Effective, strategic knowledge management is vital if a company wants to capture value and enhance its competitive positioning. How best can knowledge be used to gain insight into the consumer, and in what ways are the roles of players within the supply chain being redefined?
Elsevier Food International, Vol. 5, Number 2, May 2002
Deborah Gurney

Knowledge management is at the heart of any food company business; it takes place at all levels, from consumer-led research and product development, to managing value across the supply chain. There are various techniques used to capture and transfer knowledge, many of which are particular to the food and consumer goods industry. For the techniques to be really successful and reap the maximum benefits, there is a need to incorporate these techniques into every day business practice and processes, rather than simply treating them as separate projects. Knowledge management is fast becoming an area of priority at senior executive level, where it has been identified as an area of strategic intent. A more strategic use of the knowledge that either already exists within a company, or can be systematically captured, can be crucial in enabling the company to capture value and enhance its competitive positioning. The business base of many food companies is often spread across geographies and operating units.
Strategic use of knowledge can happen at all points in the value chain: product research and development, marketing and consumer insight, and supply chain management. First, let us take a look at how knowledge is managed to gain consumer insight.

Increased sophistication
Competition is ever increasing and thus customer and consumer information are more important than ever. Food manufacturers and retailers spend millions every year examining electronic point of sale (EPOS) and loyalty data for buying patterns and habits. Data warehousing and data mining are vital to the analysis of this consumer information. Sophisticated retailers are able to analyse spend data and track purchasing patterns, to discover the correlation of purchasing one product versus another. For example, US research showed that many consumers in a segment defined as Young Father who purchase beer also buy baby nappies at the same time. Thus retailers are able to tailor their in-store merchandising and target their one-to-one marketing at men buying only products beer or nappies.
A more recent use of data warehousing/mining is occurring on the supply side. Manufacturers and retailers are applying these techniques to search for patterns that provide insight, which will in turn increase their ability to forecast demand and supply-side inventory movements. This in turn will enable them to forecast more accurately and reduce their inventory, which in turn will reduce capital requirements, labour and equipment.
Over the last year we have seen food manufacturers turn to the Internet as a source of consumer intelligence. For example, Unilever established a joint venture with iVillage.com, a consumer site which has created a community focused around women. It is used to obtain information from consumers and to collect this information, rather than for selling products per se. Unilever also has proprietary sites, such as Lipton's Recipe Secrets (recipesecrets.com) in the US. This offers individualised meal planning, and in doing so it hopes to build individual relationships between consumers and brands, and then to feed any acquired data into subsequent product development.

Sophisticated retailers are able to analyse spend data and track purchasing patterns, to discover the correlation of purchasing one product versus another. Retailers can also use the insight they gain to forecast demand-and-supply-side inventory movement, thereby reducing capital requirements, labour and costs.

Supply Chain
On the supply side, there are many opportunities for optimising the way data and knowledge transfer and learning take place. Information technology has been the enabler of progress for food manufacturers. From electronic data interchange (EDI), through to Efficient Consumer Response (ECR) and Collaborative Planning and Forecast Replenishment (CPFR) and, most recently, B2B exchanges.
ECR is, and always has been, a good concept. However, successful ECR practices require company-to-company collaboration. During the last seven years, thousands of ECR pilots have taken place between manufacturers and retailers. While the results have generally been encouraging, the costs are moving from single pilot to company-wide roll-out, which in the past have proven cost-prohibitive. Only the very largest and most dominant companies have successfully made the shift. That said, even they have struggled.
It is only now with the emergence of industry-wide Internet exchanges that the promise of ECR can be delivered. The broad and deep industry consortia behind these exchanges should collectively have enough talent, money and patience to systematise ECR within the industry. Within five years, ECR will not represent a way to do business, it will represent the way business is done.
Industry electronic exchanges provide the framework and technology for the realisation of ECR and beyond. They are re-defining the way all players in the supply chain link together. They provide the framework and technology for the realisation of ECR and beyond. Virtually all major manufacturers and retailers have already joined, or are considering joining, one or more of emerging industry exchanges. These exchanges include Transora, CPGMarkets - both of which focus on the food and consumer packaged goods industry - and Worldwide Retail Exchange, Global NetXchange and Wal-Mart, which focus on the retail sector. Over the next five years, the exchanges expect to revolutionise the way business is conducted within the food industry. Analysts estimate that as much as 80 per cent of all trading between suppliers, manufacturers and retailers will take place via Internet exchanges by 2005. As with most trends, early adopters stand to gain the most.
It is a sign of the potential of B2B exchanges that competitor companies are prepared to team up to make it happen - which perhaps gives us some indication of the size of the potential prize.
Collaborative Planning and Forecast Replenishment (CPFR) is a business practice where trading partners share forecast and results data electronically with the aim of reducing inventory costs while improving product availability across the supply chain.
Most food manufacturers have a long way to go to turn the data they hold into information, to learn from that information and turn it into knowledge. Then, of course, they need to actually act upon it before it can become an incredible source of potential competitor advantage. The probable end results of all this are greater efficiency and better, more informed, decision-making. Tacit knowledge becomes explicit knowledge. This is particularly useful in the spanning of organisational and geographic boundaries, which in turn will help to create a world-class, global company.