Tech Trends - Consumer Goods

A S u p p l e m e n t t o C o n S u m e r G o o d S t e C h n o l o G y

ConSumer GoodS CompAnieS

ShAre Current And future

StrAteGieS for downStreAm

dAtA, mobility & mArketinG,

S&op And more

ReseaRch PaRtneR:

Tech Trends 2012

Tech Trends reporT 2012 | cgt | T T 3

edit noteWelcome to CGT and Gartner’s annual Tech Trends report. This year’s results show just how conservative our industry is, with most cG companies making very slight increases to IT budgets in risk-averse areas. Most organizations are sticking with safe, mainstream investments, more often cloud-based. however, we go back to the future as we lean on increasing supply chain complex-ity to support growth, including efforts around improving s&op to drive success. We also take a look at how com-panies are incorporating demand signals through down-stream data, interacting with consumers with mobile tech-nology, and focusing on product quality. expert Gartner analysts analyze the results and provide their perspective and advice on these areas and more. Let us know (e-mail [email protected]) if you are experiencing simi-lar things and where your efforts are focused.

04 IT spendInG overvIeW Budgets are changing / recovering since the economic downturn.

10 doWnsTreaM daTa companies turn to dsrs and other leading technology solutions.

14 s&op The future technology landscape should support more mature s&op processes.

16 MoBILITy & dIGITaL MarkeTInG ‘consumer aware promotions’ are directed towards consumers / shoppers as they enter a store.

20 reTaILer perspecTIve retailers identify technologies needed to support collaboration and operational value improvements.

22 neW producT InTroducTIon companies are using technology for new product introductions and end-of-life product management.

24 QuaLITy ManaGeMenT consistency of quality is no longer differentiating — but a prerequisite.

c o n T e n T s

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corporate officeEdgell Communications 4 Middlebury Boulevard Randolph, NJ 07869-1111 (973) 607-1300 • Fax (973) 607-1395 www.consumergoods.com

TECHNOLOGY GROUP

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PRInTED In

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MEMbER

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Tech Trends2012

kARA ROMAnOWExecutive Editor

T T 4 | cgt | Tech Trends reporT 2012

14%

2%

5%

56%

23% Expect significant decrease

Expect slight decrease

No change

Expect slight increase

Expect significant increase

PERCENT OF RESPONDENTS

25145623

IT Spending OverviewIT BudGeTs shoW GroWTh BuT uncerTaIn TIMes persIsTby michael uskert, managing vice president

figure 1: expected investment change in scm technologies, licenses, services and consulting between now and year-end 2014

0.90%1.12%

Hardware

0.31%0.83%

Internal Services

6.37%6.13%Software

3.85%3.91%IT Services

1.85%0.08%

Telecommunications

2.61%2.36%

Total Growth %

AREA OF SPEND 2013 2014

0.90 1.12

0.31 0.83

6.37 6.13

3.85 3.91

1.85 0.08

2.61 2.36

0 1 2 3 4 5 6 7 8

figure 2: gartner Worldwide vertical forecasts

No matter what headline you read — persistent questions about the global economy, political instability, the global population shift towards a growing middle class in emerging markets, or business disruptions due to more frequent and extreme natural disaster — the one theme that continues to be readily apparent is that we conduct business in uncertain times. Despite these challenges, CEOs of major companies are promoting staggering revenue challenges. Take, for example, The Coca-Cola Com-pany’s well-publicized goal to double revenue generated by the company and its bottlers by 2020, and Unilever’s goal to not only double revenues by 2020, but also, halve its environmen-tal impact. It’s not just consumer goods companies. Hyundai Heavy Industries (HHI) stated it will triple revenue by 2015, and Rolls-Royce will double its revenues within the coming decade. These examples begin to illustrate the bifurcation in how companies are approaching the future. On one side, there is a group of companies simply trying to wait out the existing challenges. On the other, are companies that are embracing risk and searching for ways to exploit them in an attempt to leapfrog competitors. With that backdrop, three themes emerged from this year’s Tech Trends study:

•IT budgets increase but most are more risk-averse•The source of technology continues to change•Supply chain must become a source of business growth

it budgets increase but become more risk-averseIn 2011, the industry average IT spending as a percent of revenue for the consumer goods vertical increased to 2.1 percent, up from 2.0 percent in 2010. Current Gartner projections are that con-sumer goods companies will continue to increase their IT budgets through the end of 2014, although at a very modest pace. The results from this year’s Tech Trends survey provided a consistent view with 56 percent of those surveyed expecting a slight increase in budget and 23 percent expecting a significant increase (see Figure 1). One call out, however: those IT professionals hoping to see those increases materialize in an increase in internal budgets will be disappointed, as budgets for internal services are expected to remain mostly flat. The largest increases will come from increased software and IT services spend (see Figure 2).

While this seems to be good news for software and services providers, there is one caveat. In Gartner’s recent technology sur-vey, business leaders were asked to indicate their organization’s application and technology adoption profile. An overwhelming

Tech Trends 2012

majority, almost 90 percent, classified their organization’s strat-egy as either “mainstream” (adopting maturing technologies with manageable risk) or “conservative” (adopting only proven technology) (see Figure 3). As the external business environment continues to increase in risk, companies are looking for ways in


IT Spending Overview

which to reduce risk internally. Less than 11 percent stated they would be willing to adopt relatively new, and therefore, more risky technologies, compared to almost 20 percent in 2010. Tech-nology providers on the cutting edge will continue to fight an uphill battle as organizations wait for someone else to prove out new solutions, unless these providers are able to show a risk of adoption equal to or less than mainstream technology.

source of technology continues to changeFor the past few years, we have been tracking the sentiment of business leaders around how they anticipate sourcing tech-nology over the next three years compared with the previous three. During this time, we have illustrated a consistent trend of companies moving from the traditional licensing model to a Software-as-a-Service (SaaS) and/or Cloud model. As compa-nies look for ways to defer cost as well as simplify, optimize and increase their IT agility, SaaS and Cloud models have become more attractive. This year, the trend is no different, with one sig-nificant change. The pace appears to be quickening. In previous studies, traditional licensing has always accounted for the lion’s share of future sentiment, however, this year’s survey illustrates the single-largest anticipated shift from traditional licensing to a Cloud/SaaS model. For the first time, future sentiment shows traditional licensing dropping below 50 percent (see Figure 4). As more SaaS/Cloud solutions become available and provid-ers address the risks associated with this mode of delivery, its popularity only seems poised for continued growth. supply chain must be a source of business growth The top two priorities from Gartner’s latest CEO survey were to increase enterprise growth and expand into new markets/geographies, respectively. The implication on the supply chain is a requirement for which most were not built nor are prepared, to be a source of business growth. Gartner asked supply chain professionals to rank the forces that contribute most significantly to supply chain complexity. The top five responses focused on customer demands/expectations, product proliferation/varia-tion, risk, and supply chain expansion (see Figure 5). The combi-nation of these two survey findings provides a glimpse into the future of supply chain… a whole lot more complexity.

For supply chain professionals to tackle these growing chal-lenges, the partnership between business and technology will continue to play an important role. In terms of where busi-ness leaders are looking to invest, the top area of focus has not changed in recent years. Companies continue to focus on their planning processes as an attempt to get ahead of shifts in de-

10.6%

48.7%

40.7%

Aggressive: Willing to adopt technologies while relatively new and risky

Mainstream: Adopt maturing technologies with manageable risk

Conservative: Adopt only proven technologies


10.648.740.7

figure 3: typical adoption profile of supply chain applications and technologies

47%60%

On-premise (traditional)licensed applications

5%4%

Other

5%3%Open source

20%7%

Software as a Service(SaaS) or ‘Cloud’ (either

on-demand or as a subscription)

10%9%

Business process outsourcedor managed service

SOURCE Next 3 Years Last 3 Years

47 60

15 15

10 9

20 7

3 5

5 4 0 10 20 30 40 50 60

15%15%

Hosted licensed applications

figure 4: expected source of new scm capabilities

mand. This area has grown to include not only the traditional demand and supply planning suites, but also demand sensing/downstream data capabilities and more advanced S&OP tech-nology that combine supply chain and finance implications into a single view. In the past, however, business leaders allocated 20 percent to 25 percent of a $100 investment to planning improve-

Tech Trends 2012

IT Spending Overview

$5.17

$3.35

$2.39

$0.14

$13.54

$10.18

$9.61

$8.79

$8.57

$7.71

$6.91

$6.23

$6.12

$6.06

$5.23

Sourcing and procurement processes

Manufacturing operationsrelated processes

Other

Outsourcing supply chainbusiness processes

Planning processes

Supply chain visibility

Logistics execution processes

Supply chain agility and adaptability

Decision making and reporting process

Talent management

Continuous improvement initiatives

Business innovation processes

External collaboration

Processes to improve customer service

Internal cross-functional collaboration

AREA OF INVESTMENT

13.54

10.18

9.61

8.79

8.57

7.71

6.91

6.23

6.12

6.06

5.23

5.17

3.35

2.39

0.14

0 3 6 9 12 15

figure 6: Where would you invest $100 to better achieve your organization’s business goals?

ment. This year, that amount is down below 15 percent (see Figure 6) as companies look for ways to deal with the shifts in demand that cannot be predicted through planning.

Areas that received greater attention this year included im-provements to supply chain visibility and logistics execution capabilities. The business environment will dictate the need to

continue revenue growth and expand into new markets. This will continue to increase complexity in product and delivery. They only way for companies to counteract the new complexity is to weed out the non-value-added complexity and continue to identify areas that can be reduced, streamlined and automated. Technology will continue to be a key enabler.

30%

28%

24%

3%

72%

65%

51%

51%

51%

50%

49%

48%

38%

35%

34%

New competitors in your market(s)

Outsourcing to third parties

Other

Mergers and acquisitions

72

65

51

51

51

50

49

48

38

35

34

30

28

24

3

Customer demands, expectations and needs

Product proliferation or variance(stock-keeping units/SKUs, excess

product variant configurations)

Increased number of locations(customers, supplier, internal operations)

Increased supply chain risk(economic, geo-political, environmental)

Globalization of your supply chain

Managing supplier risk

Pace of new productintroduction and innovation

Talent

Emerging markets

Distributed manufacturing operationsand supporting capabilities

Compliance with governmentand trading partner mandates

DRIVERS OF COMPLEXITY

0 10 20 30 40 50 60 70 80

figure 5: forces contributing most to supply chain complexity (Multiple responses permitted)

Tech Trends 2012


T T 1 0 | cgt | Tech Trends reporT 2012

Managing inventory, cost and service is challenging in the wake of increased demand volatility. Demand variation is placing pressure on forecast accuracy and the ability to manage inventory and service levels. Utilizing retailer data to manage the demand and supply chain response is benefiting the com-panies who have matured their downstream data capabilities. For leading consumer products orga-nizations, they are finding that downstream data capability is a differentiator as well as a collaboration opportunity in their customer relationships.

What you can measure, mattersRetailers are seeking partnerships that improve cash flow and reduce working capital requirements within trading relationships. While “on-time” and “fill-rate” metrics still dominate the retail scorecard, the game is changing. Those manufacturers that can measure cash flow improvement and working capital reduction, and can demonstrate increased “value” have a differentiating advantage in the categories they compete. As manufacturers expand their downstream data capabilities, the metrics they measure with trading partners become more finan-cial and customer-oriented (see Figure 7).

expanding collaboration opportunitiesLeading manufacturers have made investments

Downstream Dataa dIfferenTIaTor and coLLaBoraTIon opporTunITy In cusToMer reLaTIonshIpsby steve steutermann, research vice president

figure 7: downstream data maturity and metric development

in demand signal repositories (DSR) to harmonize and normalize data for a host of downstream data uses (see Figure 8). DSR solutions come with analyt-ics capabilities, dashboards and alerts to manage demand and supply. As companies mature their downstream data capabilities and expand their uses of downstream data, they find that collabora-tion opportunities increase and the opportunity to produce meaningful collaborative platforms, like on-shelf availability, cycle-time reduction and waste reduction initiatives, are enhanced.

the connection to the shelf and revenue growth Economic conditions continue to impact the con-sumer, making it challenging to grow revenues in a difficult environment. On-shelf availability con-tinues to be a focus area for the consumer products industry and is an excellent engagement oppor-tunity with trading partners to increase revenues. The ability to see item-level demand at store level is changing the game and allowing organizations to reduce out-of-stocks, correct phantom inventories and improve retail compliance. Indications from recent on-shelf availability initiatives suggest that, on average, a three-point improvement in on-shelf availability is yielding approximately a one-point improvement in revenue growth. In categories that

increased financial & customer focus

subjectstage 1: reacting

stage 2: anticipating

stage 3:collaborating

stage 4:orchestrating

metrics Fill rate, inventory levels, on-time

Forecast accuracy, fill rate, inventory turns, on-time, functional costs

Demand error, Perfect Order, working capital, total costs, on-shelf availability, cash flow

Demand risk, customer service, cash flow, working capital, predictive order accuracy, total costs, waste

“There is no crystal ball that suggests when down-stream data capabilities will become a require-ment to do business and have a seat at the table in the future.”

Tech Trends 2012


Downstream Data

grow 3 percent to 4 percent annually, adding a point of revenue growth to the top line is significant. It’s this connection to rev-enue that differentiates leading supply chain organizations from the rest of the industry.

nice to have or requirement for tomorrow?There is no crystal ball that suggests when downstream data capabilities will become a requirement to do business and have a seat at the table in the future. Leaders today are benefiting from improved forecast accuracy, reduced day’s inventory on hand, superior service levels and more effective trade promotions. Growing retailer expectations suggest that it’s simply not just about managing your own inventory, but demonstrating how, in your trading relationship, you can reduce both retailer store and

distribution center inventories to achieve agreed-to objectives. What some may consider a “nice to have” capability today, may become a business requirement tomorrow.

Has the tipping point in the use of downstream data been reached? This is a question that has been asked for some time in the consumer products industry. It’s clear that there is a widening gap between those that have piloted and scaled downstream data uses and those that have not. For the “few”, the tipping point has been reached and downstream data has been the catalyst for differentiation and growth, but for the “many” downstream data use remains elusive and under-utilized. The business benefits within the industry have been well documented and the busi-ness case to make investments in downstream data capability is compelling. Will you have a seat at the table?

figure 8: collaborative uses of downstream data

Downstream Data use

Description of useinDustry maturity level

Category Management Category Insights high use

Sales Targeting POS Store-Level Data high use

Trade Promotion Promotional Planning Medium use

Retail CompliancePhantom Inventory, Pattern-based Recognition, Compliance

Medium - Low

Short-Term Forecast Improving Short-Term Statistical Forecast Low - Medium

Replenishment Replenishing to a Demand Signal Low use

Inventory Management Translating Demand Across a Value network Low use

Transportation PlanningTranslating Demand for Cycle Time Reduction, network Planning & Transportation

Low use

Supplier Visibility Demand Visibility upstream to Suppliers Very Low use

increaseD collaboration & Differentiation

Tech Trends 2012


USER VISUALIZATION/INTERACTION

S&OP PLATFORM

ERP ERP ERP LOCAL CRM

Supply Chain Modeling Performance ManagementFinancial Impact Analysis

Process Management CollaborationHierarchy Management

Scenario Management Assumption Management

OPERATIONAL PLANNING PLATFORM

Demand Planning NPI PlanningSupply Planning

Master Data Management

Integration to transaction systems

Analytics/Business Intelligence/Business Activity Monitoring Met

rics

Fra

mew

ork

One of the difficult things about S&OP is that while the char-acteristics of the process (organization, metrics, etc.) evolve as the process matures, so does the supporting technology. More advanced S&OP practitioners require strategic alignment and fi-nancial impact analysis tied to strategic planning and budgeting (see Figure 9). To be effective in connecting strategy to operations, companies need both operational and business S&OP layers.

Because current S&OP solutions are not yet capable of fully supporting this, expect to see the following advancements in available solutions:

•More advanced financial analysis, scenario management and value chain modelling

•Much tighter linking of operational and business planning within the same process and data model

•Stand-alone business modelling solutions develop and com-pare financially-aware scenarios

•Corporate Performance Management (CPM) vendors evolve financial planning solutions to incorporate more value chain

•Pure play vendors develop, acquire or partner for missing components

S&OPThe fuTure of saLes & operaTIons pLannInG TechnoLoGyby tim payne, research director

figure 9: mature s&op reference architecture

Tech Trends 2012


•SCP vendors evolve solution architectures to coalesce the planning processes, layers and horizons

Additionally, expect to see technology advancements impact S&OP solutions:

•Cloud platforms will increasingly support global S&OP•External collaboration, in-memory databases, and analytics

will increasingly support larger data sets aiding speed of planning/scenario developmentUnderlying the S&OP process technology is an integrated

supply chain planning environment which provides the under-

lying detailed operational planning data that is leveraged in the S&OP process. This is the foundation for more advanced S&OP functionality. Without this foundation, the S&OP process loses connectivity with the detailed operational planning and execu-tion processes. When it comes time to deploy an S&OP solution, it is required that companies closely assess their operational planning capabilities to avoid the risk of substantially weaken-ing the integration between the S&OP planning layer and the operational planning layer leading to alignment issues across these two processes.

S&OP

As consumers get more sophisticated in using technology to leverage their individual and collective buying power, a future is emerging in which manufacturers and retailers will have to vie for their businesses in more competitive ways. One such sce-nario is what Gartner calls context-aware real-time offers, where retailers and manufacturers will use technology to proactively make offers through mobile devices to shoppers while they are in the shopping process at the store level (see Figure 10). A number of advanced technologies exist today that have the potential to help retailers and manufacturers understand the in-the-moment context of their target audience — that is, their intent and state of mind — to deliver value. Imagine the ability to deliver the right offer to the right shopper at the right time and in the right (precise) location in the store. The possibilities are endless, but not without an equally long list of barriers and risks.

In our report, “Predicts 2012: Demand Sensing Will Be Key to Success and Growth in Consumer Goods Manufactur-ing”, we predict that by 2015, context-aware promotions will compose 10 percent of convenience item promotional activity among consumer goods manufacturers in developed markets. Today, very few offers are delivered in this manner. Gartner research and conversations with clients indicate that retailers understand the importance of delivering a more personalized

shopping experience and consumer goods manufacturers want to deliver increasingly targeted messages to consumers while they are at the point of decision as the media landscape becomes more and more fractured. And, consumers are open to getting targeted messages on their phones from a trusted retailer when they shop.

building blocks in place, but complexity level high We see eight essential building blocks to delivering real-time offers in the consumer goods grocery experience: Real-time offer engines, location providers, mobile retail shopping apps, POS and Loyalty systems, 3rd party data, data management, advertising and content offer pools, and cloud computing. There is evidence that the building blocks for this ecosystem are in place and activity is happening in pockets including two vendors who are pioneering these applications in grocery stores today (Cata-lina Mobile and Point Inside).

What’s missing today is connectivity among the building blocks. This scenario is complex in that it requires very close cooperation between the manufacturer and retailer, based on the insights and data they have on the shopper. It also potentially represents a subtle power shift from the retailer to the consumer, as each consumer could conceivably be given different personal-

Mobility & Digital MarketingThe proMIse and coMpLeXITy of reaL-TIMe conTeXT-aWare offers In sTore by don scheibenreif, research vice president

Tech Trends 2012


Brand A Brand B

Real-time offer, just for Shopper, right now and redeemed at checkout

Recall Shopper’s profile and determine precise location in the store

Store recognizes Opt In Shopper via mobile app

Calculate best offer for Shopper via

real-time offer engine

1

2

3

4

vs.

SPECIAL

OFFER!

figure 10: real-time context-aware promotions in grocery retail Source: Gartner “how Manufacturers Can harness the Power of Tech-Savvy Consumers” 12/2011

ized offers. More importantly, manufacturers and retailers will get some insight into the cause and effect of these offers at a 1-to-1 level, where the use of predictive analytics will yield different models for different customer-facing situations. While this sounds good in theory, consumers today have mixed feelings when it comes to the balance of privacy and getting location-based deals. If con-sumers opt in for these offers, then they must be accurate and relevant, or else the annoyance factor will cause consumers to opt out. Worse yet, there is the “creepiness” factor, where a consumer may get an offer based on something they assumed the retailer had no way of knowing. Regardless, retailers, manufacturers and ecosystem partners must work together to balance relevant offers with consumer privacy.

get ready for the real-time ‘me’ futureTechnology leaders in consumer goods organiza-tions need to understand the implications of con-text-aware computing on their company’s shopper marketing and consumer marketing activities as well as assess their readiness for a whole new level of data sharing with retailers and their ecosystem partners. Gartner recommends that IT become knowledgeable about the vendors who are doing work in the various building blocks of the ecosys-tem and then decide what activities to undertake based on their level of readiness. It is Gartner’s position that consumer goods manufacturers can lead this transformation of consumer and shopper marketing in partnership with progressive retailers that share this compelling vision of the real-time ‘me’ future.

Mobility & Digital Marketing

“retailers understand the impor-tance of delivering a more personalized shopping experience.”

Tech Trends 2012


Despite the focus on supply chain and inventory management initiatives and improvements in shelf execution, on-shelf availability remains a significant challenge (see Figure 11).

Old measures for on-shelf availability took a “bi-nary” approach. If “one” was available the retailer was in-stock, if “zero” were available, the retailer was out-of-stock. While fairly easy to measure systemically or visually, this approach doesn’t account for:

•Shoppers equating the last remaining item with poor quality and reluctance to buy

•Most retail systems require 24 hours to recog-nize and respond to the demand signal leaving the shelf empty (see Figure 12)

•Shopper placing differing levels of importance on the item relative to purpose of the shopping trip or other items in their basket

•Inaccuracies between system balance on-hand (BOH) and actual BOH due to shortages or mis-placed product

four emerging themes defining new on-shelf availability paradigm

1. The customer experience will determine ac-ceptable levels of on-shelf availability. If the mini-mum shelf presentation for an item is five, then a BOH of five or more is in-stock. If the item’s BOH is four or less, then the item is out-of-stock.

2. Retailers recognize the need to improve out-of-stock reaction time. Generating a report today about shelf conditions yesterday won’t recover the previous day’s lost sales.

3. Recognition that not all out-of-stocks are equal. Identify the most important items to the most important customers by linking customer segmentation, shopping basket analysis and on-shelf availability reporting then create strategies to provide the highest availability for those items.

4. Improving on-shelf availability is not neces-sarily a technology challenge. Despite technol-ogy advancements, process complexity (SKU and promotional proliferation) has kept availability performance relatively unchanged.

Retail Perspectiveon-sheLf avaILaBILITy – The Measure everyone aGrees needs fIXInGby mike grisWold, vice president - retail supply chain research

7.9%19.0%

USA

8.6%19.0%

Europe

8.2%22.0%Other Regions

8.3%15.0%Worldwide

LOCATION Non-Promo Promo

7.9 19.0

8.6 19.0

8.2 22.0

8.3 15.0

0 5 10 15 20 25

figure 11: out-of-stock percentages

With little improvement in on-shelf availability during the past 10 years, re-tailers and consumer products companies must take new approaches to solving this old problem. Consumer products companies must work with their retail partners to understand how they define out-of-stocks and then align planning and execution processes supported with inventory management technology.

“With little improvement in on-shelf availability during the past 10 years, retailers and cp companies must take new approaches to solving this old problem.“

36%

19%

25%

20% 3 + days

1 day < 3 Days

8 hours < 1 day

8 hours or less


19362520

figure 12: out-of-stock durations

Tech Trends 2012


The low rate of successful new product introductions is a must-solve for most supply chain leaders. Per recent Gartner research, consumer products companies revealed that on average only 40 percent of new and 50 percent of significantly modified products were successfully launched when success was measured in re-spect to being on-time and on-budget. With an increasing focus on top-line growth, processes and technology that support new product launch success have become a top supply chain prior-

ity. The Gartner User Wants & Needs Survey (Nov-Dec 2011 with 259 participants), reflects that as companies transition to a more strategic supply chain outlook, they are shifting business priorities from cost focus to revenue and growth generating goals. When supply chain leaders were asked to rank their pri-orities, the top three in importance included: customer service improvements, targeting supply chain contributions to drive business growth and innovation (see Figure 13). We are likely to

new Product IntroductionfaILed producT Launches eMphasIze The need To sTrenGThen suppLy chaIn InvoLveMenTby Jan kohler, research director & Janet suleski, research director

figure 13: product innovation is a top supply chain priority *new response category

ranked by sum % of top 3 priorities 2008stuDy

2009stuDy

2010stuDy

2011stuDy

Improve customer service 3 3 3 1

Target SC contributions to drive business growth 5 4 6 2

Product innovation * * * 3

Improve efficiency or productivity 2 1 1 4

Reduce costs 1 2 2 5

Improve business processes * * * 6

Support corporate or SC sustainability * * 10 7

Optimize SC throughput and cash-to-cash cycle time * * 9 8

Improve asset utilization / return on assets * * 8 8

Improve business continuity, risk + security * * 7 10

**Trend Change**2011 goals based on revenue and growth generation rather than cost refinement.

Tech Trends 2012

Tech Trends reporT 2012 | cgt | T T 2 3

see increased focus on improving innovation in the next few years as it also ranked lowest in current performance. Almost all of the survey respondents agreed that supply chain innovation deserves more attention and focus. Of this group, 43 percent ex-pect it will be one of their top goals by 2014.

linking new product introduction and sales & operations planning Gartner research shows that the top three new product launch failure points are product cost is-sues, late to market or missed demand, and inven-tory shortages (see Figure 14). Strengthening the connection between New Production Introduction (NPI) and Sales & Operations Planning (S&OP) can significantly affect these top issues. Compa-nies with maturing S&OP processes develop their plans in units and financial terms, reflecting the revenue, cost and profitability of items and can balance their inventory and capacity against the forecast. A tight link between NPI planning and S&OP provides the forward view that enables proactive cross-functional alignment to improve the probability of successful launch and commer-cialization. Through this linkage, supply chain leaders realize they are able to make the necessary business trade-off decisions needed to support more effective new product launches and greater business value. Linking the supply chain planning process with the new product stage-gate process makes it possible to align on all efforts, from ide-ation through delivery. This connection enables companies to experience better communication and risk management throughout the process. We continue to see a strong need for improved process and technology support for the linkage between NPI and S&OP. When we asked companies to rate how well they are able to manage risk and supply constraints for new product introductions, only 20 percent indicate that they do this well (see Figure 15).

supply chain leaders are investing in ap-plications to support npis and planning To support the points described above, leading com-panies are making investments into applications to support NPIs. The functionality required goes well beyond traditional Product Lifecycle Management (PLM) functionality, which is primarily focused on processes related to product and manufacturing de-

sign and development. The challenges come with the handoff of the approved product to the commercialization team.

To more fully support NPI processes, companies are adopting technolo-gies for demand forecasting, S&OP and product portfolio management to help their supply chains execute against innovation by improving the flow of information across business functions.

Many companies we speak with have improved their processes, but are still conducting planning and alignment activities with Excel, e-mail and reports pulled from multiple systems. Leaders have come to understand that they need to invest on multiple fronts to mature their NPI capabilities, so that they can realize the product innovation they need to achieve their revenue and business growth targets.

Data and information are readily availableto analyze the SC risk of product portfolios

within the S&OP process.28% 2%

2%

2%

47%23%

Product end-of-life value analysis as afunction of the S&OP process used during

product portfolio management tomaximize value and reduce complexity.

48%19%

Product portfolio decisions that activelyincorporate supply constraints and

risks communicated from S&OP.56%20%

We do this well

Need significant improvements

Need moderate improvements

No plans to utilize this practice

22%

31%

23 47 28 2

20 56 22 2

19 48 31 2

0 20 40 60 80 100

figure 15: leaders manage risk and supply constraints for npis

Product Cost Issues 13%10%14% 37%

Inventory Shortage 9%11% 29%

Late to Market/Missed Demand 8%11% 31%

14 10 13

11 8 12

11 9 9

#1 Reason #2 Reason #3 Reason

12%

9%

0 5 10 15 20 25 30 35 40

figure 14: the top three reasons Why new product launches fail • May not equal 100 due to rounding

Note: Chart shows top three of 12 reasons and does not equal 100%


SUPPLYRisk

Item Master/BOM Factory Data Regulatory Compliance Supplier Audits Supplier Performance Issue Tracking Corrective Actions Traceability Cycle Counts

Quality issues impact reliable and predictable supply

Data and Information

Process

DEMANDInsights

Deal with quality Issues at the

customer

Call Center Information Warranty/Customer Complaints Repair/Service Depot Information Quality of service Customer Sat Indexes Blogs Compliance specifics

APQP/PPAP Design/Engineering Validation Part/Specification History Product Catalog FMEAs/Reliability Issue Tracking Supplier Performance Process/Engineering Changes Regulatory Compliance

PRODUCT

Innovation

Quality issues are designed into product

and processes

Impacted: • Cost to Serve

• Service Levels• Profitability

figure 16: value chain Quality gaps

Quality ManagementA New Model for VAlue ChAiN QuAlity • by simon Jacobson, vice president research

Remember the last few headlines you read about a product recall or quality defect? Did any of them seem small in terms of consumer impact, corporate brand image, or cost? Probably not. Times have changed.

Quality is now a value chain capabil-ity that requires companies to define and manage all attributes that impact cus-tomer satisfaction. The increased use of outsourcing increases value chain com-plexity. And, organizations have multiple applications supporting quality and span-ning quality management systems.

Consistency of quality is no longer dif-ferentiating, but a prerequisite for the busi-ness’s license to operate. Figure 16 identifies the data and process gaps for quality across

the value chain. When exposed through poor customer experience and quality fail-ure, these gaps put corporate financial per-formance and brand reputations at risk.

In leading companies, quality and sup-porting IT architecture are integrated into one set of priorities supporting operations excellence. This integrated systems ap-proach known as an eQM Hub extends beyond manufacturing. eQM Hubs bridge the information and process gaps between quality planning and execution acting as a coordinating entity.

Ultimately, the eQM Hub can help overcome the master data management (MDM) challenge by creating a Bill of Compliance (BoC). The BoC provides a

persistent structure that defines master data elements required to demonstrate product and process compliance for ma-terial sources and destinations by region or customer. The eQM hub provides the MDM processes needed to maintain the BoC over its lifecycle, provides a single version of the truth that preserves the integrity of data in systems of record, minimizes redundant validation efforts, and lays the groundwork for controlled continuous improvement efforts. It also provides the basis for audit and traceabil-ity requirements in the event of a recall.

Whether or not your company is ready to embark on this initiative is a reflection on the current quality management strategy.

Tech Trends 2012

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Tech Trends - Consumer Goods

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