Many e-tailers are embracing the Internet of Things (IoT) solutions with successful results. Agile supply chain operations, especially in the consumer packaged goods (CPG) industry, are using IoT and end-to-end shipment visibility software to outperform competitors with better service while keeping lower inventory levels.
IoT makes these changes possible because new digital technologies affect the value proposition of existing goods and services. By leveraging IoT, they can turn orders around in a day, deliver customized orders and replenish stocks in short order.
How CPG Companies Use the Internet of Things (IoT) to Achieve Higher Customer Satisfaction
Historically, CPG companies relied on audits at brick and mortar stores and insights gathered from retailers to understand the end customer experience. As sensor prices dropped and advanced analytics capabilities improved, more consumer packaged goods companies realized they could identify customers’ wants on their own using these technologies.
Focusing on Improved Delivery Performance
Amazon’s rapid shipping has forever altered our expectations of delivery expectations. As a result, consumers want their goods at the speed of Now. To meet high consumer delivery expectations, top-performing companies are using IoT technologies to improve delivery performance and consumer satisfaction.
Challenges to Delivering at the Speed of Now
The pivot point has moved from production to customer delivery, and the primary constraint has moved from manufacturing to transportation. This shift is hard to handle because the CPG industry spends at least 5% of revenue on transportation. Plagued with driver shortages, theft, and delays, transportation undermines results from all other cost initiatives.
Driver Shortages:
It is estimated that by 2026, the industry will be short 175,000 drivers. Given that most freight is transported over the road, this is a serious concern.
Theft:
Even though the number of cargo theft cases has decreased this year, it is a remaining problem, especially considering the lack of accurate reporting in the industry.
Estimated Time of Arrival (ETA):
Last-mile transportation challenges had caused on-time service arrival to drop. By investing in technologies, on-time Requested Arrival Dates (RAD) have rebounded from their fall in 2014, up 4.5%, according to a Boston Consulting Group study.
Accumulating Costs:
Due to transportation, long-distance truckload prices have increased at a pace of 7.8%, and are expected to continue rising for the foreseeable future.
Applying Analytics to Solve Business Problems and Optimize Operations
By leveraging IoT and other digital solutions, consumer packaged goods supply chain leaders can strengthen processes and apply advanced analytics to historical and real-time data to optimize operations. Some examples:
- By using insights that identify an optimal departure time, shippers could accurately anticipate ETAs before a truck even begins its journey.
- Manufacturers can monitor shipments along the way, get real-time shipment statuses and proactively take precautionary measures or inform stakeholders in case of any breakdowns. Pro-tip: this can improve their On-Time In Full (OTIF) KPI.
- Using IoT to track the flow of inventory and flow of information – to enable a consumer browsing an out-of-stock product online to be guided to the nearest store and receive a discount coupon as a push notification on their mobile phone
To thrive in a highly competitive landscape, CPG winners will realize the full potential from collecting data from “smart” interconnected devices and use analytics to evolve to faster, improved decision-making that drives business value and improves customer satisfaction.
Part 3 of this series looks at How the IoT is Helping Chemical Supply Chains Increase Agility
