Consumer Products & Retail

As consumer demands evolve, consumer products and retail companies must find the right balance between success today and growth tomorrow.

Disruptive technologies, new business models and agile market entrants are revolutionizing the way people shop, what they buy and how they live. In this complex environment, consumer products and retail (CPR) companies must shift their focus from protecting what they have to creating what they need to become.

CPR companies must rethink how and where to serve the smart consumer. They must build the capabilities to put data at the heart of the organization and create the agility to respond to market change. Their supply chain must evolve into a transparent demand-response network.

We help CPR companies explore, identify and implement the right balance of bold strategic choices that will sustain their business today and transform it for relevance tomorrow.

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How a family enterprise transformed their business to become future-ready

The family enterprise’s business transformation journey to drive their next level of growth and expansion

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Optimize for today? Build for tomorrow?

Getting ready to manage the scale and future growth of the business.

EY worked with one of India’s leading food and snacks brands to help gear up their business for future growth and expansion through transformation of their key business functions on the back of a robust technology infrastructure.

The organization operates in an industry which has been traditionally dominated by a few large Indian and multinational organizations but has seen a massive growth of regional homegrown players. The brand has been growing rapidly year-on-year with a market leading share in its segment. However, the client further wanted to make its key business functions future-ready and more efficient than ever before. They were cognizant of the need to build up their organizational capability and modernize yet simplify key aspects of their business in order to ensure sustained growth.

The scale and future growth of the business – EY India
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An integrated business and technological transformation approach

Strengthening key functions and processes, with supply chain, Enterprise Resource Planning (ERP) and route-to-market being the major building blocks.

EY conducted a detailed diagnostic to understand the capability, build imperatives and simplify the processes. Key focus areas for the organization were:

  • Having a scalable route-to-market model to deliver best-in-class sales and distribution services.
  • Improving control of last-mile execution to ensure availability and visibility at the point of sale.
  • Establishing an integrated and centralized supply chain function to build an end-to-end digital supply chain planning capability. This helped in improving availability of products and measuring customer service levels with optimal inventory.
  • Building a robust technology backbone with a market leading ERP and best-in-class business processes at its core.

Based on the identified themes, EY worked on a 20-month-long transformation journey which significantly changed the way the client was functioning across its entire value chain.

The key initiatives of the transformation included:

  • Route-to-market transformation: focused on improving availability and visibility at the consumer point of sales across towns and cities, the initiative prioritized direct coverage expansion and range selling across urban and rural markets. This was further facilitated by significant distributor consolidation for scale and efficiency.
  • Supply chain planning: EY helped set up a centralized and integrated supply chain planning function. This included designing the supply chain organization structure, moving to a completely pull-based replenishment system to minimize stock-outs and deploying EY’s proprietary suite of Asterisk Supply Chain Planning Solutions. The institutionalization and sustainability of the solution was backed by change management to embed the capability and new ways of working in the organization.
  • Technology: EY’s subject matter experts with consulting and technology capabilities came together to design, implement, train and migrate the client’s existing ERP system to SAP S/4 HANA in a short span of seven months. This entire initiative also entailed redesign of the brand’s key transactional business processes to leading industry practices, enabling a fully-functional state-of-the-art integrated technology backbone.
Technological transformation approach – EY India
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Positive impact on EBITDA margins with simplified business operations

The transformation was backed by right design and implementation coupled with strong change management.

Over a period of just 24 months, the client started to reap the benefits of the integrated business and technology transformation initiative. These were visible in the form of significant addition to the earnings before interest, taxes, depreciation, and amortization (EBITDA), enabling the client to improve its margins vis-à-vis its competition. This included:

  • Close to 3% addition to the top line on account of lower loss of sales.
  • Almost 4.5% addition to the top line in the pilot markets by implementing the route-to-market initiative.
  • 11% improvement in forecast accuracy and reduction of stock-outs at super stockists to below 3% without increase in inventory.
  • 58% increase in the number of outlets driven by 35% addition of frontline salesforce, completely on the back of distributor costs and no additional costs incurred by the client.

Some of the more qualitative benefits delivered included efficient, scalable and robust business processes, which were enabled and automated by an integrated technology backbone with a state-of-the-art ERP system. Another key benefit was consolidation of distributors for greater efficiency.

The overall transformation process helped the client to create a more resilient supply chain and scalable sales and distribution strategy backed by modern technologies, which are not only future-ready, but are also capable to better manage market volatility.

(Contributors include Rajan Sachdeva, Nikhil Arora, Sanjay Katyal, Aniruddha Devera Konda, Apurva Agarwal and Sumanth Viraktamath.)

EBITDA margins with simplified business operations – EY India
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How EY optimized the supply chain of a leading Indian MNC

EY helped a leading FMCG company optimize vendor costs, eliminate redundancies, and create a common sales and operations platform

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How can we unlock synergies from two businesses post acquisition?

After acquiring several iconic brands, a leading FMCG company needed to capitalize on the synergistic benefits of the opportunity.

In 2018, one of India’s leading FMCG companies acquired a consumer business which housed several reputed brands. After the acquisition, the immediate priority for the company was to identify and tap into synergistic opportunities of the acquisition. Supply chain and procurement was one of the primary focus areas for cost, operation and capacity optimization. Both sets of businesses had many overlaps across the supply chain, including suppliers, locations, and raw materials. The company had to quickly identify all existing overlaps and eliminate redundancies.

How EY optimized the supply chain of a leading Indian MNC
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We optimized the supply chain of the complete brand portfolio

The optimization covered three critical areas ꟷ procurement synergies, logistics and network optimization, and sales and operations planning.

As the company wanted to ensure that it leveraged the benefits of synergies from the acquired entities, it employed EY to optimize the complete supply chain. The core areas of supply chain optimization included:

  • Realizing procurement synergies and optimizing vendor costs.
  • Lowering of warehouse and freight costs by identifying logistics overlaps.
  • Integration of sales and operations planning across the complete brand portfolio. 

EY led three critical areas of supply-chain optimization: procurement synergies, logistics and network optimization, and sales and operations planning.

Procurement levers to extract synergistic value

To realize value from various synergistic opportunities in packaging, EY investigated several cost levers and their potential impact. The team deep dived into cost sheets and identified saving opportunities for major packaging material through index-linked buying. In addition, EY also consolidated vendor bases and leveraged scale across key categories for negotiation, besides leveraging different price floors which the two organizations had.

EY also conducted market assessments and index identification for synergistic raw material categories and alternate vendor and price discovery for high priority categories. It also developed a scientific price forecasting model for better indicative price visibility.

End-to-end network optimization from analysis to implementation

EY conducted an end-to-end investigation to identify network cost optimization opportunities. It included, sales gravity analyses, cost and service lever optimization runs, and network footprint implementation. The team also conducted center of gravity analysis for CFAs and hubs and determining cost baseline values and identified a list of several CFA locations and determined their associated cost savings.

The value drivers of the network optimization exercise included warehouse and freight lanes consolidation, price discovery and alternate vendor identification, and primary freight management. EY also piloted the 3PL logistics model in key regions.

Building a common sales and operations planning strategy

Since the two entities had different sales and operations planning approaches, the company needed a common governance model and tech-enabled process to establish visibility and control across the integrated entity’s complete value chain. EY’s intervention was targeted at bringing three crucial components of the sales and operations planning processꟷ demand planning, replenishment planning, and sales and operations planning meetings. These included overhaul to the company’s forecasting processes and reporting mechanisms, improving responsiveness of the entity’s replenishment planning approach, and establishing a formalized decision-making process.

Next generation supply chain operations - EY
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An efficient supply chain led to lower costs and better value

The company realized lower supply chain costs, more operational efficiency, and better decision-making across the complete brand portfolio.

EY’s approach was premised on several value drivers spread across different cost or value measures across all three optimization categoriesꟷ procurement synergies, network and logistics, and sales and operations planning. It involved investigation of different pricing models, alternate vendor discovery, and rightsizing different logistics costs. As a consequence of the supply chain optimization, the company identified and started implementing synergies across the target areas.

Cost and value improvements which EY’s delivered for an Indian FMCG company

  • Procurement synergies

Identified procurement synergies of

~7-10%

across key packaging material categories

  • Network and logistics

Optimized network and logistics cost reduction helped in identifying opportunities of

~12-15%

in logistics spend

  • Sales and operations planning

Identified

~20%

inventory reduction potential

(Contributors include Nishit Bhatia, Shreyan Sarkar, Abhijeet Vaidya, Amit Kumar, Shivagurunathan Narayan, Chirag Goel.)

Supply chain Management of an Indian MNC – EY

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