With winter in the northern hemisphere just around the corner, let’s start with some snow.
It’s pretty safe to assume that when it comes to knowing how to deal with heavy snowfalls, Vermont will do better than Texas, and Norway will do better than Morocco.
Similarly, it’s no surprise to find that when you’re looking at customer service and cost efficiencies, organizations in the consumer products sector are going to outperform businesses in other industries.
It stands to reason. In the consumer market, customers are more demanding and more capricious; distribution channels are in a greater state of flux; and margins are tight, and getting tighter. There is a significant impetus to succeed.
Energy and enthusiasm
In our recent industry report, “Reimagining finance for the digital age – Consumer Products sector,” we found these pressures had a significant bearing on the readiness of businesses to pursue finance automation strategies. As many as 44% of senior finance executives from the sector said their organization had an enterprise-wide automation strategy(1). The same proportion – 43% – said that an agreed automation strategy was being pursued in the finance function. In terms of having a strategic focus for automation, it’s fair to say finance teams in consumer product firms appear to be ahead of those in other sectors. Indeed, they made up the largest contingent (27%) of the automation “Masters” – a small group of finance teams in the wider survey that were outpacing the rest in the automation of finance processes.
Of the 100 executives of consumer products firms in the survey, over half reported that several of their order-to-cash processes had been fully or nearly fully automated. These figures were the highest of the five sectors in the survey. In the record-to-cash category of processes, 55% of sector respondents said that reconciliations had been fully or nearly fully automated, and 52% said the same of journal entry – again, these were the highest figures among the sectors.
When it comes to benefits they had already seen from finance automation, consumer products sector respondents mentioned the reduction of operating costs more frequently than any other (37%). One major US food manufacturer has achieved cost savings of between 30% and 50% on its core transactional processes in the past few years.
Other benefits close behind cost efficiencies were improved financial planning (with rapid access to financial data and enhanced analytics), improved regulatory and legal compliance, and greater process efficiency. Strategic analysis was seen as a particular strength: more than three-quarters (76%) of respondents in the sector agreed that automation done well could transform the finance function from scorekeeper to strategic business partner.
Strategy and practicality
Consumer product enterprises recognized that a shift up the value chain, from cost savings benefits to more strategic advantages, probably necessitates a matching shift up the technology hierarchy. While robotic process automation (RPA) can absorb repetitive tasks and thereby save money, the use of more advanced functions such as AI and machine learning can generate insights and deliver higher levels of forecasting, planning and risk management.
These organizations were also highly practical in their approach. More than in any other sector, they had identified key areas for automation – and more than half of them had a dedicated team or leader to drive the process forward in the finance department.
However, only 20% reported that budget had been assigned to the strategy, and no more than 40% strongly believed that finance should take on a wider leadership role. Only 30% of consumer products executives said there was a clear governance framework in place to guide automation. Also, eight in 10 (81%) said that senior management’s awareness of automation’s benefits needed to improve. So, in some ways, finance automation in the consumer products sector is still in a preliminary stage of evolution.
What are the main lessons consumer products organizations can draw from the experiences of their peers?
The survey summarizes them as follows:
- A joined-up strategy provides a firm footing for automation success.
- The vision for automation should extend beyond cost efficiency.
- It may be early days for automation, but governance should be addressed now.
- There is no time to lose in building knowledge and awareness.
In short, consumer products enterprises may still have some way to go in finance automation – but they have shoveled considerably more snow off the path than organizations in other industries.
Read the “Reimagining finance for the digital age – Consumer Products sector” report.
Read the full “Reimagining finance for the digital age” report.
Aaron Hart is responsible for delivery operations, client satisfaction, and growth in the CPG, Retail and Distribution industries for Capgemini’s Business Services. With over 18 years of experience helping customers achieve their goals through global outsourcing solutions and partnerships, Aaron constructs technology embedded business process solutions to deliver the desired business outcomes for clients.
(1) The survey of 500 senior finance executives, conducted in January and February 2018 by Capgemini and Longitude, included 100 executives working in the consumer products sector (54 in Europe and 46 in North America). The conclusions from that wider research effort are presented in Reimagining finance for the digital age https://www.capgemini.com/service/business-services/transform-your-finance-operations/reimagining-finance-for-the-digital-age/