to high-ROI segments.
- Uncover untapped opportunities for profitable promotions.
Optimize everyday (non-promoted) prices.
Evaluate promotion strategies, like “high-low” vs. “everyday value.”