The Next New Normal for Consumer Goods Manufacturers
9 in 10 consumers have changed their shopping behavior as a result of Coronavirus. COVID-19 pandemic has caused Consumer Goods Manufacturers with new business challenges. This has forced Consumer Goods Manufacturers to step up to find new ways in addressing these challenges & re-think the way they need to operate in long term.
The outbreak of coronavirus disease 2019 (COVID-19) has created a global health crisis. It has brought a deep impact on the way customers perceive the world and everyday lives. Along with the serious implication on people’s health, the pandemic has also impacted the business in a big way. Consumer Packaged Goods (CPG) manufactures are also facing new challenges due to changes in consumer behavior. With consumer priorities shifting to essential goods because of the consumer stockpiling, there is a sudden huge demand for essential goods. On the contrary all non-essentials goods & services have been put on halt due to government regulations. While 33% of people have started to increase the amount spent on groceries, there is almost 90% reduction in spend for Clothing & Footwear. This forces CPG manufacturers to re-think their business models to sustain business on a long run.
Top 3 forces that will push CPG manufacturers to re-think their business models are
- Consumer behavior
- Employee safety
- Government regulations
This will call for a change in the way products are manufactured in future, how they are handled in the production line and what stringent policies CPG manufacturers are following to ensure employee health and safety.
Consumer behavior: COVID-19 has made each consumers to question if the product they use is manufactured in a safe environment. The United States has seen a 20% increase in preference for contactless operations, with numerous industries adapting to this change. “Less the touch, more the preference” has become the new trend for consumers while making a purchase. Hence it becomes critical for CPG manufacturers to make their production operations less of human touch. At the same time moving towards a less touch manufacturing has a higher chance to increase the brand loyalty as consumers are looking for a trusted source.
Employee safety & Regulations: 51% of employees has shown concern to return to workplace if their employer requests to join tomorrow because of the fear of getting sick. With social distancing in place, CPG manufacturers are operating with a lesser workforce to meet the high global demand. It also becomes an important factor for the CPG manufacturers to ensure the safety of each workers in their facility by screening each worker to identify individuals who have high risk factors.
Government Regulations: With strict travel restrictions across the globe, workers movement has been limited. In the United States, more than 70% of jobs can’t be done offsite. This also puts CPG manufacturers at high risk where there is a higher dependency on a skilled labor needed from a different location. Hence CPG industries are also looking for options of how remote working could be enabled for their workforce & how the dependency on skilled labor can be reduced.
A new generation customers calls for a new generation of manufacturing technology
3 major areas CPG manufacturers are looking right now to handle the situation are
- Cost Saving
- Less Touch
- Efficiency Everywhere
The new age digital technologies will become the helping hand for CPG manufacturers to respond to this need. Internet of Things, Analytics, Digital Twin, Augmented Reality and Virtual Reality are some of the key digital technologies which will play a major role in CPG manufacturing in the days to come.
Internet of Things (IOT) & Analytics: Almost 30-40% of consumers have been trying new brands because the desired product is unavailable. Thus it is important for brands to ensure their manufacturing facility has the capacity to meet the demand and doesn’t become a bottleneck. The machine data collected using sensors attached to manufacturing machines continuously monitor the critical parameters of machines. This ensures that the quality of the product is not compromised. Also the data collected overtime can be analyzed & helps to predict what conditions indicate a greater likelihood of future machine failure. Taking right actions at the right time with these predictions can reduce machine downtime. For example, a Global CPG major correlates data across 10 plants across multiple geographies using the power of IoT to improve production line efficiency by over 8%. By doing so it also helps to potentially save millions of dollars in lost production for CPG manufacturers.
Digital Twin: Digital models of the factory can help CPG companies to enhance the operational efficiency. Factory data from IoT systems is fed into digital models of each factory and then processed by algorithms which can then be used to improve the overall manufacturing process. These digital models can be used for both Greenfield & Brownfield manufacturing plants which helps in data based decision making. For example, Unilever now has eight manufacturing facilities worldwide which have deployed digital twins. Unilever has seen significant success from deploying digital twins to greatly increase the consistency in production of soaps and detergents.
Augmented Reality (AR) / Virtual Reality (VR): CPG manufacturers should leverage technologies to enable remote support of the workforce through AR. Apart from that VR helps to train workers more efficiently in a near real environment. For CPG manufacturers maintenance operations requires skilled technicians. This dependency can now be fulfilled by remote assistance of the skilled technician through AR. This helps in business continuity & also brings in lot of cost savings by reducing the travel. For example, a US based Global manufacturer leveraged Augmented Reality to improve field engineer’s efficiency by connecting with experts instead of the traditional process of providing service manual and telephone support. This helped them with 67% increase in First-time fix rates and 20% increase in engineer’s efficiency.
CPG manufacturers should take a step back & re-think their current business model and see how these digital technologies can be leveraged to improve their business. This will also help them to meet the global need & stay ahead of the competition. Tech Mahindra Retail & Consumer Goods vertical brings in both domain & technology expertise to help CPG manufacturers to move towards the next new normal. Write to us for more information RCG.info@techmahindra.com.
