Pricing pressures, consumer sentiment, and talent scarcity demand a new way of thinking.
Leaders in the consumer goods industry are accustomed to change; shifts in consumer behaviors and the continuous evolution of the digital customer experience have been accelerating for more than a decade. However, recent years have ushered in seismic change for even the most seasoned veterans in the consumer goods sector. Just as industry leaders were catching their breath from the impact of a global pandemic, they were confronted by historic inflation, broken supply chains, changing consumer needs, and persistent talent scarcity.
Although the global supply chain challenges have eased, and central banks are working to manage inflation, persistent global economic uncertainty and talent scarcity are still major headwinds for our clients.
Our clients know they can’t control the economy or geopolitics. This is why they are laser-focused on overcoming talent scarcity to build the human capital they need to sustain innovation and continuously improve consumer experience.
Pricing pressure returns
In recent years, global retail giants such as Walmart and IKEA accepted price hikes from consumer goods manufacturers as those suppliers faced soaring costs for transportation and raw materials. Now, those cost pressures have eased. Combine that with a shaky economy that has consumers reining in spending and it’s clear that for the near future, consumer goods companies will find a consumer environment that will make it difficult to bump prices. Indeed, Walmart recently said as much, firing a warning shot across suppliers’ bow. We see a similar picture in Europe, although a hike in energy prices caused by the war in Ukraine has an added element of uncertainty, driving manufacturers to push retailers to absorb increased costs.
From a workforce perspective, this means industry leaders need to maximize existing resources rather than hope for help in the form of increased revenue. Fortunately, there’s a clear opportunity to better use those worker resources—and it begins with flexibility.
Today, more than one-third of all US workers (including half of Millennial and Gen Z workers) are supplementing their income with “side hustles” such as gig work or delivery jobs. These people aren’t avoiding work—they want more hours but on their terms. They want to choose to work in ways that don’t compromise their family time or other priorities. The demand-side flexibility from employers has morphed into a supply-side expectation of flexibility from employees.
As workers in the post-Great Resignation era base career decisions on their specific situations and the demands of modern life, employers must meet employee needs creatively. To get the most out of the existing workforce, the consumer goods sector needs to design work around workers. That means improving demand planning, shift-stacking, and offering employees more freedom to choose their hours. As it stands, I see some consumer goods firms leaving productivity on the table due to a lack of flexibility. With talent scarcity as the new normal, CHROs in consumer goods have a great deal of work to do on this front—which means they have a real opportunity to lead and develop competitive advantage.
As manufacturers get closer to their customers and seek to personalize offerings, we see significant growth in another area that can demand flexibility: customization and co-branding. Think of a simple example of a consumer staple such as shaving kits co-branded with the most popular sports teams in each region.
This sounds simple, but keep in mind that such promotions are tailored for a very specific timeframe and retailer. While the two products themselves may stay the same, challenges around packaging, scheduling, and fulfillment are enormous, with major workforce consequences in terms of hiring temporary staff at scale for a fixed ‘spike’ period. As both retailers and consumer goods firms use data to more accurately pinpoint and meet customer needs, these kinds of promotions will continue to grow.
Digital transformation: The elephant in the room
These days, there’s so much talk about digital transformation that the term itself threatens to lose its meaning, or to be taken for granted. But that doesn’t mean it’s not real. It is! Technology is already at the heart of nearly everything, and this trend will continue to snowball. Accordingly, investments—including workforce investments—are showing up across the value chain, from manufacturing to distribution.
Retailers are putting strategies in place to fully integrate orders and inventory against fulfillment; more than two-thirds cite the use of analytics and AI to improve inventory management and eliminate excess stock. Consumer goods companies, along with other manufacturers, are increasingly using robotics and 3D/4D printing to shorten the supply chain and provide customization at scale. In the warehouse, robots will perform goods movement, picking, and order preparation.
And then there’s the ever-growing importance of data: gathering it, cleaning it up, analyzing it, and devising new ways to make use of it through the expanding use of large language learning models such as ChatGPT. By 2025, the average connected person anywhere in the world will interact with their devices nearly 4,800 times per day. That’s once every 18 seconds!
What does all this mean for consumer goods firms trying to more effectively manage their workforce? First, leaders need to realize they are competing for tech skills against other industries, such as tech and finance, which may be perceived more favorably by top talent, especially younger workers.
Beyond mere IT
So yes, tech is enormously important. But I often find myself reminding clients that while tech is the way of the future, those jobs are evolving. Indeed, entirely new job categories are emerging in the consumer goods sector, including digitally enabled designers, brand ambassadors, and supply chain associates who can navigate technology both during and after a customer interaction.
We are hearing an increasing number of clients talking about the convergence of IT and operational technology (OT). Today it is being increasingly leveraged for production and fulfillment—changing the relationship between manufacturers and their major customers, not to mention the very nature of shipping/receiving, picking, planning, sorting, and storing in distribution centers.
Consumer goods CHROs and other leaders can’t afford to hold onto an “IT-only” mindset. Most clients tell me that the folks who fill these new positions require human and tech skills. A transformation is needed in the way the consumer goods industry thinks about and develops the necessary skillsets for a sustainable future in a highly competitive market.
Aligning with buyers’ values
Much has been said and written recently about consumers’ increased focus on sustainability. As our Consumer Goods World of Work 2023 Outlook report indicates, this phenomenon is vitally important, especially with younger consumers—and forward-thinking companies are responding. In conversations with clients, I’ve learned about two different, but equally viable, approaches to sustainability:
Supply Chain Transparency: Many enterprises are increasing transparency around their supply chain. Consumers want to know where raw materials are sourced, who processes them and where, how they’re transported, and more. Such transparency requires skilled talent to analyze big data and comply with any applicable government regulations.
Green Innovation: Another approach is to manufacture “greener” alternatives. For example, a global manufacturer of laundry detergent recently created a new cold wash formula which can reduce the energy impact (and utility costs for consumers) of washing laundry by as much as 50% by eliminating the need to heat the water.
While this is a relatively simple example, consider the skilled talent needed to develop this product and its potential to reduce carbon emissions. Multiply this need across industries and you can understand why the World Economic Forum predicts there will be 30 million new green jobs by 2030.
Ongoing and fundamental developments in the people side of the consumer goods industry are gathering pace. The war for talent—at all levels of the operation from the factory to sales and marketing—will be buffeted by changing trends in the world of work.
Worker-oriented flexibility and workforce planning will enable employers to meet the needs of the workers who want more work and will create a more productive organization. In tech, the convergence of IT and OT will demand joined-up thinking across IT and other parts of the production process to ensure you can retain key workers by offering them a career path via up-skilling and reskilling.
The past several years have seen change in the consumer goods sector that presents major challenges for CHROs seeking to maximize their workforce. For some, this may be uncomfortable. But in the dynamic environment that prevails today, and will certainly do so tomorrow, executives must view this change as an opportunity to differentiate their organizations and lead the way.
To learn more, contact us or read our Consumer Goods World of Work 2023 Outlook report.