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SAP Point of View | PUBLIC

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Enabling Consumer Outcomes: Unlocking New Business Value with Digital Technologies

“In the consumer products industry, we expect more change in the next five years than we’ve seen in the last 50. What consumer products companies do will not fundamentally change. But what is changing dramatically is why consumer products companies do what they do, how they go about it, and even how they define themselves. What’s changed is more than simply the rules of the game. The game itself has changed.

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The “consumer products” industry is rapidly transforming into the “consumer outcomes” industry. Consumers today want more than products. They crave subjective, personalized, and timely experiences and outcomes like joy, confidence, control, protection, and more.

They don’t want to be sold to or influenced. They want to be inspired, guided, educated, and helped.’’

E.J. Kenney Senior Vice President, Global Head of Consumer Products and Agribusiness SAP SE

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Consumer Products Companies Face New Challenges and Opportunities Amid Digital Disruption Macro-level market dynamics are constraining growth among consumer products companies – but these same dynamics provide massive opportunity for companies that embrace innovation.

Growth in search interest for “open now” between 2015 and 2017

The “Amazon effect” Channel proliferation and increasing cost pressures across product categories are driving new, nontraditional growth models that challenge how products, and even the industry itself, is defined.

New business models will no longer define companies by traditional industry definitions, but by the consumers they serve and the ecosystems in which they compete.

60% Growth in the last two years in “for me” item searches (for example, “what running shoes are best for me?”)

“Born digital” competitors Speed is the new big. Smaller, more agile competitors are entering the market, challenging the old order and becoming the new engines of category growth and innovation.

300%

Transformative consumer engagement strategies focus on experiences and outcomes that extend and expand consumer lifecycles.

More than 100% Year-to-year growth in searches for “best” smalldollar items like toothbrushes or umbrellas

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“Right now, right here, just for me” consumers Increasingly well-informed consumers with Gen X and Gen Y needs and preferences expect to be advised in ways that are timely, tailored, relevant. and increasingly local.

Source: Google Trends, U.S., June 2015 vs. June 2017

Shift from influencing consumers to buy products to helping consumers solve problems, get things done, and explore the world around them – often via brand-focused communities.

120% Growth in mobile searches for “wait times” in the last two years

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To Meet the Challenges, Consumer Products Companies Must Focus on Strategic Priorities That Drive Digitalization The consumer products industry is in the midst of massive change, in which traditional assumptions, models, benchmarks, and metrics are transforming to enable new growth opportunity.

Journeys Engaging consumers throughout the entire consumer journey means going beyond just the purchase and use of a product to include content, services, and other complementary solutions delivered as part of an ongoing dialogue.

Experiences Consumers seek timely, tailored experiences that guide them through the journey. These experiences drive and sustain engagement, providing valuable guidance for consumers and deep insights for consumer products companies about what motivates and inspires consumers.

Outcomes Consumers want more than products. They want to achieve outcomes. New digital leaders are creating new value by delivering health, joy, comfort, beauty, control, security, confidence, and more.

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Ecosystems Business today is so fast-paced that companies that compete as an ecosystem are at a tremendous advantage. By embracing unique partnerships, these innovators can deliver new value as information, offers, products, and services.

Speed Today’s innovative companies are capitalizing on economies of speed. They can sense opportunities in the moment, analyze available options, optimize the best response, and act with confidence and agility across both physical and virtual channels.

Fonterra employs the SAP® Global Batch Traceability application, enabling a realtime, global view of individual batch origin and ultimate destination – helping to make total traceability a reality.

Krone has partnered with SAP on an innovative digital farming initiative in which sensor data enables farmers to make better decisions about where to allocate resources.

Swarovski teamed with SAP to integrate machine learning into its retail business model, creating an intelligent library of classified product images to enable consumer interaction.

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Our Point of View: To Achieve These Strategic Priorities, Leading Consumer Products Companies Are Becoming Intelligent Enterprises The intelligent enterprise enables employees to focus on higher-value outcomes and to invent new business models and revenue streams.

By applying intelligent technologies such as the Internet of Things (IoT), artificial intelligence (AI), machine learning, and advanced analytics, leading consumer products companies transform into event-driven businesses. Event-driven businesses automate repetitive tasks, enable employees to focus on higher-value tasks, and allow companies to invent new business models and revenue streams by monetizing data-driven capabilities and applying core competencies in new ways.

Optimize and extend the value of current processes Business process automation

Digital transformation

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Productivity

Industrial automation

Transform with next-generation business processes

Intelligent enterprises

High-value tasks Repetitive tasks

Automation

Time

Optimize

Optimize existing processes for more efficiency or reliability

Extend

Extend current business processes beyond efficiency gains to capture new sources of value

Transform

Transform the company’s value chain or business model to capture new revenue streams

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SAP Enables Consumer Products Companies to Become Intelligent Enterprises SAP helps consumer products companies transform to intelligent enterprises through integrated business applications that use intelligent technologies and can be extended on SAP® Cloud Platform. This enables next-generation business processes to deliver breakthrough business value on our customers’ journey to becoming intelligent enterprises.

Intelligent Suite The set of applications provides the business capabilities that consumer products companies need to run their business. End-to-end business processes span multiple applications, so processes and data must be integrated for automation, a seamless user experience, fast adoption, and ease of operations.

Intelligent Technologies

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Several innovative technologies have matured to practical use:  The Internet of Things makes business applications interact with the physical world.  Big Data makes large data sets accessible for advanced analytics and intelligence.  Machine learning and artificial intelligence automate repetitive processes and learn from human exception handling and decision-making.  Advanced analytics find data patterns to support decisions and predict the future.  Blockchain distributes collaborative processes across the entire value network.  Data intelligence finds new value in data assets for new business models.

Digital Platform The digital platform, which is powered by SAP HANA®, extends the intelligent end-to-end processes and connects to data sources:  Cloud platform that allows customers and partners to extend their intelligent suite to run additional business processes  Data management to handle and organize data, a key asset of the intelligent enterprise

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SAP Leonardo SAP Leonardo brings the power of intelligent technology to your platform and applications to streamline existing workloads, reveal optimal decisions, maximize revenue and profits, improve customer satisfaction, and capitalize on digitally transformed business models.

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In addition, companies can use SAP Leonardo Services, delivered by world-class innovators that combine industry and emerging technology expertise, to help you drive innovation and business impact at scale.

SAP Leonardo Intelligent Technologies

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SAP Leonardo: Intelligent Technologies Optimize, Extend, and Transform the Business Consumer products intelligent scenarios SAP Leonardo capabilities are embedded in the business core and industry applications to optimize and extend business processes. Companies can also use them together with innovation services to build and assemble next-generation business processes. For consumer products companies, we support more than 20 intelligent scenarios to optimize, extend, and transform their business. Below are a few highlighted ones that will be further explained on subsequent pages.

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Optimize

Optimize existing processes for more efficiency or reliability

Extend

Extend current business processes beyond efficiency gains to capture new sources of value

Transform

Transform the company’s value chain or business model to capture new revenue streams

• Brand impact

• Cold chain logistics

• Source-to-consumer traceability

• Customer retention

• Consumer products assets

• Fashion runway

• Predictive analytics

• Digital boardroom

• Connected agriculture

• Resume matching

• Fleet management optimization

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SAP Leonardo: Applications Optimize Business Processes

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Optimizing business processes results in achieving the same business outcome more efficiently and reliably. We begin with scrutinizing current practices: What can be automated using machine learning? How can we make processes aware of the real world by connecting them to the things around them? How do we give people the right analytical tools to make sense of vast amounts of data and to handle exceptions?

Brand impact

Customer retention

Predictive analytics

Resume matching

No way to track and assess return on brand-related spend

Lack of insight into root causes of consumer attrition

Difficult to forecast future margin of products under development

Time consuming to identify viable candidates for open positions

The SAP Brand Impact application uses advanced computer-vision techniques to recognize logos in images and videos – monitoring consumer brand impressions in real time and delivering accurate, timely insights into marketing ROI.

The SAP Customer Retention application anticipates consumer behavior – such as product cancellations or renewals – with instant insights from transactional data and digital interaction points.

The SAP Product Lifecycle Costing solution helps secure future product margins in the early stages, when the design is evolving and master data is incomplete. Gain visibility across teams and support new product innovations.

The Resume Matching service automates the talent screening process by applying machine learning models. The service enables recruiters to identify the candidates with the best skills, while also mitigating the personal bias of recruiters.

• Higher ROI on marketing spend

• Increased consumer retention

• Increased profitability

• Higher customer satisfaction

• Increased market awareness

• Optimize costs

Optimize

“Consumer products companies must apply AI and machine learning to read patterns within functional areas so that they can provide predictive trends and insights across the organization.”

– Sahir Anand, Managing Vice President, Research and Strategy, EnsembleIQ

• Faster response time

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SAP Leonardo: Capabilities and Services Extend Current Processes to Capture New Sources of Value

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Extending business processes aims at generating more value and new outcomes. Begin by challenging the status quo: Are we doing the right things in managing assets and in shaping customer and consumer relationships? Innovators use digital technology to reimagine business processes to create new value. Digital technology extends services that increase the value of products and enables IoT-driven processes that get the right products to the right place at the right time.

Cold chain logistics

Consumer products assets

Digital boardroom

Fleet management optimization

Lack of visibility into condition of in-transit perishable items

Key decisions about assets are highly reactive in nature

Lack of visibility across key dimensions of the business

Difficulty predicting when vehicles require maintenance

The cold chain logistics option for the SAP Leonardo accelerator package for Consumer Products is an IoT solution for real-time monitoring of temperature, humidity, and location of goods that are in transit as well as stored in warehouses. Cold chain logistics provides monitoring and tracking of refrigerated cargo whether it is moved by sea, land, or rail.

The assets option for SAP Leonardo for Consumer Products provides visibility across a connected series of assets, such as branded freezers and coolers that are located in retail and convenience stores. Assets can be monitored to ensure they are optimally located, appropriately stocked, and kept at the right temperature.

Further, maintenance resources can be dispatched before a potentially costly problem occurs.

SAP Digital Boardroom equips C-level executives with real-time contextual information and ad hoc analysis from across their organization. Built on the SAP Analytics Cloud solution, this nextgeneration board portal leverages line-of-business data from SAP S/4HANA® and other applications to provide a single source of truth for the company.

Fleet management optimization enables the fleet manager to view fleet performance across a number of important parameters, from routes to fuel efficiency to driver behavior analysis. Based on a real-time view of data, the manager can then make better, more-accurate decisions about everything from vehicle routing to proactive maintenance.

• Decreased loss due to spoilage

• Reduction in lost revenue due to stockouts

• Better decision-making

• Decreased vehicle downtime

• Greater customer satisfaction

• Maximize equipment uptime

• Executive time refocused on strategic activity

Extend

Cargill has partnered with SAP to digitize its supply chain using tools driven by SAP Leonardo – such as manufacturing and transportation management – all in support of Cargill’s mission of “helping the world thrive.”

Colgate-Palmolive has teamed with SAP to build the SAP Digital Boardroom into its day-to-day operations, gaining a real-time view of valuable data from across multiple processes to enable better decision-making.

Bosch is using IoT technology to keep its truckers and cargo safe by locating secure parking spaces in real time. Scanning technology “recognizes” the trucks to eliminate the possibility of fraud.

• Increased fuel efficiency 10 / 17

SAP Leonardo: Intelligent Technologies and Innovation Services Transform the Consumer Products Value Chain and Business Models

Transform

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Transforming the business starts with ideas to conquer new markets with current products or deliver new value on your home turf. It often goes along with a renewed view on who is the ultimate customer and what kind of value do they really need.

Source-to-consumer traceability

Fashion runway

Connected agriculture

Lack of visibility into a product’s journey from farm or factory to wholesaler to retailer to consumer.

Inability to pinpoint a specific batch or shipment in the case of a problem

Difficulty of garnering real-time feedback on fashion designs during runway shows. Inability to forecast likely demand for fashion items.

Inability to gain a wide-angle view of farming operations, hindering decisionmaking about allocation of valuable resources such as water, fertilizer, and human labor.

With source-to-consumer traceability, blockchain technology enables the creation of a “chain of custody” – a detailed ledger of data regarding a product’s origin that is carried through all the way to the consumer. This provides greater assurance to the consumer while enabling the producer to take action in case of problems.

Using the mobile app for fashion runways, fashion houses are able to view real-time consumer response to a given design.

Further, they can determine whether characteristics such as geographical location have a meaningful impact on sentiment. Taken together, this data enables better decisionmaking about which designs to pursue, and in which locations.

With the SAP Connected Agriculture solution, farms are able to harness data from sophisticated sources such as drones and smart machines to gain a holistic view of farming operations.

Armed with this data, they can make highly accurate decisions – even down to the plant level – about what level of resource a given field or crop requires.

• Increased consumer trust

• Faster time to market

• Increased yields

• Decreased loss in case of problem batches

• Increased revenue

• Decreased outlay of resources 11 / 17

SAP Leonardo: Transformational Scenario – Source-to-Consumer Traceability Business transformation often starts with a paradigm shift that triggers a cascade of business innovations that may end with new business models. Change the focus from assets to relationships or from physical goods to data – and innovators will generate a broad range of opportunities. Rapidly turning ideas into experimental practices needs technologies and services for rapid composition of new ways to do business.

Identification of materials

Writing to a material provenance blockchain with network validation of entry

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Example <Vendor ID; material name; material ID; quantity; production date; production location; Quality grade>

Example

Creating a chain of custody and genealogy, material balance accounting of which quantities of materials went where

Retrieving the record

Example By way of blockchain Web app

Enterprise systems or cloud solution retrieving and writing data to this material provenance blockchain

One of the most pressing issues currently facing consumer products companies is the increasing demand, from customers and consumers alike, for full visibility into a given product’s journey – from farm or factory to wholesaler to retailer to consumer.

Up until now, the ability of consumer products companies to provide this type of accurate accounting of provenance was extremely limited. If a problem was identified with a certain item, it wasn’t possible to pinpoint a specific batch or shipment.

With the advent of blockchain, companies now have the ability to create a highly detailed ledger of data regarding a product’s origin, which is then carried through the “chain of custody” all the way to the consumer.

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SAP Leonardo: Transformational Scenario – Fashion Runway Build a mobile app for fashion runways, like the Apple iOS app originally created for iconic designer firm Badgley Mischka’s New York Fashion Week show in February 2018. Consumers attending or viewing the show were prompted to download the app and provide real-time feedback such as which styles they liked or loved. In addition, the designers could spot subtrends based on the geographical location of the viewers.

Fashion runway app built for Apple iOS

Runway analytics app built on SAP Cloud Platform

Kate Jacob Available

Value Delivered • Faster fashion, saving a minimum of 6 weeks off runway-to-store time • Greater profits by making styles consumers want • Replacement of social media for uniquely immersive experience • Global reach, with consumers everywhere taking part

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• Speed to innovation, with development to industrial strength global release in 8 weeks

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GPX – Clarify shortage & backorders Search

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Runway analytics screen is illustrative only 13 / 17

SAP Leonardo: Transformational Scenario â&#x20AC;&#x201C; Connected Agriculture Large-scale farms today are typically beset with a series of challenges that stem from a common cause: Inability to gain a holistic view of operations in order to make optimal decisions. Which plants need to be fertilized or watered? Which are ready for harvest? What is the best sequence of daily activities to maximize productivity?

Absent these insights, farmers can make costly decisions such as overfertilizing, underwatering, or not harvesting crops in time.

With connected agriculture, crucial data is made visible and available from across a chain of processes through automated data ingestion from IoT-enabled sources such as sensors and drones. Analysis of this data in real time enables better decision-making about everything from crop planning to water management to fertilization and harvest.

Data sources

Aerial images

Analytics and optimization layer Farming cockpit (plan, schedule, execute)

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Sensor data

Farm management process layer Mobile apps (such as field scouting)

Machine data

Data layer Content and master data

Farmer portal

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Aimiqi Reimagine: Business model, business processes

25%

Digital business pillars: Customer experience, digital core

Reduced design time

Related KPIs: Days in inventory, time to market, customer satisfaction

30% Shoe shopping is going digital with Aimiqi Shoe Company Aimiqi’s goal is to connect people and processes by using digital R&D machine learning to create a whole new consumer experience and respond to changing market requirements and fashion trends. Earlier, only 5% of design proposals would reach the production stage, and there was significant overstock and wastage.

Aimiqi uses the SAP S/4HANA® Cloud solution for intelligent product design on SAP ® Cloud Platform with product lifecycle management and virtual reality technologies in the SAP Leonardo IoT Bridge digital operations center. With these solutions, Aimiqi is able to collect and analyze customer requirements to design products that truly fit the market needs.

Customers can design personalized pairs, select the desired color and the right fit, “virtually” test the “end product,” and place an order.

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• Press release

Expected increase in profits

40% Reduced overstock

“Through the digital innovation platform from SAP, we gained agility and precision in design and production, and reduced inventory. It is totally game-changing for the footwear industry.”

– Lin Yuchun, President, Aimiqi Shoe Company

Click here to watch

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How to get started with SAP Leonardo

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Whether you’re still exploring new ideas or have defined one in detail already, SAP Leonardo brings together world-class innovators, industry and emerging technology expertise, proven use cases, and design thinking methods to help you optimize your business and drive innovation and impact at scale – faster and with less risk.

Explore Workshop

Design for the Future

Identify and prioritize your business challenges, explore how SAP Leonardo might help to rapidly solve them and define a path for the way forward.

Use a guided process to reimagine the future of your business and uncover where a blend of SAP Leonardo and established technologies might take you – from testing a new business model to organization transformation.

Accelerate Draw on our library of industry innovation kits to address common value propositions, and let SAP guide you to a business outcome in weeks, not months.

Bring Your Own Idea Bring a defined idea and we’ll support rapid prototyping and progression with a constant eye towards how to scale it across your business.

SAP takes a holistic approach to innovation. Because digital transformation isn’t just about installing the latest tech, we also address the readiness to receive a new idea. From human capital to infrastructure, we bring best business practices across your organization to improve communication, plan for employee training, review technical and regulatory feasibility, and consider other cross-functional needs to drive change and truly scale your innovation.

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SAP Is the Innovation Partner for Consumer Products Companies

Ten-year innovation vision

Comprehensive industry coverage

Proven services offering

Deliver fully intelligent business solutions and networks that span across company boundaries and promote purpose-driven businesses.

These solutions will be the most empathic symbiosis between machine intelligence and human ingenuity.

SAP enables the comprehensive coverage of the complete consumer products value chain across the enterprise. With its clear industry road map, SAP is the partner of choice for the consumer products industry.

By bringing together world-class innovators, industry and emerging technology expertise, proven use cases, and design thinking methods, we help consumer products companies develop innovations that deliver impact at scale.

• Self-running enterprise systems • Self-organizing business ecosystems • New markets and business models

• More than 14,100 consumer products companies in 134 countries are innovating with SAP solutions • SAP customers produce more than 79% of the world’s chocolate • All lines of business supported on a single platform

• Use proven methodologies to drive innovation, from reimagining customer experiences to enhancing operations • Fuel your innovation through a managed innovation ecosystem from SAP • Build your own innovation capability and culture

Learn more • SAP.com for consumer products • SAP Leonardo • SAP Digital Business Services • SAP Design Thinking Workshops

SAP delivers support for the intelligent enterprise for consumer products companies – providing integrated business applications that use intelligent technologies and can be extended on SAP Cloud Platform to deliver breakthrough business value.

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