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Search - Omni-channel will be the key driver of growth, but only 38% of senior executives say omni initiatives have a positive impact on profit margins
- 81% believe the supply chain is no longer fit for purpose as new channels emerge
- Companies must build a more responsive, integrated supply chain and improve consumer visibility
LONDON and PARIS, 3rd February 2015 – Omni-channel is fast becoming the key driver for consumer products and retail sector growth, but few can make it profitable using the traditional supply chain. That is according to Re-engineering the supply chain for the omni-channel of tomorrow – a joint survey conducted by EY and The Consumer Goods Forum drawing on the views of 42 senior executives from the world’s largest consumer products and retail companies.
Omni-channel provides consumers with a seamless shopping experience across multiple platforms, including online and in-store. Amidst record online sales over the 2014 holiday season, consumers now have higher expectations than ever about how they purchase and return goods across these channels.
Yet, while effective omni strategies yield clear competitive advantages for companies, only 38% of respondents say their initiatives have a positive impact on profit margins.
The supply chain is not fit for purpose
Eighty-one percent of respondents state that the current supply chain is not fit for purpose for omni-channel.
Annual global online growth is set to soar to 15% between 2014 and 2019, while bricks and mortar will account for just 5% of growth. In a drive to meet this new demand, many companies have simply annexed e-commerce systems, rather than developing integrated processes. To succeed, firms will need to redesign the supply chain to address increasing complexities.
Andrew Caveney, EY’s Global Supply Chain and Operations Leader, says: “Reengineering the omni-channel supply chain must be a priority for consumer goods companies and retailers if they are going to remain relevant to both the consumer and their shareholders.”
A consumer-centric approach
The report recommends placing omni-channel at the center of operations to understand how to meet consumers’ ever-changing needs and expectations. This will require achieving end-to-end visibility across the supply chain by adopting new technologies and analysing where companies can add value.
Firms need to tread a delicate balance between efficiency and agility; embedding flexible systems that respond to customers’ priorities is essential. Notably, only 24% of respondents believe they have a strategy to achieve this.
David Jones, Co-Chair of The Consumer Goods Forum Supply Chain Committee, says: “Getting to know your consumer and striking the right balance between agility and efficiency is at the heart of omni-channel. This is not an overnight process and could require an overhaul of everything from corporate structures to IT systems.”
Bold and committed leadership
To manage the transition, leadership must commit to change by rebuilding organizational structures from the ground up and resolving conflict among the workforce. Indeed, 37% of respondents identified lack of leadership support as a key barrier to success.
Caveney says: “It rests with leadership to create the impetus for change and cultural shifts. We advise companies to create teams that mix people with more ‘disruptive’ capabilities and those who are more aligned with the existing model.”
— Ends —
Methodology
EY worked with the Consumer Goods Forum to survey 42 senior executives of large organizations in the consumer products and retail sectors. The interactive report was supplemented by in-depth interviews with select companies that had completed the survey. The respondent distribution is shown below:
- 40% – More than US$25b
- 24% – Between US$10b and US$25b
- 24% – Between US$1b and US$10b
- 10% – Less than US$1b
About EY
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This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.
How EY’s Global Consumer Products team can help your business
Strategic trends are driving the next wave of supply chain evolution, creating different challenges and opportunities in industry sectors and services. With more than 2,400 supply chain and operations professionals across 150 countries, EY has a truly globally integrated supply chain organization addressing clients’ most complex supply chain transformational problems and delivering innovative, superior and sustainable results.
Consumer products companies are operating in a brand new order, a challenging environment of spiraling complexity and unprecedented change. Demand is shifting to rapid-growth markets, costs are rising, consumer behaviour and expectations are evolving, and stakeholders are becoming more demanding.
To succeed, companies now need to be leaner and more agile, with a relentless focus on execution. Our Global Consumer Products Centre enables our worldwide network of more than 17,500 sector-focused assurance, tax, transaction and advisory professionals to share powerful insights and deep sector knowledge with businesses like yours. This intelligence, combined with our technical experience, can assist you in making more informed strategic choices and help you execute better and faster.
Visit EY’s Consumer Products homepage here: ey.com/UK/en/Industries/Consumer-Products.
About The Consumer Goods Forum
The Consumer Goods Forum (“the CGF”) is a global, parity-based industry network that is driven by its members. It brings together the CEOs and senior management of some 400 retailers, manufacturers, service providers, and other stakeholders across 70 countries, and it reflects the diversity of the industry in geography, size, product category and format. Its member companies have combined sales of EUR 2.5 trillion and directly employ nearly 10 million people, with a further 90 million related jobs estimated along the value chain. It is governed by its Board of Directors, which comprises 50 manufacturer and retailer CEOs.
The CGF’s mission is, “Bringing together consumer goods manufacturers and retailers in pursuit of business practices for efficiency and positive change across our industry benefiting shoppers, consumers and the world without impeding competition”. It provides a unique global platform for the development of global industry processes and standards as well as sharing best practices. Its activities are organised around the following strategic priorities: Sustainability, Product Safety, Health & Wellness, and End-to-End Value Chain & Standards, each of which is central to better serving consumers.
The CGF’s success is driven by the active participation of its members who together develop and lead the implementation of best practices along the value chain. With its headquarters in Paris and its regional offices in Washington, D.C. and Tokyo, the CGF serves its members throughout the world.
For more information, please visit: www.theconsumergoodsforum.com.
For further information, please contact:
The Consumer Goods Forum
Fergus Campbell
GOLIN (PR agency)
+44 (0)207 067 0699
fcampbell@golin.com
Michael Curtis
EY Global Media Relations
+44 (0)207 980 045
michael.curtis@uk.ey.com
