BY: ERIK SVENSSON, SENIOR CONSULTANT AT TWELVE CONSULTING GROUP
Commercial planning is not a new topic—for as long as businesses have sold goods, someone has continuously planned to meet the needs of their customers. This has never been easy, but today it’s become herculean: Businesses must respond to markets that evolve at a breakneck pace, with lower-than-ever barriers to consumer access. The beverage industry is no exception, with new entrants appearing seemingly from thin air, new rules, and new categories taking the market by storm. Fortunately, with new challenges come innovative technologies to address and solve those challenges. Below, we’ll explore key challenges faced by players in the beverage industry and how technology—specifically, Connected Planning—can help them turn supply chain risks into opportunities. Changing Consumer Preferences Consumers are buying different things today than they used to, and for different reasons. What’s not always clear is why. For example, healthy options are on the rise in almost all sectors. Per LEK, although 93 percent of consumers are trying to eat healthily, approximately 85 percent say they give in to more than half of their cravings.1 So, although consumers are more health-conscious, they still indulge. What is clear is that regardless of the direction that consumers lean, their preferences and behaviors change in ways that aren’t necessarily predictable or immediately discernable. These changes make commercial planning tough. What will they want next? How much will they buy? When? Delays in answering these questions and turning their answers into actions create inefficiencies and hurt the bottom line. Shifting to E-commerce and Buying in Different Places Consumers are also buying things in different ways and different places. The biggest (and most obvious) shift is to online sales. According to the U.S. Department of Commerce, e-commerce sales in third quarter 2018 were up 14.5 percent from the prior year, as compared to 5.3 percent of total retail sales over the same period.2 Rest assured, this isn’t slowing down anytime soon; as online sales continue to grow, it’s imperative that manufacturers and retailers find ways to make every dollar count. They must find ways to stay agile and competitive among the expanded beverage market available at the consumer’s fingertips. Growing Beverage Industry Competition Beverage markets have traditionally been dominated by big-name brands owned by global manufacturers. However, from soft drinks to spirits, consumers are increasingly interested in healthy alternatives and premium “craft” brands. Soft drinks have been under scrutiny for their high sugar content, leading to the rise in flavored water sales. The adult beverage industry faces a similar challenge as craft distilleries pique the interest of thirsty consumers, driving down revenue almost across the board. In order to stay competitive, existing manufacturers and distributors must bring new products to the shelf faster and more efficiently than ever before. Connected Planning for the Beverage Industry How can beverage leaders address today’s obstacle-laden competitive ecosystem? How can they keep external factors like changing product preferences, buying behaviors, and growing competition in mind while planning for success? Connected Planning combines a powerful planning platform with a new approach to collaboration. When plans and data come together in one place, it becomes much easier to make the right decision. Leveraging a Connected Planning tool allows beverage leaders to make commercial planning decisions based on data, efficiently deploy resources through centralized demand planning, effectively drive revenue with smarter trade promotions and pricing models, and innovate faster—putting new products on the shelf before their competitors. Centralized Beverage Demand Planning Predicting consumer preferences is not an easily solved puzzle. You create a demand plan and deploy resources to match, only to find that reality differs from expectations. What if there were a quick way to update your demand plan and see the downstream effects in real-time? This is the power of a connected plan. Building a Connected Planning model means implementing a feedback loop: Demand feeds supply, trade promotions, pricing, and more, and upon receipt of actual data, gaps can be closed. And many steps that may be currently manual can be accomplished with the click of a button. Bringing the required data and forecasting together in one place is integral for any business that hopes to keep pace with constantly changing consumer preferences. Example: You can model market demand with statistical forecasting to predict how much of your product will be purchased and when. Use the output of this plan as the input of your supply plan, which dictates the materials needed to fulfill your customers’ needs. Connect the two in real-time and use actual purchasing data to create a positive feedback loop. The result: Reduced planning times, increasingly accurate demand forecasts, and reduced inventory and warehousing costs. Efficient Trade Promotions and Pricing With new options available to consumers almost daily, it is now more important than ever to maximize the impact of promotions and pricing deals. In this way, you can stave off competition on the shelf. A Connected Planning platform makes it easy to collaborate with retailers and distributors, feeding volume data back in to understand which promotions are most effective and which deal structures should be continued. Gone are the days of working in silos and spending your days wrestling with spreadsheets. Connected Planning can also ensure consistency across the board with straightforward, rules-based approval processes (for example,. if the margin falls below 18 percent, the deal must be approved by finance). Advanced modeling of proposed promotions and pricing scenarios can help leaders quickly assess impacts to revenue, cost, and margin. Example: Build a centralized data hub in a Connected Planning platform to simplify how you manage product and customer data. Bring this data into a pricing model for the field sales team to create the deal structures they use to make sales to buyers. Ensure profitability by requiring director and/or executive approvals for any deals below specified margin percentage thresholds. The result: Consistent data across the business with one easily managed source with impacts from pricing changes seen real-time.
Increased Speed-to-Innovate and Speed-to-Shelf A Connected Planning platform can reduce the time it takes to get a product from an idea to the shelf in multiple ways. Collaborative planning cycles move faster. For example, when Del Monte implemented Anaplan, they cut their planning times from two or three weeks to two or three days. Gaps shorten between people, data, and plans, thereby reducing wasted production and shrinking inventory. Connected Planning also affords businesses the opportunity to involve partners directly, because a platform like Anaplan provides transparency and real-time data-sharing through direct partner log-ins, integration, or data exports. From soft-drink manufacturers passing demand data to syrup suppliers or adult beverage producers sharing real-time deal structures with distributors, Connected Planning removes roadblocks for moving a new product from design into the hands of thirsty customers. Example: After building out a pricing model, provide trusted buyers read-only access to the model through their own Anaplan accounts. Give them access to products they’re eligible to purchase, while keeping other products and any sensitive internal data hidden. The result: Buyers have the most up-to-date data from one secure central source—they no longer rely on a field sales rep to send them a spreadsheet or PDF and there is no question about whether the costs are current.
Bringing it Together With the fluidity of the beverage industry, innovation is key to success. To keep up, beverage leaders can leverage new technologies like Anaplan to effect data-driven change, close gaps between people and plans, and dramatically reduce process cycle times. As Anaplan’s 2018 and 2019 Americas Partner of the Year, and with over 300 implementations, Twelve Consulting Group is uniquely positioned to help leaders make this change a reality.
Read about the biggest challenges facing supply chain professionals here
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