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Case study: How a CPG major improved growth and profitability through digital transformation

The Vietnamese division of an Indian consumer packaged goods (CPG) company increased revenue and operational efficiency by reducing sales and supply chain costs, supported by digital transformation of its business.

Related topics Supply chain Consulting
Operational processes in supply chain
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The better the question

What aspects of business transformation can eliminate inefficiencies and impact the top line?

Several inefficiencies were causing high cost of operations and high raw material, procurement and logistics costs.

A large Indian CPG’s Vietnamese business was experiencing slow growth and low profitability for five years. Consequently, it impacted the company’s ability to invest in brand building and growth. The company needed to identify the reasons causing its slow top line growth and dipping profits.
An investigation into the company’s systems, suppliers, and operations revealed that inefficiencies in sales and distribution, operational processes, and supply chain were resulting in higher costs and reducing profitability.

Core inefficiencies impacting a CPG company

Core inefficiencies impacting a CPG company

Source: EY’s engagement team working with an Indian CPG company

Digital business transformation in CPG industry
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The better the answer

High market servicing costs and operating inefficiencies were the focus areas of the business transformation

The transformation constituted optimizing distributor channels, identifying opportunities for digitizing operations and lowering sourcing costs.

Our analysis revealed that there were three areas requiring transformation – sales (sales channel was spending an inordinate amount of effort in servicing fringe outlets, operations (eliminate role and responsibility duplications that were slowing down the decision-making process), and supply chain & procurement (inefficiencies in its dated supply chain and procurement system which translated into high vendor and raw material and procurement costs).

EY formed a three-pronged strategy that looked into the sales strategy, digital processes, and the supply chain and procurement channels to simplify, streamline/rationalize and bring in more efficiency in the system for faster decision making and lower costs.

Transformative change
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The better the world works

The digital transformation drove value across revenue, cost, and working capital

EY helped bring a transformative change to increase future profitability and optimize current spending.

We identified a potential saving of approximately ~50% of profit before tax in the three channels – sales, operations and supply chain and procurement.

Efficiency improvements at an Indian CPG company after EY’s business transformation

Efficiency improvements at an Indian CPG company after EY’s business transformation

Source: EY’s engagement team working with an Indian CPG company

EY’s solutions cemented distributor channels and relationships and provided better service for the company and its products. The revamped sales channel proved to be invaluable in boosting revenues, overall firm’s growth and save viral costs, which thereby led to higher profits. This also allowed the company the required time to focus on building the brand.