The Impact of Direct to Customer on Consumer Goods Organizations

As retailers increase the private label footprint, Consumer Goods (CG) companies are working hard to get closer to their end-consumers and increase brand recall. This has triggered the trend of consumers and shoppers buying directly from Consumer Goods (CG) companies –largely through online and mobile channels – with the result that control over deliveries has become exceedingly important.

For CG and retailers alike, directly serving the consumer and shopper is an increasingly attractive route to manage demand. It allows them to offer multiple delivery options aligned with the customer’s needs, keep costs down and make direct contact with customers thus helping to improve communication, feedback and loyalty.

Consumers and shoppers prefer buying from CG companies directly for a variety of reasons as shown below.

The Impact of Direct to Customer on Consumer Goods Organizations

To take advantage of this trend, CG companies need to be on top of their logistics chain and ensure that products are packed and delivered to customers using the `lowest-cost + fastest-delivery’ option. This means facilitating deliveries direct to consumer to be made from a number of stock points including factory, supplier, warehouse, back of store and directly off retail shelves.

This shift in consumers’ buying trends has direct implications on the CG organizations to build up their own e-commerce operation, either by developing their own fulfillment capabilities or by distributing the product via a third-party platform. Let us look at some components of this rewiring:

Products/ SKUs must be picked and packed accurately as per customer order; else the surge in returns can impact margins
apart from fueling customer dissatisfaction.
A capability to pick and pack products from multiple stock points may be needed to complete a single order.
Tight delivery windows based on customer convenience focuses on outbound transportation optimization.
Delivery destinations can be completely unpredictable, forcing better routing decisions to optimize delivery costs.
Ability to proactively inform the customer in the event of order changes (substitutions, partial/split fulfillment,
delivery window changes etc.)
Reverse logistics should look at returns policies as well as processing.

Technology comes into play once the above processes are outlined. Giving visibility to the logistics partner into the CG Company’s production units, suppliers, order management system, warehouses and other stock points is a start. In addition, the IT system (whether it’s the logistics provider’s or the manufacturer’s) must accurately estimate shipping time and costs, communicating it clearly to the customer upfront and staying through the order life cycle all the way to fulfillment and order closure.

What are the biggest hurdles a CG company is going to face when setting up the IT systems to integrate channels, orders and logistics? I would love to hear your thoughts on this.

About the Author

Srini Pallia

Srini is President and Global Head of Wipro’s Consumer Business Unit which serves customers in a range of consumer-focused industries including Retail, CPG, New Age, Media, Entertainment, Travel, Transportation, Hospitality and Public Sector. He is responsible for setting the vision as well as shaping and implementing growth strategies for each of these industry verticals.

He is a member of Wipro’s Group Executive Council & Wipro’s Inclusion and Diversity Council. Srini has been with Wipro for over 28 years in various leadership roles – establishing, scaling and spearheading growth across Business Units, Service Lines and Markets. In his previous role Srini was Sr. Vice President and Global Head of Business Application Services, and prior to that he was Vice President and head for Enterprise Business in North America.

He was rated among the top 25 Young Business Executives in India by Business Today in 2008. He has received several accolades for his contributions to Wipro’s growth and customer success. Srini holds a Master’s degree in Management Studies from Indian Institute of Science, Bangalore and a Bachelor’s degree in Engineering. He has undergone Leading Global Business Executive program from Harvard Business School and an Advanced Leadership Program from McGill Executive Institute.

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