Consumer Goods Executives focused on transforming their Businesses

Focusing on updating operational efficiencies and applicable technology, increasing spending to expand or improve facilities and continuing product innovation are just some of the steps that are being taken by executives in the consumer goods industry to transform their businesses, according to the 2014 Food, Drink, and Consumer Goods (FDCG) Outlook Survey by KPMG LLP, the U.S. audit, tax and advisory firm.

According to a similar KPMG survey, when asked where their companies are in the business transformation process, approximately 33 percent of consumer goods executives surveyed stated that they have started the implementation of a transformation initiative, 18 percent stated that they have completed at least one major transformation initiative, another 18 percent stated that they have completed several major transformation initiatives and 22 percent stated that they are planning a transformation initiative.

“Transformation is about making comprehensive changes to a business at a time when incremental shifts are not sufficient,” said Patrick Dolan, National Line of Business Leader for Consumer Markets at KPMG LLP. “Businesses are challenged to think holistically and to develop operating models that will empower them to respond to current pressures in the marketplace, and that requires the support of leaders and employees with enterprising perspectives. It is refreshing to see many consumer goods companies turning this vision into a reality.”

According to the 2014 FCG Outlook Survey, 83 percent of executives feel that their organizational culture supports innovation. Seventy-eight percent feel that their organizational structure supports cooperation between functions and departments.

Key Elements to Enabling Transformation

To enable strategic visions, keep up with customer demands and keep pace with disruptive technologies, FDCG executives will be focused on operational efficiencies, technology updates and cost reduction initiatives. According to the survey, 52 percent of executives state that throughout the rest of 2014, senior management’s time and energy will be mainly focused on operational efficiencies and applicable technology updates. Forty-seven percent state that they will mainly be focused on cost reduction initiatives.

Financial investments is an important part of transforming a business. When asked for a few of the top areas where they plan on increasing spending throughout the rest of 2014, 28 percent of executives surveyed plan on increasing spending to expand or improve their facilities. This is closely followed by increasing spending on technology (27 percent), new products and services (27 percent), sales and marketing/branding (26 percent) and acquisition of businesses (26 percent).

Top channels that consumer goods executives will support through technology investments are the company website (63 percent), social media (54 percent) and physical/permanent stores (29 percent). When asked which technology-related trends are having a significant impact on their organization, 42 percent of executives cited waning brand loyalty as consumers become more empowered; 40 percent cite social media; and 38 percent cite multi-channel consumer engagement.

Product Innovation, Data Analytics and Supply Chain Transparency

More than half (52 percent) of the executives surveyed state that product innovation will continue to be the key growth driver for their companies over the next one to three years. Throughout the rest of 2014, 44 percent state that new product development will be a key growth initiative that will consume most of senior management’s time and energy.

Analyzing market effectiveness and using business intelligence to focus efforts are important components of the transformation process. Fifty-six percent of the FDCG executives surveyed state that their organizations use data and analytics to help support strategic decision making when it comes to customer insight. Forty-seven percent use data and analytics for pricing decision support, while 47 percent use it for supply chain optimization support.

Only 29 percent of executives cited that their supply chain is fully integrated across the business and across all channels. When asked to identify the top supply chain challenges their organizations face, 37 percent of executives cited the alignment of operations to real-time fluctuations in customer demand; 33 percent cited inadequate IT systems for supply chain visibility, planning and execution; and another 33 percent cited the lack of information and material visibility across the extended supply chain.

“The streamlining of operations and sustainment of efficiencies is critical,” said Dolan. “It is paramount to understand that to create a transparent supply chain, efforts should not be seen as a single project or a series of independent activities, but a carefully coordinated set of interdependent initiatives, each contributing to the greater effort.”