Adopting Fourth Industrial Revolution (4IR) technologies will help countries and businesses achieve sustainable growth, several studies have shown. 4IR capabilities create higher top and bottom line value through faster design, novel products, reduced risks, elimination of waste and so on. But while growth is clearly a vital objective for any industry, is it the ultimate motive for rushing into such technologies?
The world’s ever-growing population is increasingly digitized, affluent, ageing - and seeking sustainable solutions. Today, three billion people have mobile access, with a 10% annual growth rate. Innovations such as voice assistants and the Internet of Things are redefining the whole shopping experience and disrupting retail, blurring the lines between when and how consumers learn about products, decide on a purchase and actually transact.
As a result, e-commerce is growing globally at 18%, with a broadening scope from fashion and electronics to beauty, cosmetics, pet care, pharmaceuticals and sporting goods. P&G’s e-commerce business grew by 30% last year, accounting for nearly $4.5 billion of sales - about 7% of our total business. Low prices, free shipping and price transparency are challenging the economic model of traditional retail. New business models are forming to embrace emerging needs for the last mile in business-to-consumer and consumer-to-consumer delivery, creating space for new players.
There is no doubt that the consumer packaged goods (CPG) industry is undergoing massive disruption. The best way to rise to the challenge is transformation through leveraging technology in every corner of the business. We need to integrate product innovation, manufacturing, marketing, distribution and sales into a smooth and holistic business model. It should be fast and flexible so that it can follow constantly evolving needs.
Modelling and simulation need to be used widely to design products, consumer experiences and manufacturing systems, and to optimize supply chains. P&G has tripled its use of robotics over the last five years and used data and analytics widely. In a recent experiment in the UK, overlaying data about category development with sales and demographic data revealed where and how consumers are shopping, allowing optimal distribution and merchandising, and targeted marketing. All these interventions result in faster insights, suggesting priority actions to drive value while securing a better consumer experience.
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Eventually, it all boils down to product availability “anytime-anywhere”, at a competitive cost. Continuously evolving online and offline consumer demands elevate expectations on supply chain execution. Delivery times are getting ever-shorter, with same-day and even 1-hour services on the rise. End recipients are demanding more flexibility and more delivery options that fit around their lifestyle, rather than around company operational processes. The old way of producing, warehousing and delivering products is obsolete.
A new end-to-end synchronized supply network is needed, where suppliers, manufacturing sites, customers and experts partner efficiently within a seamless ecosystem. This supply network would be touchless and interconnected, and able to pilot quickly, learn, eliminate low-quality tasks and standardize repetitive actions. It would generate high efficiencies and optimize costs, while also leaving a smaller environmental footprint.
Automation, collaborative robots and drones are becoming the backbone of logistics, artificial intelligence and digitally enabled manufacturing, distribution and warehousing platforms. These allow us to analyze trends and spot opportunities, including optimal handling, accurate forecasts and enhanced geographical agility to address emerging omnichannel fulfilment needs.
Predictive algorithms map behaviours to reveal product vulnerabilities, transitioning from manual quality detection to fully automated online analysis. Geovisualization systems enable truck location, synchronizing arrival with the order load preparation. In parallel, employees relieved from lower-value or repetitive tasks can focus on higher-value jobs and reskilling to operate efficiently and effectively in the renewed digital environment.
Two steps to building the factory of the future
The World Economic Forum has chosen P&G’s Rakona Fabric and Home Care manufacturing site in the Czech Republic as one of its Global Production "Lighthouses". The site illustrates the power of leaning forward to adopt 4IR technologies in product supply.
The successful implementation of end-to-end supply chain synchronization at Rakona addressed several problems, from excess products to inventory-bound capital and slow speed to market. P&G’s approach, which benefits from continuous improvement based on user requirements, utilizes analytical modeling and simulation to provide end-to-end visibility of the supply chain, ultimately enabling identification of tension points to improve agility.
This reduced inventory by 35% in three years, increased inventory efficiency by 7% during the previous year, reduced the number of returns and stock-outs, and improved the speed to market of new product introductions.
There are two fundamental principles behind the Rakona success story.
- First, investing in new technologies and systematically exploiting the external digital ecosystem. Where expertise internally is lacking, we look outside to leverage external experts at universities or start-ups to quickly bridge the gap.
- Second, fully enabling and involving people across the organization, and investing in new capabilities. Continuous teaching and building new skills is the new norm. Abandoning old tasks and inventing new ones is not to be avoided or feared. Instead, we should aim for an inclusive culture of innovation, which challenges the status quo and empowers everyone to contribute with ideas to improve and simplify.
Rakona points the way to the future, in which technologies solve any emerging demand and employees embark on a continuous upskilling and reskilling journey. It promotes an open culture of continuous personal development and experimentation that gets the best out of everyone.
The Lighthouse network offers an opportunity to exchange this knowledge and explore new partnerships with Lighthouse peers and start-ups. Ultimately, it’s helping the wider industry embrace and accelerate the change required to be able to serve the billions of digitally empowered consumers of the future.