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MDM for CPG: Addressing the 5 key challenges of today

Joeri Moors | 10-06-2020

During the corona crisis, digital proves to be the lifeline for many organizations. This holds especially true for CPG manufacturers, which are impacted particularly hard by the pandemic. Digital transformation is set firmly on their agenda, if it wasn’t already there. Essential to digital transformation is mastering your data, as data lies at the heart of today’s CPG challenges.

All industries are feeling the effect of COVID-19. Stock markets, employment, oil prices and local economies are currently taking hits. With global supply chains and a complex landscape of suppliers and vendors, the coronavirus pandemic impacts the CPG industry particularly hard. And while the full economic consequences are still unclear, consumers respond in real-time. Their shopping habits fluctuate rapidly and lead to new rules of engagement.

Changing Consumer Behavior

On top of the loss of consumer income and declining consumer trust, come the changing of categories and the shifting of channels. Home-cooking has replaced lunching and dining out, so consumers buy more baking products, specialty foods and dairy staples. Brands closely connected to outdoors like sports and certain fashion brands are seeing a revenue decline.

Shopping as a fun activity has made way for fewer retail trips that are focused on efficiency and keeping safe while shopping. Customer loyalty to physical stores has become a conscious act that now holds a small but present risk to health. Also, the moment of spending shifts, as weekend consumption drops and the difference between weekend and weekdays flattens out.

Boosting E-Commerce And Acceleration Digital Transformation

The biggest impact, however, comes with the acceleration of online purchasing. Products and services normally bought physically are now being sought out and offered online. Wherever available, online groceries increase so much that getting a grocery delivery time online can be challenging for consumers. Retailers and brands with a head start in e-commerce are experiencing a further boost.

The adoption of e-commerce is turning out to be a long-lasting behavioral change. Before the pandemic, e-commerce was already firmly on the rise. As consumers could only find certain products and services available online, this new shopping experience solidifies in the coming out of the crisis. Additionally, consumer segments that previously preferred offline shopping – notably baby boomers – were forced online by the corona crisis. As shops reopen, a significant group of consumers keeps avoiding crowds and stays more at home than before the crisis. E-commerce is proving to be the lifeline that keeps the market open in dire times.

In the long term, the corona crisis is contributing to technical progress, says the majority of respondents in the DMEXCO Trend Survey. They expect the digital economy to emerge stronger than ever before from the current situation. The pandemic will accelerate the pace of the digital transformation.

Putting Digital Transformation in Practice

The dictum Transform or die that may have been over-hyped before, it is becoming a reality today. But don’t let yourself get swept away by the ambiguity and abstractness of digital transformation. It can mean many things for CPG manufacturers: opening up new online marketplaces, operational excellence in the supply chain or creating superior customer experiences. The common driver behind these business goals is data, the most valuable asset since oil. In the post-Covid, digital age, mastering your product, customer, supplier, vendor and location data is critical for creating business value.

The solution for mastering all your data and creating a single source of truth is called Master Data Management (MDM). MDM allows you to define, manage, centralize, organize, categorize, localize, synchronize and enrich all your master data. From products and suppliers to customers, vendors, locations and much more. And while MDM maybe doesn’t sound as exciting to every business leader, it allows you to tackle the key challenges for CPG manufacturers today.

The 5 Key challenges for CPG Manufacturers

Before the corona outbreak, digital transformation was already set on most agendas. From the need to create operational excellence to increase margin, improving product data for e-commerce success to better managing the supply chain, compliance with new privacy regulations and technologies. Partly in response to changing consumer behavior, and partly to improve business processes and to create more business value. The corona crisis simply added more urgency and pressure on the top.

In each of these CPG challenges, mastering data holds the key to success:

1.     Bringing your business online

Going online means so much more than starting with e-commerce. You need to understand how the internet is influencing your customers’ behavior. They get inspired online, browse through pages of their favorite brands, research new trends and compare products from different shops. The final purchase doesn’t even have to be online, as the modern buying trend research online, purchase offline (ROPO) among the young generation proves. The least that customers expect is to find your product information online, accurate and rich with images and branded content.

Quality product data is also a prerequisite for utilizing platforms such as Zalando, bol.com, Otto and Amazon. These new marketplaces offer additional retail channels to present your brand to a large audience, but in return demand your product data to be structured and organized.

Product Master Data Management (PMDM) allows you to create a single product record that can be enriched, measured, stored, structured and shared according to all your e-commerce needs.

2.     Operational excellence in the supply chain

Not only online channels need quality product data, but also the retailers and vendors. Through data exchange standards such as GS1 large retailers pull the product data from CPG manufacturers. Connecting to these data pools and becoming compliant can be a real hassle, but is sometimes necessary to be even considered for being taken up in the assortments. This is again where PMDM helps you to source product data from your suppliers and share it in whatever standard required. Enriched, accurate and structured. This ensures everyone works with the same product data and prevents painful mistakes that can result in product returns and callbacks.

And MDM covers more domains than just products: also supplier data and vendor data need to be managed. Mastering these data domains helps to improve processes and prevent small errors with possible big consequences. And once you start mastering location data and combining it with the other domains, you unlock valuable new insights. Adding where to the equation will help you make better supply chain and marketing decisions. These improvements help to achieve operational excellence, which is more needed than ever. As online sales are putting real pressure on margins, reducing costs is becoming crucial to stay afloat.

3.     Create superior customer experiences

What sets CPG manufacturers apart from other manufacturers, is the fact that they also address customers directly with their brands. Connecting with customers and their values calls for a culture and organization that places the customer first. To do this, CPG manufacturers need to source customer data from all the touchpoints to create a single view of the customer.

Sources for customer data can be manifold: CRM or ERP systems, POS systems, websites, review sites, surveys, customer service and social media. The big challenge lies in removing duplicates, reducing errors and fixing incomplete records. That’s exactly what MDM does. By creating a single source of truth, customer data becomes reliable and trustworthy. This gives the foundation needed to make data-driven decisions that impact customers and do customer analysis that leads to key customer insights.

With understanding the customer also comes the ability to create better experiences for the customer. In exchange for their personal data, customers expect value. They want to be understood by brands and have experiences that are both personalized and relevant. With a single view of the customer, you can track customers across channels, recognize behavior and respond with the right message in the right context at the right time.

4.     Complying with regulations

Especially during the corona crisis, the demand for healthy food is booming. Adhering to the American Food Safety Modernization Act (FMSA) or the European Food Safety Standards is crucial for food manufacturers. MDM gives them the ability to track food as it moves around the supply chain, so tracing any outbreak or contamination back to its source is easier. Also, privacy regulations such as the European General Data Protection Regulation (GDPR) can be fully covered by MDM capabilities.

As a standard practice for being in business, regulatory compliance also creates the organizational focus that is needed for the quality and sourcing of data. This focus lays the foundation for data excellence needed in bringing the business online and opening up marketplaces.

5.     Innovation

Consumer expectations for product quality, price, differentiation and convenience are higher almost every year. One of the main reasons is called expectation transfer: when an innovation serves a basic human need in a new way, it sets new customer expectations. This is basic human behavior that applies to almost everything. Luxurious goods become specialty goods and then turn into commodity goods. What once was an experience to shop for, turns into autopilot consumption.As digitization takes root across markets, expectations are more and more transferred. When you order from your favorite brand, you expect the delivery next day just like your favorite webshop does, for example. This continuous raising of the bar leads to the need to accelerate innovation cycles.

But unlike retail sectors like apparel electricals or home furnishing, CPG’s traditional approach does not cater to this. Typically, innovation cycles are long, product innovations are uncommon and often incremental. Innovation cycles need trusted data.

By using MDM to manage, share and enrich the data that fuels your business processes and workflows, you can eliminate inefficiencies and develop innovation processes. This improves the product lifecycle – from onboarding suppliers to providing customer service – and speeds up the time to market. MDM gives you the business agility you need to be successful in the digital age.

To read more about the Master Data Management topic, visit our dedicated page here.

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Joeri Moors

MDM Market Development Manager

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