Jan 26 2021
Article

The three IT areas to focus on to have a more sustainable, profitable FMCG business

Written by Peter Evans
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Ask any FMCG business owner if they want to be more profitable, and the answer will be a resounding yes. But ask about sustainability, and the answer can be a little more complicated, especially in the current situation. But it shouldn’t be.

Did you know that during the 2008 recession, companies committed to sustainability practices achieved “above average” performance in the financial markets, translating into an average of $650 million in incremental market capitalization per company?

Or that investors are now able to track the high performers on ESG (environmental, social and governance factors) and the winners here are also showing better financial performance?

Sustainable means profitable

The two concepts of profit and sustainability are not at odds, but instead interwoven.

Take Walmart, who aimed to double fleet efficiency between 2005 and 2015 through better routing, truck loading, driver training, and advanced technologies and by the end of 2014, had improved fuel efficiency approximately 87% avoided 15,000 metric tons of CO2 emissions avoided — and they made savings of nearly $11 million.

Coupled with the fact that consumers want to know that the companies are making serious sustainability efforts, and with the FMCG sector responsible for over a third of global greenhouse gas emissions, now is the time to act.
Michel Porter and Mark Kramer pioneered the idea of “creating shared value,” and have suggested that businesses can generate economic value by identifying and addressing social problems that intersect with their business. You can do the same, and the great news is, the tech is already one step ahead. AI is meaning that you don’t need to wait for the push of government regulation. Instead, you can access your own personalised steps to limit waste, engage shareholders in your mission and deliver real change.

Here are three steps we recommend to have a more sustainable, profitable FMCG business.

One way to improve is to focus on small incremental changes using achievable goals.

In the McKinsey article ‘Profit with Purpose’ it states that FMCG businesses should set external goals that can be distilled into business metrics.

“These goals should be specific, ambitious, and measurable against an established baseline… and their intent should be unmistakable.”

One way to do this is by the use of a scorecard system. A scorecard gives an AI-generated, intelligent set of flexible and adaptive goals to where your business is today.

Using AI-generated recommendations, each person in your supply chain can make the suggested weekly, incremental improvements to drive exponential value over time — saving waste, money and conserving precious resources.

By using a scorecard, store managers can focus on driving sustainability by decreasing waste (and increasing profit) and ensure everyone can focus on sustainability in their daily work.

The Orderly scorecard focuses on three areas; using AI to display three sustainability areas that the store is doing well at, two they can improve upon and finally one overall “Orderly Score”.

Multiply this gradual improvement across an entire store estate, and there are dramatic changes.

Improved order management systems

Covid-19 has led to widespread transformation within the entire supply chain, causing a significant digital adaption acceleration.
It also brings the chance to reassess how you are doing things. With that disruption has come the opportunity for substantial innovation.

We all needed to efficiently manage how our orders were made and delivered, and pick/pack and warehouse operations changed at speed. Now is the time to work from this new landscape and ensure you also reduce waste in your supply chain, and for you, the fastest way to make this change may be through a new and improved order management system.
Nestle (an Orderly client) has said, ‘focusing on automation and digitalization will enhance efficiency in processes and speed to market.’ It can also ensure you only order things that you actually need and use, increasing sustainability.

Speedier, more reliable forecast management

Forecasting correctly gives you your best chance to control your business and safeguard against waste. The first steps are to assess — what is happening in stores? How are sales levels? How are stock levels? Now is the time to be proactive and establish channels with store networks, IT and suppliers.
Ensure your data reviews enable you to spot problems in advance, and potentially, bring extra expertise into forecast management.

With Orderly, planning and replenishment teams are now forecasting with more accuracy and timeliness, with no need to write off stock. This reduces waste and increases responsibility and profits.

Now is the time to change

Whilst the discussion on having a sustainable FMCG business is changing from one of superficial virtue signalling to becoming embedded in corporate and consumer culture, it’s critical that you can act now to make realistic business adjustments.

Realistically, it is not the quickest, easiest and cost-neutral changes that will drive the best results, but as the phrase goes ‘The man who moves a mountain begins by carrying away small stones.’

If you’re ready to use tech to make a change today, speak to us today,