In today's fast-paced digital landscape, data has become the lifeblood of businesses across industries—and the consumer packaged goods (CPG) sector is no exception.
As CPG companies and brands strive to meet evolving consumer demands, manage supply chain disruptions, and stay competitive, they are becoming increasingly reliant on data for their day-to-day operations and for making educated business decisions. Therefore, harnessing the power of data, especially big data, has become crucial for success. However, the increasing volume, variety, and velocity of retail data pose significant challenges for effective data management throughout the enterprise for CPGs, as well as for their retailer partners.
Implementing best practices and efficient processes and systems for retail data management can help suppliers overcome the associated challenges and unlock the full value of their demand and supply data, which can result in tremendous opportunities for profitable growth.
In this blog post, we will explore some of the most common, key data management challenges CPG companies face and how to solve them.
Top 9 Data Management Challenges
CPG companies invest a substantial amount of time, money, resources, and effort into developing and implementing reliable decision support systems to generate actionable insights and improve their decision-making capabilities—that is, timelier, more collaborative, and more-informed decisions. But, if their point-of-sale (POS) and inventory data quality are poor and/or the data is not readily available and accessible, there will be a negative impact on the CPG’s decision-making approach and effectiveness, resulting in poor business outcomes.
CPGs and numerous teams within a CPG company are frequently confronted with an array of challenges in aggregating, harmonizing, maintaining, and generating value from their massive amounts of data, some of which are described below:
1. Volume and Variety of Data
Depending on what research you look at, the amount of data created each day ranges from 2.5 to 3.5 quintillion bytes. Whether you want to convert that number to zettabytes, petabytes, terabytes, or gigabytes to figure out how much data that is doesn’t really matter—all you need to know is it's an extreme amount of data!
CPG companies generate vast amounts of data from various sources, including retailers, distributors, and syndicated and third-party data providers. And the data encompasses everything from sales transactions, supply chain, and marketing campaigns to new product launches, social media, demographics, and consumer interactions. Managing and making sense of this data, which comes in different formats and structures, can be overwhelming.
As more data is collected, more data cleansing, harmonizing, validation, and monitoring is required to ensure the most accurate data is available for use. By effectively managing this large volume of disparate data, CPG companies can gain a better understanding of consumer behavior, market trends and patterns, and inventory activity to make smarter decisions, increase sales, improve promotion effectiveness and product launches, and strengthen retailer relationships.
A CPG supplier that is equipped with the right technology, data collection and consolidation methods, and data transformation processes can better manage and leverage an influx of new and more data.
2. Data Quality and Accuracy
Data inconsistencies, errors, duplicates, and missing values can significantly affect decision-making processes. Ensuring and maintaining data quality, accuracy, and reliability is critical for CPG companies, as it directly impacts the effectiveness of marketing campaigns, product development, and supply chain operations.
However, ensuring data integrity can be a complex task due to the vast amount of data generated from multiple sources, including point-of-sale systems, customer feedback, social media, and more. It is essential, though, to gain actionable insights and make informed business decisions that drive effective strategies and retail execution.
Implementing robust data governance practices is essential to address this challenge. CPG companies should establish data quality standards, perform regular data audits, and invest in data cleansing and validation tools. By maintaining a high level of data quality, organizations can enhance their decision-making processes and build more reliable insights.
3. Data Integration
This is one of the most common retail data management pain points for CPG companies. CPGs often struggle with integrating sell-through data and inventory data from disparate systems and sources such as retailers, distributors, and third-party providers. They may also have legacy systems, multiple databases, and data silos across different departments, making it difficult to have a unified view of the data. In addition, the lack of standardized formats and data structures can make data integration complex and time-consuming.
One of the main reasons for wanting and having comprehensive, high-quality data is to have it available for further analysis and processing by other business intelligence tools to deliver greater insights and aid senior management in making better decisions.
To overcome this challenge, implementing data integration platforms and tools can streamline the process. Application programming interfaces (APIs) and data integration middleware can help connect various data sources, allowing for real-time data synchronization and enhanced data accessibility.
If a CPG can seamlessly integrate demand and supply data with the numerous cloud-based tools and applications, it will make life much easier for numerous business teams and speed up time to value for both CPGs and retailers.
4. Scalability, Performance, and Agility
As the volume and variety of data continues to grow, CPG companies need scalable, agile data management solutions and infrastructure that can handle the increasing data load. Ensuring efficient data storage, retrieval, and processing capabilities while maintaining optimal performance can be challenging. Also, legacy systems and outdated technologies can hinder data processing capabilities, leading to delays and inefficiencies.
To address scalability and agility challenges, CPG companies should consider adopting cloud-based data management solutions. Cloud platforms, such as Retail Velocity's VELOCITY® platform, offer elastic scalability, enabling businesses to handle large volumes of data efficiently. Moreover, cloud-based solutions provide flexibility and agility, allowing organizations to adapt to changing business needs quickly.
5. Data Security and Privacy
Data is an extremely valuable asset that must always be protected. Data security, when compared to other data management and data-related concerns, is one of the most difficult obstacles for CPGs and should be a part of any data management policy.
CPG companies handle sensitive and confidential information, including customer data, financial records, and intellectual property. Protecting this data from breaches, unauthorized access, and complying with data privacy regulations such as General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA) is a significant challenge.
As the CPG industry continues to leverage consumer data for personalized marketing and product innovation, ensuring data privacy and security has become a paramount concern. Mishandling of personal information can lead to reputational damage, legal issues, and loss of consumer trust.
To address these concerns and properly safeguard their data, CPG’s should employee cutting-edge, sophisticated technology and adhere to strict data protection regulations, such as GDPR and CCPA. Implementing robust cybersecurity measures, conducting regular vulnerability assessments, and providing employee training on data privacy best practices are crucial steps in safeguarding sensitive data.
6. Data Analytics and Insights
CPG companies strive to gain near real-time insights from retail POS and inventory data to drive operational efficiency, improve demand forecasting, drive product innovation, and enhance shopper experiences. However, many organizations struggle to extract those valuable insights due to limited data analytics capabilities, including processing speed, trying to process large data sets, the inability to convert unstructured data to structured data, and the availability of advanced analytics tools.
To tackle this challenge, CPG suppliers should invest in advanced data collection, harmonization, and analytics tools and technologies that support machine learning and artificial intelligence. These tools can help import, process, and analyze complex data sets, uncover patterns, and generate actionable insights. By leveraging data analytics effectively, CPG companies can gain a competitive edge in the market.
7. Data Governance and Compliance
As previously mentioned, data has quickly become the most valuable asset companies possess; therefore, establishing robust data governance frameworks is essential for CPG companies to ensure data integrity, data lineage, usability, and compliance with industry regulations.
Managing data ownership, access controls, data retention policies, and audit trails can be complex and time-consuming, but a company must have a principled approach to managing its data during its life cycle, from data gathering and storage to processing and disposal.
To address data governance and compliance challenges, CPGs should have an organization-wide data governance plan in place and implement proper data governance practices, which include establishing clear policies and procedures, properly training employees and assigning responsibilities appropriately, and ensuring the right technology and controls are in place. A company also should regularly monitor and audit their data management practices to ensure ongoing compliance and make any necessary improvements to keep their data accurate, trustworthy, and protected from misuse.
8. Data Silos
One of the major hurdles faced by CPG companies is the presence of data silos. Various departments within a company often collect and store data in separate systems, resulting in isolated islands of information. Marketing, sales, supply chain, and finance teams may all have their own databases, making it difficult to gain a comprehensive view of supply and demand activity and make data-driven decisions about trade promotions, new product launches, retail replenishment, and retail execution.
To tackle this challenge, CPG companies need to implement integrated data management systems that facilitate the seamless flow of information across departments and business units. By breaking down data silos and creating one version of the truth—a centralized repository of accurate, granular data—companies can achieve a holistic view of their operations, enabling better decision-making and driving overall efficiency across the organization.
9. Skills Gap and Resource Allocation
Effective data management requires skilled professionals with expertise in data engineering, data science, and analytics. CPG companies may struggle in attracting and retaining talent, with one reason being that these skilled professionals often require a larger salary since they are required in any organization that must maintain strong management of their data. Also, training entry-level data management personnel can be costly for a company that works with new or advanced technology. CPGs may also have difficulty allocating resources effectively to handle data management tasks.
CONCLUSION
In the era of digital transformation, data management has become a strategic imperative for CPG companies, consumer brands, and retailers. Collecting, connecting, and consolidating retail data at all levels—and for both brick and mortar and e-commerce—will remain paramount as business needs become more complex. Overcoming the challenges associated with data silos, data quality, data privacy, integration, scalability, and analytics will be essential for leveraging the power of data effectively.
By investing in modern data management technologies, such as VELOCITY®, and implementing integrated data management systems, establishing robust data governance practices, prioritizing data quality, and adopting advanced analytics tools, CPG companies can unlock valuable insights that will drive sales, reduce costs, improve operational efficiency, and deliver exceptional consumer experiences.
As the CPG industry continues to evolve and the importance of data management continues to grow, organizations that successfully navigate these data management challenges and foster a data-driven culture within their company will be well-positioned for profitable growth and success in the dynamic retail marketplace.
John Lennon said it best: "There are no problems, only solutions." If you and your company are facing challenges with effectively managing your retail data and leveraging it to its fullest, schedule a consultation with us. For more than 28 years, we have provided the CPG industry with industry-leading data collection and harmonization solutions that allow brands to unlock the full value of their data to generate sustainable growth.
