CPG Trying to Become Demand-Driven

The goal for consumer products companies is growth, but IT and supply chain strategies are focused on reducing costs and improving efficiency. Over the last ten years, this mismatch in spending versus priorities has never been greater.

Companies recognize that being demand-driven – sensing and responding to demand with near-zero latency – minimizes waste and enables revenue growth while minimizing costs. However, the movement to embrace demand-driven principles has been delayed by change management issues.

The primary issue is the movement from supply chain thinking – where the focus is minimizing costs in supply – to value chain thinking where companies connect from the customers' customer to the supplier's suppliers to translate and orchestrate demand through demand shaping programs: price, promotions, marketing programs and sales incentives.

In parallel, companies are realizing that their investments in enterprise resource planning have improved efficiency but not flexibility. As a result, in 2011, the market will experience an ERP hangover. Major ERP vendors will struggle to meet Wall Street estimates and there will continue to be an onslaught of merger and acquisitions between the business intelligence and ERP transactional software markets.

To overcome this hurdle, look for companies to invest in enterprise data warehouse technologies and build enterprise data models, new forms of predictive analytics that sense and respond and better use downstream data, and advanced analytics to better use data in existing systems.

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