FMGC SECTOR AND DATA SCIENCE

Introduction:
FMCG (Fast Moving Consumer Goods) refers to organisations that sell products in
large quantities. These products are usually inexpensive; the volumes sold are large and
often have a short shelf life. Profits on individual items are very small and large
volumes are required to have a viable business. These characteristics offer many
challenges and also many opportunities. The industry is characterized by huge data
volumes and a big number of transactions. On top of that, the inflow of data comes from
multiple sources which influence the projections as well. In this scenario, this makes the
FMCG the ideal playground for data science. FMGC Sector One of the largest sectors
of the Indian economy, the Fast Moving Consumer Goods (FMCG) industry is expected
to reach $104 billion by 2020, growing at a CAGR of 20.6%.

In today times, FMCG manufacturers rely on consumers ‘pulling’ products through the
supply chain; thus, they require a better understanding of consumer behaviour and
choices. Consumers are well-informed about product information—in particular,
promotions and price comparisons via the Internet—which makes predicting behaviour
very complex. This is where data science plays a very important role, as it allows
organisations to derive predictive insights to enable competitive fact based decisions.
Armed with deeper insights into consumer behaviour, FMCG manufacturers will be
able to direct R&D investment, improve the effectiveness of marketing and maximise
supply chain efficiencies.

The world's top FMCG companies reveal big data being used widely. Significant gains
relate to using customer behavioural data to improve supply-chain issues, and support
for specific marketing initiatives. Manufacturers and FMCG companies are already
using Data Sciences to achieve significant savings in inventory costs (in the case of
Procter and Gamble, over $1bn). Others, such as Nestle, Uniliver are using it to develop
innovative products, improve targeting and increase revenue per custom.
WHY DATA Science in required in FMGC?

The FMCG (Fast Moving Consumer Goods) industry is an ideal target for Predictive
Analytics and Data Sciences. There are several unique attributes of the industry that
makes this so; these are:

1. The massive volumes involved.

2. Access to good quality sales data.
3. Short shelf life.
4. Current forecasting techniques are relatively inaccurate.
5. Current marketing strategies are less than optimal.
6. Current manufacturing practices are less than ideal.
7. Current supply chain strategies are less than optimal.
8. Consumer numbers are very large.

A) Large volumes / access to good quality sales data

The number of sale transactions available to modern FMCG organisations is huge.

This data can usually be purchased from retailers and is of very high quality. This
sales data forms the backbone for any predictive model as increasing sales should
always be the primary objective of any predictive project. Most large FMCG
companies also have very good systems in place that record data at every stage of a
product’s lifecycle.

B) Short shelf life

FMCG products usually have a short shelf life meaning that the costs of
oversupply and over manufacture can be significant. The large volumes of
products any optimisation to the oversupply (or undersupply) problem can result
in very large ROI. The over/under supply problem is perfectly solved by
predictive models through data Sciences.
C) Sales and marketing

If goal is to increase sales then having accurate sales forecasting is critical. With
an accurate forecasting model can create simulations that allow managers to do
quality “what if” analysis. Data sciences having the ability to merge many data
sources (sales, marketing, digital, demographics, weather, etc.) greatly improves
the quality of sales forecasts when compared to traditional predictions which are
traditionally done on isolated and aggregated sales figures. Once the sales data
is merged with the marketing data we can start making very accurate marketing
predictions also. Questions like:

 Which product should we promote this month?

 What type of campaign will be most profitable for this product?
 What consumer segment should we target?
 How can we get value from our social media data and use current
consumer sentiment to create timely marketing campaigns?

D) Manufacturing and supply chain

Most large FMCG have ERP systems that hold a wealth of hidden value in their
data. This data can be used to create models that can answer several critical
questions.

 How can they guarantee on time delivery?

 How can they shorten the time to manufacture a product?
 How can they increase the yield for a product?
 How can they minimise product returns / complaints?
How Data Science can transform Indian FMCG Businesses?
Data Science makes use of information obtained from historical data or research to
predict outcomes based on Six P’s for FMGC sector:

1. Proposition
2. Product
3. Packaging
4. Pricing,
5. Promotional campaigns
6. Place

It applies statistical modelling, forecasting and optimization algorithms together with

business rules, to transform hindsight into insight, moving beyond the descriptive to
the predictive, from the ‘what’ to the ‘why’ of businesses.

A. Marketing

Data Science leverages tactical measures that analyse marketing programs

efficacy to build predictive models prioritizing sales and profits. Thrust areas
are building of future market strategies for asset optimization, lead generation,
service models, brand building and product pricing based on market response
rate prediction. Based on historical data, predictive segmentation can be made
for best market locations, purchasing behaviour models, optimal promotion
strategies and market share targets for an overall effective ROMI (Return on
marketing investment).

B. Market Mix Modelling

Data Science is used to create marketing mix models that evaluate the potential
value of all marketing inputs, to discover the marketing investments most
advantageous for revenue growth. Multiple regression techniques are applied to
predict the optimal mix of marketing variables. Regression is based on
independent variables like advertising mix, promotional campaigns, regional
trade policies, industry trends or competitor data. Predictive models are built to
determine how these relate to sales, revenues or profits. As market mix
modelling sets forth the roadmap for a company’s growth, data science in a
FMCG company has become core to its functioning.
C. Digital Marketing
In the high growth B2B sector in FMCG, Data science consolidates the
consumer experience in real-time to create and anticipate customer experiences
to create profitable interactions and move them further to the buying cycle.
Locational variables and browsing history are analysed for geo-behavioural
targeting and targeted advertising with contextual ads; while time-series are
correlated with external factors to make predictions of sale volumes, fast-selling
items and consumer trends.

D. Pricing
Data science not only helps predict the outcome of price changes, but also
facilitates optimal pricing based upon variable factors like festivals, competitor
launches, Government policies, geographies, consumer preferences and the like.
Consumer trends and other variables are analysed for optimal pricing solutions.
A company also factors-in the price elasticity of demand for various products to
predict impact of pricing on product sales. Predictions of Price elasticity of
demand typically help decide the pricing strategy, differential pricing policies
based on demographics, where products are price inelastic.

E. Supply Chain Management

Supply chain management is central to the Indian FMCG industry, with typical
problems of high inventory, high stock-out ratio, erratic logistics and
transportation costs with lengthening supply and distribution lines. Using
sophisticated algorithms, near real-time demand data is integrated with
traditional projections, to increase supply chain flexibility and agility for a
higher ROLA (Return On Logistics Assets).

F. Operations
From resource allocation, manufacturing and distribution to marketing
performances and sales forecasting, data sciences can rationalize the entire
business operations for improved decisions based on ‘what if’ scenarios.
Operations can be tied-in to financials by predicting areas of cost trimming,
optimal utilization of resources and revenue expenditure, fraud prevention and
bad debts reduction, for an effective business ROI.
 DATA science and FMGC SECTOR

Case how P&G USING Data Science for its marketing

Strategy:
Data Science allows P&G to evaluate the spending of their marketing dollars. With
the increasing significance of digital marketing and e-commerce, they are now able
to exactly determine the ROI of most marketing activities and quickly understand
what type of consumer and channel activity they are attracting.
 Combining Social Media, E-Commerce & Data Science: With P&G's Facebook
store, the company will gain a wealth of information about its target consumer's
behavior to drive future marketing strategy.

Source :( P&G)

Summary:
The FMCG sector already uses big data, often the same data as the retail sector, but
greater opportunities exist. Big Data, Business Intelligence and Data Sciences help
FMCG companies to identify the most profitable customers and optimize the pricing
structure. It also used to analyse inventory turns to improve sales and predicts customer
buying patterns. Data science plays a very important role, as it allows organisations to
derive predictive insights to enable competitive fact based decisions. Armed with deeper
insights into consumer behaviour, FMCG manufacturers will be able to direct R&D
investment, improve the effectiveness of marketing and maximise supply chain
efficiencies.