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Home » 2008 Outlook: IT Trends for Consumer Products

2008 Outlook: IT Trends for Consumer Products

January 9, 2008
From AMR Research/Lora Cecere

With 2008 upon us, it's a great time for planning, and goal setting. To help consumer product (CP) companies, here are five trends for the CP industry for 2008.

No. 1--Brand loyalty is a street fight: Our No. 1 prediction, last year, as well, this fight still rages as CP brand loyalty battles retail chain loyalty. The pressure from private label and store brands has never been higher as retail brands like Best Buy, Target, Starbucks, and Wegmans demonstrate the power of the retail brand loyalty, and grocers like Tesco and Kroger try to distinguish the customer experience with private-label brands aimed at the burgeoning healthy-eating market.

The top question on the CP executive's mind: how do you win at the shelf and continue to build brand loyalty? The answer lies in rethinking front-office systems and processes as part of a demand-driven change management program. The idea is to become a market-driven culture, rather than a marketing culture.

Spending on demand signal repositories (DSR) and trade promotion management (TPM) is on the rise, reflecting this trend. The average CP company plans to spend $6M on each of these initiatives in 2008, our spending studies show, as companies look to better sense and shape demand, and promote profitable orders. As the year progresses, we expect market consolidations, with these technologies coalescing into a new front-office product for predictive trade analytics using downstream data. The true value of downstream data lies in using it in predictive analytics.

No.2--Cost-to-serve takes higher priority: While cost-to-serve analysis is only used by 20% of CP companies, 2008 should see wider adoption of the technologies and practices used to understand what effect a customer request has on the supply chain. As account teams focus on more profitability than revenue, the use of cost-to-serve technologies and practices will increase in importance. In parallel, the financial organization will build centers for supply chain costing to support this analysis. The emergence of financial groups focused on the profitable perfect order and supply chain excellence will foster this change in customer interaction. This shift will benefit vendors like Acorn Systems, Chainalytics, Jonova, and S&V Consultants.

No. 3--Global supply chain excellence is a top goal: CP companies are looking to a global presence as their main source of growth. And the move from multinational to being a globally integrated company demands that supply chain organizations change to support global tradeoffs. The average CP supply chain organization is relatively new--five-to-nine years old--and just beginning to grasp the requirements for talent development in the face of changing supply chain practices. As such, 2008 will be a year of SCM supply talent shortages, especially in emerging markets. Attention will be on training, mentoring, and employee retention. We'll also see new alternatives for SCM training and certification programs. The shift will favor products like Accenture's Supply Chain Academy, the Supply Chain Council's training and certification programs, and the SCM academic programs that have sprung up at Cranfield Institute, Harvard, Ohio State, MIT, Stanford, Wharton, and the University of Tennessee. We also expect sell-out crowds at our annual supply chain executive conference in Scottsdale, Arizona, May 30--June 1, 2008. Expect greater coverage in this area from AMR Research's value chain team in 2008. Along these same lines, it will also be a year when sustainability moves into SCM practice from just buzzword. Sustainability processes will be better defined, tracked, and reported for shareholder reports as it becomes a reality on executive committee agendas. Traceability and supplier development will also increase in importance with particular attention to product safety in the extended supply network. While few products for traceability meet the needs for the CP industry, look for vendors, like Lawson, e2open, Enguinity, and RedPrairie, and system integrators, like Infosys and WIPRO, to step-in and fill the voids.

No. 4--Rethink innovation: Breakthrough innovation is the life blood of CP, yet results are dismal. Traditional product lifecycle management (PLM) products won't close the gap, but building design networks--the use of demand insights to design new platforms and business models--and a focus on commercialization excellence will. Coverage of this process evolution will be a core theme of our research this year, with extensive coverage planned this first quarter. As companies look to solve this problem, we expect to see an increase in spending with industry-specific technologies like Bright Idea, Enguinity, and Paxonix to improve design networks and formulation strategies.

No. 5--Rethink IT strategies: With continued pressure on IT spending, the IT organization is moving from a world of project implementation to process innovation. Globalization, growth, and better use of data are the key concepts. Systems will increasingly become data driven, giving rise to the data architect. Master data management (MDM), downstream data, metadata, and the extraction and the usage of attributes will be of great importance (look for an article on this subject in next month's Bulletin). The shift to attributes from units will cause a rethinking of packaged applications and data flows.

As companies implement market-driven, front-office platforms, demand and supply visibility systems and networks, and systems to better use data, software becomes less mature and implementations carry greater risk. As a result, project management offices (PMOs) will rapidly adopt stage-gate like processes for the testing and progression of software implementations, with a growing role of line-of-business (LOB) managers in funding and making go/no-go decisions.

With these changes, the following five trends will continue:

1. The role and number of LOB buyers will increase.
2. IT outsourcing of noncritical business functions will rise.
3. Shared-service structures will mature, with serving the business becoming the main focus.
4. More effective use of data will take precedence over transactional efficiency.
5. Adoption of software as a service (SaaS) will grow in demand and supply networks, while service-oriented B2B processes will grow in importance, with data synchronization being the foundation for promotion and price synchronization.

2008 is shaping up to be a busy year.
http://www.amrresearch.com

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