Consumer goods industry: The state of adoption of the advanced operating model

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An early adopter of shared services and outsourcing, the consumer goods industry has significantly evolved and is now preparing for the next level— by leveraging the learning from other industries and redesigning the service delivery of industry-specific functions. Insight and analysis from a recent survey by the Everest Group and Shared Services and Outsourcing Network (SSON) focused on industry-specific strategies in shared services and outsourcing.


Consumer Packaged Goods (CPG) companies are operating in a complex environment of changing demand—evolving attractiveness of developed and developing markets, increasing global and local competition, fickle customer behavior, and retailer consolidation. Compounding this dynamic backdrop, CPG faces severe input cost volatility, strained supply chains, as well as the need for organizational transformation to harness the new shape of demand.

Compounding the dynamic backdrop, CPG faces severe input cost volatility, strained supply chains, as well as the need for organizational transformation to harness the new shape of demand.

CPG companies are evolving the existing operating models2 to effectively address these challenges. The new models must combine global scale with local relevance, and balancing operational efficiency and continuous improvements with the agility to adapt to new market conditions and strategic necessities. CPG companies are ahead in adopting these new models compared to many other industries. Many companies have already “industrialized”—through adopting advanced delivery models such as shared services, outsourcing, or Global Business Services (GBS)—parts of business functions such as spend analytics, marketing and brand management, sales operations, trade promotion, stores management, order processing and fulfillment, and reverse logistics.

To better understand these trends, Everest Group and the Shared Services & Outsourcing Network (SSON) conducted the first survey1 focused on industry-specific strategies in shared services and outsourcing. The research provides a comparison of respondent opinions across three groups (CPG companies, all companies, and self-reported “mature3 organizations” that have greater representation of large organizations with higher degree of centralization).

Levers for optimization

Three key levers that can be identified generate value delivered by advanced operations: optimizing processes through standardization and embedding analytics and technology, increasing scale and scope, and increasing global delivery.

Process optimization

Process optimization remains the most important area of focus across all industries. Like most other industries, CPG’s response for top areas of optimization of service delivery was reengineering/standardizing processes (92% placed these initiatives in the “top three”), which is especially important given the focus on emerging markets and increasingly global supply chains and operating margins. Similar considerations might explain that increasing consolidation/centralization is the second most important initiative. Adoption of new tools and technologies is third, ahead of increasing collaboration with business users, likely linked to the advent of social media, smart phones, and online shopping that are changing consumer spending habits and behaviors.

Interestingly, analytics and business intelligence was rated in the top three by only 23% of CPG companies, a result similar to other industries (we believe this result should be read in conjunction with the response about “new tools and technology”).

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Increasing scope: The path towards real GBS

Historically, much of the adoption in shared services and outsourcing across industries has been in traditional “horizontal” functions such as Finance and Accounting (F&A), human resources, and IT. CPG companies have also outsourced most of these transactional, repetitive back-office services such as payroll processing, help desk operations, requisition management, and accounts payable tasks as shown in Figure 2 and Figure 3.

Taking F&A as an example, CPG companies have taken a lead in including F&A processes like regulatory reporting and compliance, tax, receivables, payables, general ledger, and internal audit in global business service delivery models. However, CPG trails slightly behind in consolidating areas like risk management, budgeting and forecasting, strategic sourcing, vendor management, and compliance management (Figure 3).

However, having said that, results also show that CPG companies are adopting advanced service delivery for “core” industry functions such as spend analytics, marketing and brand management, sales operations, trade promotion, stores management, order processing and fulfillment, inbound, outbound, and reverse logistics support, asset and inventory management support, and master data management (master, customer, and vendor data). Many functions have already been centralized across various business units/geographies and focus is now on increased consolidation and reengineering of these processes for better effectiveness. The retail sector is instead looking at optimizing logistics and supply chain, store operations, and merchandising support.

Increasing global delivery

CPG companies are less likely than others to declare increased off-shoring/near-shoring among their top three priorities, but more likely than others to indicate a focus on expanding the talent base given the focus on emerging markets, increasing digital consumers, and the competition for talent from other industries.


The path forward

Although CPG firms were an early adopter of advanced delivery models, they still have the potential to accelerate the path to value by leveraging knowledge accumulated in industries where the transformation has gone further. CPG firms’ recent significant interest in GBS shows that many are on that path already. Combining that strategic direction with experience, and a clear understanding of the strategic needs unique to the company, can help craft the right strategy for a target-operating model.

Contact Genpact’s specialists to learn about how to advance the operating model for the delivery of your business processes.

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  1. The survey covered 650 executives across enterprises, service providers and industry influencers. It covered 28 vertical industries, 8 horizontal and 164 vertical functions
  2. Operating models – Shared services, outsourcing or Global Business Services
  3. Mature organizations are defined as those indicating “Agree” or “Strongly agree” that they are mature compared to peers.