Final Project Dissertation

DATA ANALYTICS IN FMCG INDUSTRY

Submitted in Partial Fulfilment of the Requirements

For the Award of

Post Graduate Diploma in Industrial Management

By
Saurav Shikha
Roll No. – 1702175
PGDIM- 24
Year 2017-19

Under the guidance of

Prof. Karuna Jain

National Institute of Industrial Engineering, Mumbai

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 CERTIFICATE OF PROJECT COMPLETION

This is to certify that Saurav Shikha, student of Post Graduate Diploma in Industrial
Management (PGDIM), 24th Batch of the National Institute of Industrial Engineering (NITIE),
Mumbai has successfully completed the project titled:

DATA ANALYTICS IN FMCG INDUSTRY

The project was successfully completed under my guidance and supervision from the 24th
January 2019 to 15th March 2019. Based on the work done by her, this report is being
submitted for the partial fulfilment of Post Graduate Diploma in Industrial Management
(PGDIM) at NITIE, Mumbai.

I hereby convey my best wishes to her for all her future endeavours.

Faculty Guide
Prof. Karuna Jain
NITIE, Mumbai

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 ACKNOWLEDGEMENT

I take this opportunity to extend my sincere thanks to NITIE, Mumbai for offering me a unique
platform to gain exposure and garner knowledge in the field of Management.

I would like to extend my heartfelt gratitude to my faculty guide Prof. Karuna Jain (Professor,
NITIE, Mumbai) for having made my field project a great learning experience by her constant
guidance, encouragement, and support.

I would also like to thank her for her co-operation and valuable advice throughout the course
of my project.

Last but not the least I would like to express my profound gratitude to friends who contributed
in their own ways to improve the quality of my work. There are many who I may have left out
in the acknowledgement, but whose co-operation no doubt went a long way in the project
completion.

Saurav Shikha
PGDIM-24
1702175
NITIE, Mumbai

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ABSTRACT

The convergence of several technology trends is accelerating progress. The volume of

data continues to double every three years as information pours in from digital platforms,
wireless sensors, and billions of mobile phones. Data storage capacity has increased,
while its cost has plummeted. Data scientists now have unprecedented computing power
at their disposal, and they are devising ever more sophisticated algorithms.

The companies at the forefront of these trends are using their capabilities to tackle
business problems with a whole new mindset. In some cases, they have introduced data-
driven business models that have taken entire industries by surprise. Digital natives have
an enormous advantage, and to keep up with them, incumbents need to apply data and
analytics to the fundamentals of their existing business while simultaneously shifting the
basis of competition. In an environment of increasing volatility, legacy organizations need
to have one eye on high-risk, high-reward moves of their own, whether that means
entering new markets or changing their business models. At the same time, they have to
apply analytics to improve their core operations. This may involve identifying new
opportunities on the revenue side, using analytics insights to streamline internal
processes, and building mechanisms for experimentation to enable continuous learning
and feedback.

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 CONTENTS

SR.No. Content Pg.No.

1. Introduction 7
2. Objectives 10
3. Deliverables 10
4. Literature Review 11
5. Challenges for FMCGs in Data Analytics 16
6. Use Cases of Data Analytics in FMCG industry 22
7. Research Outcome 28
8. Conclusion 29
9. References 30

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 TABLES & FIGURES

SR. No. TABLES & FIGURES Pg. No.

1. Figure 1 11
2. Figure 2 14
3. Figure 3 15
4. Figure 4 18
5. Figure 5 18
6. Figure 6 20
7. Figure 7 21
8. Figure 8 22
9. Figure 9 23
10. Figure 10 24
11. Figure 11 24

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1. INTRODUCTION

1.1 Data Analytics

Data analytics (DA) is the process of examining data sets in order to draw conclusions about
the information they contain, increasingly with the aid of specialized systems and software.
Data analytics technologies and techniques are widely used in commercial industries to
enable organizations to make more-informed business decisions and by scientists and
researchers to verify or disprove scientific models, theories and hypotheses.

As a term, data analytics predominantly refers to an assortment of applications, from basic

business intelligence (BI), reporting and online analytical processing (OLAP) to various forms
of advanced analytics. In that sense, it's similar in nature to business analytics, another
umbrella term for approaches to analysing data -- with the difference that the latter is
oriented to business uses, while data analytics has a broader focus. The expansive view of the
term isn't universal, though: In some cases, people use data analytics specifically to mean
advanced analytics, treating BI as a separate category.

Data analytics initiatives can help businesses increase revenues, improve operational
efficiency, optimize marketing campaigns and customer service efforts, respond more quickly
to emerging market trends and gain a competitive edge over rivals -- all with the ultimate goal
of boosting business performance. Depending on the particular application, the data that's
analysed can consist of either historical records or new information that has been processed
for real-time analytics uses. In addition, it can come from a mix of internal systems and
external data sources.

At a high level, data analytics methodologies include exploratory data analysis (EDA), which
aims to find patterns and relationships in data, and confirmatory data analysis (CDA), which
applies statistical techniques to determine whether hypotheses about a data set are true or
false.

Data analytics can also be separated into quantitative data analysis and qualitative data
analysis. The former involves analysis of numerical data with quantifiable variables that can
be compared or measured statistically. The qualitative approach is more interpretive -- it
focuses on understanding the content of non-numerical data like text, images, audio and
video, including common phrases, themes and points of view.

At the application level, BI and reporting provides business executives and other corporate
workers with actionable information about key performance indicators, business operations,
customers and more. In the past, data queries and reports typically were created for end
users by BI developers working in IT or for a centralized BI team; now, organizations
increasingly use self-service BI tools that let execs, business analysts and operational workers
run their own ad hoc queries and build reports themselves.

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1.2 FMCG Industry Background

Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian economy
with Household and Personal Care accounting for 50 per cent of FMCG sales in India. Growing
awareness, easier access and changing lifestyles have been the key growth drivers for the
sector. The urban segment (accounts for a revenue share of around 55 per cent) is the largest
contributor to the overall revenue generated by the FMCG sector in India However, in the last
few years, the FMCG market has grown at a faster pace in rural India compared with urban
India. Semi-urban and rural segments are growing at a rapid pace and FMCG products account
for 50 per cent of total rural spending.

Market Size: The Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$
840 billion in 2017, with modern trade expected to grow at 20 per cent - 25 per cent per
annum, which is likely to boost revenues of FMCG companies. Revenues of FMCG sector
reached Rs 3.4 lakh crore (US$ 52.75 billion) in FY18 and are estimated to reach US$ 103.7
billion in 2020. The sector witnessed growth of 16.5 per cent in value terms between July-
September 2018; supported by moderate inflation, increase in private consumption and rural
income.

Developments: The government has allowed 100 per cent Foreign Direct Investment (FDI) in
food processing and single-brand retail and 51 per cent in multi-brand retail. This would
bolster employment and supply chains, and also provide high visibility for FMCG brands in
organised retail markets, bolstering consumer spending and encouraging more product
launches. The sector witnessed healthy FDI inflows of US$ 13.63 billion, during April 2000 to
June 2018.

1.3 Data Analytics in FMCG Industry

In India, after Agriculture, IT, Telecom and Healthcare, the FMCG sector provides the highest
employment to more than three million people in the country. Major players in the FMCG
sector are ITC, Hindustan Unilever, Amul, Coco-Cola India, half of them being in the household
and personal care.

The FMCG companies try to out-do one another in production, supply chain, sales, marketing
and retail strategies in bringing to us on the store shelf, fast-moving inexpensive products that
may often have a low shelf life. The profit earned from such products is very low and
therefore, to have a sustainable business, the aim of any FMG company is to supply high
volumes that cater to a huge consumer base, thereby earning a high turnover, albeit low
margins.

At every stage of this journey from manufacturing to delivery to marketing and sales, an FMCG
company faces several challenges in decision making and the only resource that can be relied
upon is data. From day one of inception, the company starts collecting data in the form of
POS data, customer demographic data, market research data, promotional campaign data,
finance data, Twitter data, Facebook data, weather data and the list goes on. This data is often
noisy, unstructured, scattered and available in different formats.

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With the help of advanced machine learning algorithms, the FMCG company can merge all
the data and bring structure to it, and therefore find better answers to various problems that
plague their business.

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2. OBJECTIVES

(a) To do a detailed study of Data Analytics and scope of its implementation and impact

(b) To study the application of Data Analytics in FMCG industry and identify areas of impact
through use cases

(c) To study issues related to the implementation of Data Analytics in FMCG industry

3. DELIVERABLES

Detailed study of Data Analytics, and its uses in FMCG industry


Identification of the benefits of Data Analytics implementation, areas where it will be
of significant use for FMCG industry


Study of use cases on implementation of Data Analytics in FMCG industry

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4. LITERATURE REVIEW

Data Analytics in FMCG Value Chain:

Effective use of analytical capabilities will enable FMCG companies to cope with and even
benefit from the key trends impacting FMCG

i. Unfulfilled economic recovery for core consumer segments: Analytics supports the
shift to value by identifying key price points in the market, defining customer
segments, developing new pricing strategies based on competitive intelligence and
increasing efficiency in manufacturing and logistics to reduce costs.
ii. Health, wellness and responsibility as the new basis of brand loyalty: Companies will
experience greater pressure to better align offerings and activities with customer
interests and values. Big Data and analytics help to better understand customer
sentiment, preferences and behaviour. At the same time data analytics enables supply
chain visibility and identifies potential risks.
iii. Pervasive digitization of the path to purchase: An increasingly larger share of
consumer's spends, and activity will take place through digital channels. Analytics is
key in better understanding of purchase and consumption occasions as well as
tailoring channel experience
iv. Proliferation of customization and personalization: In a world where customized
products and personalized, targeted marketing experiences win companies market
share, technologies like digital commerce, additive manufacturing and artificial
intelligence can give a company an edge by allowing it to create customized product
offerings
v. Continued resource shortages and commodity price volatility: Analytics can fuel a
better understanding of the resource market volatility and more efficient use of
critical resources in the production process

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FMCG Analytics Framework:

Figure 1: FMCG Analytics Framework

FMCG Analytics Framework - Marketing/Sales:

In the Marketing/Sales process of the FMCG value chain, analyses are geared towards
improving commercial performance and customer centricity

 Digital Analytics: The online channels are of increasing importance, also in FMCG.
Defining a uniform digital KPI framework and building web analytics capabilities is
key to create insights into the digital performance on the ecommerce platforms.
 Brand Analysis: This analysis focuses on providing insights into the brand
perception of a firm. With the use of (among others) sentiment analysis the firm
can compare the perception of their brand with that of the main competitors and
create a data driven brand strategy.
 Marketing Mix ROI: Analyses focus on determining the effectiveness of marketing
investments. By reducing ineffective spend and intensifying high return marketing
tactics, the marketing mix is optimized leading to higher returns on the overall
marketing spend.
 Pricing Strategy: The analysis focuses on demand variation at different price levels
with different promotion/rebate offers. It is used to determine optimal prices
throughout the product/service lifecycle by customer segment. Benefits include
increasing sales margin, decreasing markdowns and aiding inventory
management.
 Trade Promotion Effectiveness: This analysis focuses on providing insight in both
the effectiveness and planning of trade promotions. These insights allow the

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 company to improve the aforementioned processes to increase sales while
keeping the marketing costs at the same level.
 Competitor Intelligence: Knowledge is power. Knowledge of what your
competitors are doing allows you to take action quickly in order to gain an
advantage. This analysis focuses on obtaining this knowledge and extracting the
actionable insights that allow one to form data-driven competitor strategy.

FMCG Analytics Framework –Manufacturing

In the Manufacturing process of the FMCG value chain, analyses are focused on optimizing
production processes taking in consideration forecasting, planning, efficiency and risk
exposure.

 Production Forecasting Optimization: Analyses focus on the evaluation of

promotion forecasting based on a measurement framework of forecasting
accuracy/error, bias and stability. Improving forecasting accuracy can potentially
lead to reductions in excess inventory, lower labour costs, lower expedite costs,
holding costs, spoilage discounts and reduced stock-outs.
 Production Efficiency: Analyses focus on proactively addressing challenges such as
the increase of efficiency and reduction of costs, but also to help identify
opportunities for consolidating facilities and determine outsourcing and offshore
transfer solutions for international and domestic organizations.
 Workforce Safety: Analyses focus on the identification of the key factors impacting
safety related incidents, the design of measurable interventions to minimize safety
risk and the prediction of types of person(s) who are most at risk to get hurt.
 Asset Analytics: Analyses focus on the prediction of the lifetime of long-term assets
such as building, large machinery and other structural elements. This is done by
calculating the influence of for instance weather, material and usage of the assets.
 Production Planning: Analyses focus on the support of delivering more scientific
and data based real time contingency plans by generating optimal solutions in
short time windows after certain disruptions happen.
 Quality Analytics: Analyses focus on identifying the high impact issues and
understanding a facility’s past performance. The solution consolidates
information allowing a better understanding of the organization’s scope drilling
down to a single facility to make actionable decisions.

FMCG Analytics Framework –Logistics

In the Logistics process of the FMCG value chain, analyses are focused on optimizing
delivery, shipments and warehousing performances

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  Location Analytics: This type of analysis helps solve the problem on what the
optimal location is for a certain facility, based on geographical data. As an
example, the fire department would want their facilities to be spread throughout
a city, so that a fire at any point in the city can be reached with an acceptable
response time.
 Inventory Diagnostics: What is the optimal inventory level that on the one hand
makes sure that the customer receives their goods on time, and on the other
hand ensure that the holding and ordering costs are as low as possible? The goal
of the analysis is to solve this problem for the company.
 Resource & Route Optimization: The goal of the model is to optimize the
available resources and truck routes. This is executed to maximize profitability by
implementing the new optimized route planning model which leads to a
reduction of the resource usage.
 Supply Chain Diagnostics: Supply chain diagnostics aims at enabling and
improving the ability to view every item (Shipment, Order, SKU, etc.) at any point
and at all times in the supply chain. Furthermore, its goal is to alert on process
exceptions, to provide analytics, and to analyse detailed supply chain data to
determine opportunities of cycle time reduction.
 Fulfilment Intelligence: Focuses on increased reliability of purchase order
submission process until delivery. Analysing supply chain for identification of
common or consistent disruptions in fulfilment of orders. Reliability is key, even
more so than speed.
 Reverse Logistics: In case of malfunctioning products, companies have to deal
with the process of reverse logistics. By getting more detailed insights in the
costs of this process, companies can have a better focus on how to reduce these
costs.

FMCG Analytics Framework –Business Management & Support

In the Support process of the FMCG value chain analyses are focused on determining
potential improvements in the organization

 Workforce Analytics: Encompasses workforce planning and analytics across all

phases of the talent lifecycle. The workforce planning component provides
insights and foresight into addressing current and future talent segment related
challenges and development. Moreover, this offering applies analytics solutions
to key talent processes.
 Sustainability Analytics: Helps companies with sustainability related strategies such
as assessing future environmental and health impacts. Using an overview of the
most important resources and an insight in the product lifecycle, a prioritisation can

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 be made which product categories are most at risk and which show the most
potential.
 Finance Analytics:
o Working capital, spend analytics, double payment, risk and tax analyses
o Helping companies to get control of their financial data, finance analytics
enable companies to model business processes and gain deeper insight
into cost and profitability drivers
 Business Process Analytics: Help companies to understand their risk exposure
better, and to proactively identify and mitigate sources of risk on an enterprise
scale. Armed with this information, executive management and boards will be
better equipped to navigate challenging economic conditions.
 Program/portfolio analytics: Enables companies to model their
program/portfolio performance by providing fact-based insight into the
performance of the total portfolio down to project level. Among other things, it
allows companies to prioritize projects better, identify potential budget overruns
in an early stage and optimize resource allocation.

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5. CHALLENGES IN THE WAY OF FMCGS FOR DATA ANALTYICS

There are six main challenges with FMCG companies moving forward in the field of data
analytics. These have been listed below.

Figure2 Challenges with FMCG

The above challenges have been explained.

1. Product Master Data:
Product master data is a key enabler of transactions across the value chain. Recent studies
have found that 34 percent of product master data is misaligned between trading partners.
Australian and New Zealand suppliers and retailers conduct millions of transactions and
product shipments every week. It is critical that the supply chain or logistical data associated
to each product, such as weight, height and width, is accurate and can flow in near real time
across the value chain. This is referred to as PMD.
This information is used to plan store shelf layout, warehouse storage and transportation, to
manage hazardous products and the health and safety of workers. It is critical to the value
chain working effectively and efficiently.
As consumers demand more information about their products and online sales increase,
there is also a need to link consumer information to each product. This information includes

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ingredients, country of origin, allergens information etc. For the purposes of this study we
have included this consumer facing data in our definition of PDM.
In Australia and New Zealand, GS1, the industry standards organisation, provides a solution
for the industry to capture, share and update this information. This is known as the National
Product Catalogue (NPC), and suppliers and retailers can connect to it electronically to
update or extract the product data they need.
Despite best efforts, the challenge is that the PMD in retailer systems do not always align
with data in the supplier systems, and hence is inaccurate and misaligned. An audit from a
large retailer in June 2017 found that a massive 34 percent of its PMD did not match the
information from its suppliers.
This misaligned data has wide reaching financial, service and safety implications.

Figure3. Data Misalignment Potential Issues and Themes

2. Customer Data:
Access to, and effective analysis of customer and consumer data is becoming a key business
requirement to drive supply chain performance improvement. As value chains are required
to be more agile and efficient, increasing levels of data needs to be shared with the entire
value chain to drive business decisions, particularly forecasting and demand planning.
An ability to harness real time data, e.g. point of sales, stock on hand, and where possible
access consumer data through new and emerging channels, is a key enabler of creating
insightful forecasts and establishing a responsive demand driven supply chain.
Insightful forecasting in the FMCG environment has never been more critical or complex,
and based on the study we just completed, we expect this to continue.
Some of the drivers behind the criticality and complexity are:
 increased product innovation leading to less stable demand
 focus on simplifying ranges at a retail level leading to high levels of SKU churn and
less stable demand

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  ongoing use of promotions leading to significant fluctuations in demand.
Through industry engagement processes a gap in the level of operational and transactional
data shared between supply chain participants was observed. A number of manufacturers
indicated they do not always have access to required data from retailers to create
meaningful and insightful forecasts.

3. Empowered Consumer:
Empowered consumers are demanding increasing levels of data with regards to products
and at the same time are expecting increasing levels of customisation in product and
service.
Improved supply chain transparency, trust, customisation and agility enables organisations
to deliver on customers’ value levers.
Accelerating innovation and technology adoption have heightened consumer expectations.
Today’s consumers are connected, empowered, conscious, demanding and informed, with
seemingly unlimited information sources and choices.
Consumers expect tailored and customised products and services and they are willing to pay
a premium for products that have a positive impact on the local community, environment
and their health. These expectations are putting pressure on supply chains to be
transparent, agile and customisable.
The first challenge for FMCG and retail value chains is keeping up with evolving consumer
product data demands. Consumers want to understand the ingredients, provenance and
sustainability of products, and select products that provide this information. A Nielsen’s
study suggests that 55 percent global online consumers across 60 countries are willing to
pay more for products and services provided by companies that are committed to positive
social and environmental impact.1
The second challenge is how to capture this information, share it, and integrate it into
product labels or digital sales channels. Small suppliers can struggle (due to product
complexity, capability and capacity) to provide it in the first instance.
Lastly, brand manufacturers need to work towards improving trust in their products and
product claims. This will require commercial and operational teams to develop processes
and procedures to standardise and verify data across the supply chain.
To meet this growing market demand, organisations need to provide transparency of
product information throughout the supply chain. They need to have the capability to
associate information with products.

4. Government Regulation and Public Responsibilities:

The FMCG and retail sector operates in a complex regulatory environment which requires
increasing levels of supply chain data.
Data is a key enabler to deliver on government policy objectives and conversely,
government policy often requires new forms of supply chain data.
The FMCG and retail supply chain operates in a complex regulatory environment. There are
a number of regulatory and policy areas which will affect the operation of FMCG and retail
supply chains. Some of the key policy areas identified include the Food & Grocery Code of

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Conduct, food labelling, focus on food waste reduction and the container deposit scheme.
We will highlight two challenges: waste and food labelling.
Supply chain data will be a key enabler of identifying the cause and solving the issues. There
are a number of opportunities to improve the sharing of data up and down the supply chain,
to help identify the root cause and combat food waste. For example:
 Primary production: Using predictive smart sensing technology to identify the ideal
harvesting time for key food crops, and working from farm through to retailers to
influence demand from farm to consumer is becoming an increasing focus for
primary producers.
 Logistics: Using IoT, blockchain and innovative packaging technologies to extend the
shelf life of products.
 Store operations: Improving the process to accurately measure waste and identify
root causes at a retail level.
 Consumption: Using big data to better understand consumer buying preferences and
sharing this up and down the supply chain to better match supply to demand.

5. Data Security:
As supply chains become more complex and increasing levels of data are shared between
partners the risk of data security breaches increases.
Supply chains have always presented data security risks, but with the digital age increasing
the reach and number of linked businesses, a simple contract or a basic device like a radio-
frequency identification (RFID) tag could now be a ‘Trojan Horse’ for potential cyber-security
issues.
Eighty percent of Australian CEOs rate cyber security as a top investment priority and
amongst the top five risk areas for their business. Less than half (45 percent) believe they
are fully prepared for a cyber-threat. Some estimate up to 80 percent of security breaches
occur through the supply chain. (SANS Institute Info Sec Combatting Cyber Risks in the
Supply Chain).
If suppliers have poor IT security, there is greater potential for Intellectual Property,
customer information or a business strategy to be exposed.

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Figure 4: Top supply chain risks from a C-level view

Figure 5: Anatomy of a supply chain breach

6. Supply Chain in a Digital World:

A number of technologies are currently or will revolutionise the FMCG and retail supply
chains. These include Artificial Intelligence (AI), Blockchain, Machine Learning and the
Internet of Things.

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Technology investments are driving the supply chain evolution from linear responsive flows
to interconnected predictive smart networks, where customers are the core focus.
Organisations are making significant supply chain technology investments. In 2017 Gartner
valued the supply chain technology market at $13 billion, up 11 percent on 2016, and on
track to exceed $19 billion by 2021.
Technology investments are driving the supply chain evolution from linear responsive flows
to interconnected predictive smart networks, where customers are the core focus.
A plethora of new technologies are enabling supply chain partners to sense, predict and
respond more efficiently to consumer demand signals. Those that embrace these
technologies are experiencing significant uplift in supply chain performance including:
 reduction in inventories
 improved transport flows and costs
 connected and shared data
 reduced volume of returns
 significantly improved overall customer experience

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6. USE CASES OF DATA ANALYTICS IN FMCG

This section contains the analysis of the usage of data analytics in the FMCG industry and
the use cases of Data analytics in various FMCG firms. These use cases also show instances
of where a consulting firm Deloitte has helped the various FMCG companies implement data
analytics.

Use Case 1: Digital Analytics: Defining a KPI framework and embedding it through online
dashboards

Challenge: This global Food company wanted to undergo a digital transformation. However
there was little visibility on web analytics capabilities, no accessibility to in-market web
analytics, limited standards and KPI definitions and reporting. For e-commerce there little to
no online market share data available in the countries

Approach: Deloitte supported in defining uniform KPIs and a roadmap for implementation
for both domains. Deloitte supported in extracting web analytics data and requesting in-
market data about on-line market share from the countries. The first phases for both
marketing and e-commerce were to develop tooling to measure and compare digital
performance across target countries for both marketing and e-commerce

Benefits:
•Delivered a marketing dashboard & KPI framework with global definitions
•Delivered a (hosted) e-commerce dashboard & KPI framework with global definitions, also
making web analytics more financial by measuring the financial impact of web analytics
•Finally, the roadmaps for both marketing and e-commerce providing clear guidance on
maturing in the area of online marketing and e-commerce

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Figure 6

Use Case 2: Brand Analysis: Investigating brand perceptions by assessing positive and
negative opinions regarding the firm

Challenge: The firm wanted to investigate its brand perception by assess positive and
negative opinions regarding the firm. They wanted to be able to highlight locations showing
positive and negative perceptions. The client also wanted to compare their firm with the
main competitors in order to create a data-driven brand strategy

Approach: The project involves a web spider which extracts related and unstructured data
from the internet from a number of different sources (social media, blogs, news feeds
etcetera). The analysis is then carried out in a text mining tool to process the data for
sentiment related content and output the results to an interactive dashboard for
visualization

Benefits: The results of the analysis include sentiment scores across the business areas and
a root cause analysis. These enable a real-time understanding of their online brand and

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identification of the differentiating factors between positive and negative perceived
programs/areas. The delivered insights can be used to determine the necessary actions in
order to promote the firm’s brand in certain programs/areas.

Figure 7

Case Study 3: Pricing Strategy Using analytics to reshape pricing strategies

Challenge: Years of inorganic growth and sales led customer negotiations to tailored pricing
across trade customers, resulting in large and difficult to defend price variance across
customers. Pricing differences between accounts exposed this CPG client to downward
pressure on pricing when trade partners consolidated or buyers moved retailers
Existing pricing and trade terms structure were not compliant with internal accounting
standards

Approach: Deloitte developed a consistent, commercially justifiable list of pricing and

trading terms. The potential impact of new pricing and terms on customers was assessed

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and a high-level roadmap for execution was established. The business is supported in the
preparation for the implementation of the new pricing and trading terms.

Benefits: Following were the benefits of the implementation

 Single common list price for each product

 Revised ‘pricing waterfall’ and trade terms framework
 Customer and product level impact analysis
 Trade communication strategy
 High-level implementation roadmap

Figure 8

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Figure 9

Case Study 4: Production Efficiency: Analytics is imperative to quickly and comprehensively

evaluate your production process, identify opportunities for improvement and customize
solutions that quickly drive measurable results

Challenge: At any stage of a company’s evolution, improving operating performance is

important. Lean methodologies applied to nearly any organization enable an efficient and
lean enterprise. Analytics can support manufacturers to proactively address the challenges
they face today. If applied correctly, analytics can become a major driver for Lean Six Sigma
and other process improvement disciplines seeking to increase efficiency and reduce costs

Approach: Analytics assist management teams to devise the appropriate process control
strategy and support its implementation.
Different methods are applied to uncover potential inefficiency and cost reduction
opportunities such as:
•Outlier detection
•Predictive modelling
•Scenario modelling
•Optimization & simulation

Benefits: Key results of production efficiency analytics include;

•identifying opportunities for consolidating facilities, outsourcing and off shore transfer
solutions
•identifying unprofitable product lines for manufacturing operations
•reducing idle time for production facilities
•reducing defects and waste

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Figure 10

Figure 11

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7. RESEARCH OUTCOME

Our research outcome comprised of the following:

 Detailed study of data analytics and its uses in FMCG sector

 Identified the benefits of data analytics implementation, areas where it will be of

significant use keeping FMCG firms as a potential user for the technology

 Studied use cases of the areas where data analytics has already been implemented in
FMCG firms, and how it has benefitted

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8. CONCLUSION
Organizations generate colossal amounts of data every day. However, only a handful of them
are able to harvest useful information. Why only a handful, because these organizations
follow a business intelligence strategy that harnesses knowledge. Enterprises and
organizations that are able to integrate a business intelligence strategy have a competitive
advantage. Such enterprises do not focus only on traditional reporting and/or analytics but
on predictive analytics to deliver robust products and top-line. For today’s enterprises and
organizations, hunches and experience, that mid and senior level management brought to the
table, have been replaced with logical frameworks and business strategies.

The competition in the FMCG industry today adds various components to consolidate their
position in the market, create new sales channels and growth opportunities, while increasing
the efficiency of their supply chain. To compete in such an environment, FMCG companies
should leverage an authoritative grouping of business intelligence, technology and management
to be able to compete and win market share.

Data Analytics helps in increasing top line revenue and saving costs at the same time by:
 Determining the ROI for marketing strategy.
 Ensuring the organizations spend the right amount at the right place at the right time.
 Identifying lost opportunities.
 Identifying new segments to target.
 Optimizing spend, based on the BCG Matrix.
 Providing insights on determining the best promotional strategies which yield
maximum results.
 Bettering marketing and sales strategies.
 Increasing sales by improving operational efficiencies by driving better OTIF and MSL
compliance.
 Identifying the ROI on the shelf expenditure for each individual retailer.
 Improved sales forecasting.
 Understanding market share and competitor performances better.
 Helping organisations analyze the performance of new product launches relative to
other compete products.

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9. REFERENCES
1. Colleen McCue, Data Mining and Predictive Analysis: Intelligence Gathering and Crime
Analysis (Burlington, MA: Butterworth-Heinemann, 2006), 117.

2. David J. Hand, Heikki Mannila, and Padhraic Smyth, Principles of Data Mining (Cambridge,
MA: MIT Press, 2001), 6.

3. Robert Nisbet, John Elder, and Gary Miner, Handbook of Statistical Analysis and Data
Mining Applications (Burlington, MA: Elsevier, 2009), 316.

4. Facebook Engineering, “Under the Hood: Scheduling MapReduce Jobs More

Efficiently with Corona,” November 8, 2012, www.facebook.com/notes/
facebook-engineering/under-the-hood-scheduling-mapreduce-jobs-moreefficiently-
with-corona/10151142560538920.

5. Nisbet, Elder, and Miner, Handbook of Statistical Analysis and Data Mining
Applications, 23.

6. Pete Chapman et al., “CRISP-DM 1.0, Step-by-Step Data Modeling Guide,” www
.the-modeling-agency.com/crisp-dm.pdf.

7. Canadian C-Spine Rule web site, www.ohri.ca/emerg/cdr/cspine.html.

Brown, “Introduction to Data Mining for Medical Informatics.”

8. Hastie, Tibshirani, and Friedman, The Elements of Statistical Learning, 4.

9. Samprit Chatterjee and Ali S. Hadi, Regression Analysis by Example, 5th ed. (Hoboken, NJ:
John Wiley & Sons), 1.

10. Conrad Carlberg, Predictive Analytics: Microsoft Excel (Indianapolis: Pearson Education,
2012), 4.

11. Richard O. Duda, Peter E. Hart, and David G. Stork, Pattern Classification, 2nd ed. (New
York: John Wiley & Sons, 2001), 395.

12. Hastie, Tibshirani, and Friedman, The Elements of Statistical Learning, 417.

13. Nisbet, Elder, and Miner, Handbook of Statistical Analysis and Data Mining Applications,
316.

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