Helping

Alliston Ackerman, News Editor

1/1/2005

There is no doubt that 2004 proved to be a more than challenging year for consumer goods (CG) companies. With industry mandate deadlines such as RFID and Sarbanes-Oxley breathing down their necks and the need to gain and maintain competitive advantage, CG companies sought safe harbor in consulting firms like Deloitte, IBM and Clarkston Consulting, which help distinguish a CG company with improved processes and systems. After all, it is the consultant's job to understand trends driving consumer industries, become the expert and then leverage extensive industry and technology experience, tools and methodologies to successfully fulfill a CG company's unique needs.

Cause for Consultation
Looking toward 2005, AMR Research and Clarkston Consulting help CGT reflect on the past year's trends and challenges, identify those to come and understand how consulting firms can help CG companies to adapt to an ever-changing business and technology landscape:

RFID- AMR Research recently reported that CG firms only spent a mere $1 million to $3 million each on RFID implementations in 2004. As evidenced by modest spending, suppliers haven't exactly embraced the technology "because many are more convinced than ever that there is no benefit, and even worse, consider their technology investments to be a throw away thus far," says Kara Romanow, AMR Research. However, those companies that do understand the potential of the technology and architect their enterprise to leverage the supply chain data have the opportunity to become not only compliant, but will use RFID as a differentiator.

With EPCglobal's recent ratification of the UHF Generation 2 (Gen 2) specification, vendors will step up RFID offerings in 2005. As independent third parties, consulting firms can drive change by providing a horizontal view of the industry and cross-vendor knowledge to create the correct RFID solution for each CG company. "Certain vendors work well in certain environments, but not in others, causing CG companies to essentially waste hundreds of thousands of dollars unless they look across a group of vendors for "best-of-breed" homogenious pieces (tags vs. readers vs. transmitters)," says Thomas Bornemann, managing partner, Consumer Products for Clarkston.
Realtime - CG executives recognize the need to establish real-time responses to evolving market conditions, customer expectations and daily supply and demand shifts. The year 2004 saw an increasing emphasis on the concept of realtime and, in 2005, real-time strategies and gradual execution for the integration of the demand and supply chain should be on the top of every CG company's to-do list. Using internal resources to adopt a real-time model will only lead to variations of existing internal models rather than the creation of an innovative solution. Consulting firms can provide strategic insight and roadmaps to help create the real-time and integrated supply and demand chain for a CG company.
Product Innovation - Successfully launching profitable new products that meet changing and dynamic consumer needs often separates market leaders from followers. Yet, despite the importance of this process, product lifecycle management (PLM) and product information management (PIM) investment in CG has lagged behind initiatives such as enterprise resource planning and supply chain management.

In the coming year, expect to see new product innovation and success as priority issues in the CG industry. Consultant firms will help CG companies view product innovation as a technology strategy comprised of many components (that may not come from a single application vendor) and create a long-term vision of where the business needs to be, supported by an incremental deployment roadmap. According to Bornemann, consultants can help CGs drive innovation "centers of excellence" and create the holistic view to drive "follow-the-sun" innovations.
Trade Promotions - Industry experts agree that the CG industry is in the midst of a Trade Promotion Management evolution. Promotion planning will become centralized, and sales organizations will be reorganized/incented based upon return on investment (ROI). Consulting firms can help CG companies to determine if they should hold out for enterprise vendors like SAP and Oracle to offer a robust product or gain ROI with a "point" solution, with a replacement strategy in place once enterprise vendors offer a robust solution. In 2005, Bornemann predicts that ROI-based analytics and optimization of trade spending will become a reality. TPM vendors not providing analytic capabilities will become Tier 2 companies.
Sarbanes-Oxley - The growing popularity of TPM solutions can be attributed, in part, to the emergence of The Sarbanes-Oxley Act of 2002, which mandates major changes in corporate governance, requiring companies to certify that financial reports "fairly present in all material respects the financial condition and results of operations."

Given the fact that CG companies spend some quarter of a billion dollars annually on advertising, marketing and promotion, the issue of proper accounting is most likely here to stay. CG companies should view this as an opportunity to understand the risk profile of the business and have made strides throughout 2004 to ensure the processes are in place to manage material risks.

Bornemann predicts that hype around Sarbanes-Oxley will die down as most companies will have documented their processes and identified gaps by 2005. However, maintenance-based Sarbanes-Oxley support from consulting companies will remain a priority.

Guaranteed Support
Whatever the next big trend, challenge or mandate, CG companies can rest assured that consulting companies will be on top of it, helping to guide them through the confusion that accompanies emerging business processes and technologies. For 2005, however, expect to see consultants focus their attention on RFID, TPM, product innovation and, of course, the supply chain.