Harnessing the power of simplicity in a complex consumer-product environment
Companies can generate significant value by deliberately managing sources of complexity, including those presented by the COVID-19 landscape.
Even before the onset of the coronavirus pandemic, complexity in consumer goods was increasing at an accelerated rate. The evidence can be seen all around: in grocery stores alone, new product launches have risen dramatically, from around 20,000 in 1996 to 39,000 two decades later. The evolving retail landscape has created new and different ways for consumers to shop, with each channel bringing its own product and packaging requirements. Meanwhile, direct-to-consumer models and the growing demand for personalization have led to faster cycle times and ever-smaller shipments, and the explosion of small, nimble players across industries is forcing legacy manufacturers to expand their supply chains to be more responsive. The current crisis and market landscape are making choices in assortment more important than ever.
Adding some complexity to address consumer and retailer needs is inevitable—and can spur tremendous growth. But as the current market landscape highlights, it also needs active management to avoid an erosion of productivity and profitability for consumer-packaged-goods (CPG) companies.
The implications of COVID-19 have created more urgency for CPG companies to act. Certain businesses have performed well during this time: for example, over-the-counter cold and flu drugs saw a 150 percent increase in sales in the weeks following the outbreak, while grocery e-commerce has increased by 25 percent. But many more have struggled, as more than 40 percent of US consumers have slowed their purchases.1
To adapt to this new market landscape, manufacturers are being forced to make difficult assortment decisions, as retailers, given rapidly shifting consumer tastes, are demanding different products on their shelves. Further complicating the situation, prioritizing the well-being of vital employees affects the day-to-day operations of manufacturing and the supply chain. The cumulative effect of these forces can feel overwhelming. Still, it is important to keep a balanced view of both the short-term needs of securing the business and success in the longer-term environment.
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Πηγή: mckinsey
