IDC's Top 10 Predictions for 2010
By Simon Ellis, Practice Director, Supply Chain Strategies, IDC Manufacturing Insights
IDC Manufacturing Insights spoke with technology vendors, consultants, academics and manufacturing end users about what the coming year will hold for brand-oriented value chain manufacturing companies across supply chain, product lifecycle management and emerging technologies. Brand-oriented value chains are those companies characterized by branded products that serve consumer markets, including food/beverage, footwear/apparel, healthcare/beauty and household products. The segments that make up our brand-oriented value chain category are dealing with consumers that are trading down to more affordable products while retail partners increase their private label mix and ask manufacturers to take more responsibility for fulfillment execution. Product mix changes have driven higher-than-normal profitability volatility, and cost-cutting measures have been stepped up.
Brand-oriented value chains are structured around branded consumer products that must manage highly variable demand of a large number of stock-keeping units. SKU churn is also high, more than 50 percent in some segments. The demand side of the supply chain is highly volatile, often driven by high levels of promotional spending. The supply side of the supply chain, on the other hand, is relatively stable with less global souring than in other value chains. Although we are starting to see some regional supply networks, Brand-oriented value chain companies generally source closer to their consumers as a result of high distribution costs.
As we observed last year, modest growth in mature regions continues to be augmented by faster-paced growth in emerging regions, specifically China and Eastern Europe. Consumer goods companies have been working to properly align sources of supply, manufacturing and distribution channels with this shifting demand. At the same time, the organizational model is neither global nor multinational, but more "transnational." This industry category continues to drive greater levels of global integration, and this effort is reflected in the value chain's IT investments.
Managing the products, ingredients, manufacturing and sales channels becomes further complicated in this "transnational" global model. The industry has relatively high adoption rates for ERP, SCM and CRM, which gives it a strong transactional foundation and future IT investment will center on putting that information to work in making decisions at a more granular level (e.g., store level instead of regional) and at a pace that supports shifting market conditions. We also expect to see broader adoption of SRM and PLM application tools in brand-oriented value chains.
Consequently, here are our top 10 predictions for brand-oriented value chains for 2010 that will inform our research throughout the year:
-- Prediction #1: "Dynamic Optimization" dominates capability investment to support redefining of the supply chain.
-- Prediction #2: S&OP re-emerges as the synchronizing process for reconciling supply and demand, and getting to a consensus forecast.
IDC Manufacturing Insights spoke with technology vendors, consultants, academics and manufacturing end users about what the coming year will hold for brand-oriented value chain manufacturing companies across supply chain, product lifecycle management and emerging technologies. Brand-oriented value chains are those companies characterized by branded products that serve consumer markets, including food/beverage, footwear/apparel, healthcare/beauty and household products. The segments that make up our brand-oriented value chain category are dealing with consumers that are trading down to more affordable products while retail partners increase their private label mix and ask manufacturers to take more responsibility for fulfillment execution. Product mix changes have driven higher-than-normal profitability volatility, and cost-cutting measures have been stepped up.
Brand-oriented value chains are structured around branded consumer products that must manage highly variable demand of a large number of stock-keeping units. SKU churn is also high, more than 50 percent in some segments. The demand side of the supply chain is highly volatile, often driven by high levels of promotional spending. The supply side of the supply chain, on the other hand, is relatively stable with less global souring than in other value chains. Although we are starting to see some regional supply networks, Brand-oriented value chain companies generally source closer to their consumers as a result of high distribution costs.
As we observed last year, modest growth in mature regions continues to be augmented by faster-paced growth in emerging regions, specifically China and Eastern Europe. Consumer goods companies have been working to properly align sources of supply, manufacturing and distribution channels with this shifting demand. At the same time, the organizational model is neither global nor multinational, but more "transnational." This industry category continues to drive greater levels of global integration, and this effort is reflected in the value chain's IT investments.
Managing the products, ingredients, manufacturing and sales channels becomes further complicated in this "transnational" global model. The industry has relatively high adoption rates for ERP, SCM and CRM, which gives it a strong transactional foundation and future IT investment will center on putting that information to work in making decisions at a more granular level (e.g., store level instead of regional) and at a pace that supports shifting market conditions. We also expect to see broader adoption of SRM and PLM application tools in brand-oriented value chains.
Consequently, here are our top 10 predictions for brand-oriented value chains for 2010 that will inform our research throughout the year:
-- Prediction #1: "Dynamic Optimization" dominates capability investment to support redefining of the supply chain.
-- Prediction #2: S&OP re-emerges as the synchronizing process for reconciling supply and demand, and getting to a consensus forecast.
-- Prediction #3: Balancing supply and demand across the value chain prompts a strategic redesign of the supply network.
-- Prediction #4: Adoption of product lifecycle management applications grow as brand-oriented manufacturing companies focus on innovation delivery.
-- Prediction #5: Virtual market research comes of age as brand-oriented manufacturers and retailers recognize the power of collaborating for the consumer.
-- Prediction #6: Growing demand in emerging economies causes brand-oriented supply chain organizations to invest in capabilities that facilitate global operations.
-- Prediction #7: Transportation capacity will tighten, causing brand-oriented supply chain organizations to re-think delivery approaches and fulfillment strategies.
-- Prediction #8: Product mix pressures continue to put focus on cost optimization, causing brand-oriented value chain companies to renew their interest in trade promotion management and optimization tools.
-- Prediction #9: RFID waxes in footwear and apparel, wanes in consumer packaged goods.
-- Prediction #10: Armed with metrics, manufacturers move from sustainability reporting to intelligence.
To read this full report, click here.