How Frankenstein’s Monster software hampers FMCG agility
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Multinationals trying to prevent ‘conscious consumers’ deserting long-established brands for newcomers often have to grapple with unwieldy legacy IT systems that make it hard for them to adapt.
Despite their sector’s name, many of the biggest firms operating in the Fast Moving Consumer Goods industry have ground to a halt of late. Even with decades leading their product categories and billions of dollars of investment in advertising, some of the world’s leading brands are finding they aren’t as relevant or popular as they once were. Now that shoppers are increasingly aware of the sustainability and provenance of ingredients, formulations and packaging, our old favourites seem out of step with the conscious consumer.
That’s not to say FMCG brands aren’t doing anything about the situation. Far from it. However, the few large conglomerates that dominate the sector have grown to such a scale that responding to a market that is evolving at this pace is testing the limits of their technology, processes, and systems.
When it comes to sustainability, consumer goods giant Unilever is one of the most vocal of this group. The recent announcement by CEO Alan Jope that the firm intends to halve the amount of new plastic it uses in its products and packaging over the next five years should come as no surprise. Consumers are demanding more responsible consumption of resources from their favourite brands and are prepared to put their money where their mouth is on these issues, forcing even the biggest multinationals to respond.
It’s welcome to see companies of Unilever’s size and scale commit to reducing their reliance on new plastic, but to have real, meaningful impact they must address the root cause of their issues. If they fail to do so, they may find long familiar products with decades of advertising and branding investment behind them losing share to new, sustainability-native challengers.
It’s one thing to talk about being more sustainable. It’s quite another to implement it at Unilever’s scale. And with consumers not just aware of the issues, but actively asking questions of the brands they buy from, any gap between what is said and what is done will erode trust and damage hard-earned reputation.
In order to satisfy the growing demand for product sustainability and transparency, consumer goods companies – whatever their size – must look at the infrastructure that underpins their activities – the systems, software, and processes that lay the foundations for their global success.
One of the major barriers to companies of Unilever's scale delivering on bold commitments is the antiquated software that powers their operations. Efforts have been made to streamline over the years, but as conglomerates have grown their IT infrastructure has been built up in parts, often leading to a Frankenstein’s monster of newer and legacy tech stitched together. Although well-intentioned and designed to solve a problem at that moment in time, the lack of longer-term thinking when building these systems has meant that many simply cannot cope with the challenges that younger brands and their modern agile systems can handle with ease.
With these legacy giants, the key issue is the software that underpins their financial operations. This software is often completely disconnected from the systems used to source their raw materials, formulate their recipes and manufacture their products. Information about the source of raw materials, what batch of product they went into and the history of product in a given package are often kept in several disparate systems. These records can be found in everything from Excel spreadsheets and legacy Enterprise Resource Planning (ERP) solutions to Manufacturing Execution Systems (MES), or even on paper!
New and nimble challengers that have implemented their systems from the ground up around a sustainable proposition have an advantage. They don’t have a hundred years of legacy technology and processes to retire or revamp. However, if they want to achieve the longevity and market share of the likes of Unilever, they too will have to adopt the right technological foundations.
Technology that enables the senior executives who are able to sign off on reductions in plastic packaging, or trace the sustainable palm oil in a product, to easily see how reformulation will impact revenue, will help them make these disruptive moves. If the cost is unknown or hard to pin down, then any change is unlikely to happen. The internal business case becomes much harder to make, and without incentives to do so, all but the most determined executives are unlikely to put their necks on the line and make a nuisance of themselves without hard numbers behind them.
For the large, legacy players of this world, this is unlikely to change anytime soon and that is a shame. Loyal customers of these brands, who may wish to remain loyal to their shampoo or toothpaste, will begin to feel they are no longer able to if an alternative brand’s product more closely aligns with their values.
The challengers that recognise what consumers are calling for and move to address that need have a huge opportunity. Companies of all sizes can benefit from truly integrated resource planning, but while the Unilevers of this world try to deploy this technology to manage attrition, challenger brands the world over are using the same technology to overtake them. Using software that provides them with the visibility, flexibility and agility to give socially aware and health-conscious consumers the product transparency they demand, they can grow and evolve to be the Unilever of tomorrow.
Shy of having a monopoly, a market leader has only one way to go. Consumer goods giants have had their wake-up call. Challengers that are better able to visualise and respond to the demands of the day, be it in the use of plastics, palm oil or parabens, are coming for them, and may soon end up on top.
Colin Elkins is global director, process manufacturing with enterprise software supplier IFS.
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