Companies in the Fast Moving Consumer Goods industry are struggling with high costs that they have difficulty passing on to consumers. According to Cazijn Langeler of consulting firm IG&H, this is why the industry is now embracing artificial intelligence (AI) en masse. 'At some companies, more than a hundred AI projects have already been defined.'
The Fast Moving Consumer Goods (FMCG) sector is in dire straits, notes strategy and digital transformation consultant Langeler. 'Companies are under pressure on two sides. On the procurement/production side, companies are facing hefty cost increases due to increased raw material prices and higher salaries. Normally you discount such costs in your selling price, but that is difficult for producers because the retailer sets the price in the supermarket. And they have to deal with price-conscious consumers. In any case, these more often choose the supermarket's cheaper private-label items than go for the A brands. As a result, FMCG producers are seeing not only their profit margins but also their volumes decline.'
Extremely powerful tool
To turn the tide, Langeler says there are roughly two knobs that producers can turn: get closer to the consumer and offer more added value (think Nespresso) or start initiatives to bring increased costs back under control. 'We are currently being asked a lot to implement cost reduction programs at clients. These can be classic reorganizations, but increasingly artificial intelligence is also being looked at. Especially now with the emergence of generative AI (GenAI), companies have gained an extremely powerful tool for achieving efficiency improvements on a broad front. This is where IG&H is currently doing a lot of projects.'
Spectacular results
So what are typical AI applications for FMCG companies? Langeler: 'You can actually achieve cost savings with AI in every business process. For administrative processes with many repetitive actions you already had Robotic Process Automation, which is a form of AI, but spectacular results can also be achieved in customer service departments. Customer questions can sometimes be answered better by an AI bot than by a human. But think also of procurement departments where contracts can be screened super-fast with AI. You can deploy AI in every department at different levels; more than a hundred initiatives have already been identified at some FMCG companies.'
Roadmap of AI projects
IG&H helps companies define their strategy and translate it into a roadmap of AI projects. Langeler: 'Together with the client, we determine where the most value is and how to scale it. Are the right data available? Is there enough AI knowledge available? We naturally look at use cases at other customers, but also start new projects. From our AI factory, we have the development tools and all projects are monitored. The great thing is that at any given moment, new ideas keep coming up within a company. It resembles a continuous improvement program such as those found in Lean and Six Sigma. The first small projects fund the follow-up projects.'
Cazijn Langeler
Director Retail
+31610545518