There’s no time for manual processes in today’s dynamic CPG marketplace. Consumers have already embraced a digital future, from how they research products to how they make their final purchase. The pandemic didn’t start this migration; it just accelerated it. Digitalization presents the best way forward for CPG companies to transform their business and ensure their continued success.
“The winners of the next generation of CPG brands will think differently,” Dr. Amanda Williams, Smart Packaging Lead at Jabil Packaging Solutions, explained. “They will change the brand-consumer relationship from a transactional dynamic that emphasizes cost, product placement and mass advertisement to a new model that offers a radically improved, personalized user experience.”
There’s little doubt digitalization can improve food safety and supply chain transparency, but a growing number of CPG companies have turned to digital solutions to supercharge new product development.
Digitalization and digitization
For years, CPG companies have leaned hard into digitization, the process of converting paper records, such as Certificates of Analysis and other supplier documents, into digital files that employees can store and access on computers, tablets, and mobile phones.
But fewer companies have taken advantage of digitalization, or digital transformation, the practice of reorganizing the entire business operations around digital technologies.
The Institute for Digital Transformation describes digital transformation as “the integration of digital technologies into a business resulting in the reshaping of an organization that reorients it around the customer experience, business value, and constant change.”
“This definition recognizes that digital transformation is much more than just a change in IT technology such as hardware, software, or a digital platform,” Raymond Sheen, president and founder of Product & Process Innovation Inc., writes. “A digital transformation goes to the heart of the business processes and transforms them to leverage digital capabilities that were unavailable during the industrial age.”
New product development is the primary driver of organic growth in the food and beverage market, but most new products fail within the first year. The key to success is an NPD process built on digitalization, which allows faster research, sourcing, and failure – letting companies test out alternative formulas or even move on to the next launch more quickly.
Today’s consumers value sustainability almost as much as traceability, which is why it’s been a driving force of late in terms of developing new products and innovative packaging for existing offerings.
“According to New York University’s Stern Center for Sustainable Business…products marketed as sustainably packaged experienced 5.6 times faster growth than those that weren’t, across 36 CPG categories,” Content Analyst Vivek Kumar wrote for Industry Wired in 2021. “The research revealed that sustainable products are a key driver for product sales and should provide a solid statistical foundation that CPG companies may use in their future strategies.”
A digital supplier management solution can help manufacturers easily source and qualify sustainable ingredient suppliers and packaging vendors. Finding those supply chain partners more quickly can speed up the development of new products and more earth-friendly packaging options.
Digitalization also paves the way for much smoother new product development, making it easier for different departments to communicate and collaborate, while improving supplier relationships.
Responding to market shifts
A digital recipe management solution allows manufacturers to respond swiftly to sudden shifts in consumer demand. With the ability to rapidly generate a wide range of finished good alternatives, manufacturers can dramatically slash the time to market for new products and packaging, which is critical in such a rapidly changing marketplace.
A single, accessible system allows development teams to draft and manage formulas and recipes while working across departments and external collaborators. As a result, manufacturers can cut development time and cost with rapid digital prototyping that leverages real-time ingredient and supplier data to assemble product criteria efficiently.
Even more importantly, digitalization empowers manufacturers to pursue a customer-first attitude toward product development that incorporates both customer and employee input and drives a nimbler approach to rapidly changing consumer sentiment.
According to PWC, 72% of manufacturers believe data analytics will significantly improve customer relationships and insight to inform the product life cycle.
Historically, CPG manufacturers have operated within a linear, inflexible gating process when developing new products, with each phase spelled out sequentially, from ideation to launch. But companies that leverage digital strategies can move outside of that slow, outdated model and accelerate the new product development process. Such companies can automate routine tasks, eliminate systemic redundancies, and connect teams seamlessly with suppliers over a single, networked platform.
Check out our on-demand webinar, “A Roadmap for R&D Digital Transformation,” featuring RTI Innovation Advisor Susan Mayer, to learn more about digital innovation and how your team can tap into supply chain data to reduce product development timelines and create better products. Tune in here.