Information Integration

In order to leverage the opportunities presented via a demand driven pull model, one of the challenges consumer goods executives face is make sure that their information is integrated and transparent. This month, Consumer Goods Technology sat down with Bill Kester, senior director of Industry Marketing and Strategy for Consumer Products at Oracle. Bill taps into his 20 years of experience in the consumer goods industry to address issues such as retail compliance, government mandates, RFID and trade promotion effectiveness, as well as some of the unique challenges facing smaller to mid-sized companies.

With increasing competitive pressures, government compliance and retailer mandates, what course should consumer goods firms take to remain competitive?
At Oracle, what we see is an increasing number of companies taking a hard look at the technology and information architecture platforms they have been running on over the past 10 years and beyond. There is a growing industry recognition that these highly fragmented information systems built over the recent decades are not sustainable in order to remain competitive in today's challenging environment. There is a general acceptance of the fact that consumer products (CP) companies need to move to a more demand driven pull model rather than the pre-dominate, inventory heavy push model. This fundamental shift requires information integration and enterprise transparency not possible in yesterday's fragmented environment. Government regulations and big retailer compliance mandates only makes the case of change towards information transparency more critically compelling. Many of the companies we work with are in the mid-tier of CP and the need to upgrade "burning platforms" to cost effective, fully integrated manufacturing, distribution and customer management systems is particularly critical to ensure short term survival and build a sustainable platform for long term competitive viability.

Do mid-to-small sized companies face unique challenges?
Compliance and mandates will be a great and costly challenge for all CP companies, but will tax the mid-tier and smaller companies disproportionately because they are often running critical business functions on legacy systems and speadsheets, certainly not designed with these compliance requirements in mind. So once again, re-evaluation of the underlying information architecture for cost reduction, standardization and integration also becomes the enabler of compliance requirements as an output of a more efficient technology platform.

Upstream compliance with retailers and the government on trade promotion practices begins with a difficult problem for CP manufacturers to deal with, consolidation of product and customer master files to generate a "single source of the truth". To obtain information integrity and an enterprise-wide visibility required to develop excellent compliance and financial management practices, companies will need integrated information architecture, a single, unified data model that stores information across all data sources and an integrated reporting infrastructure that lowers costs and minimizes the chance of data errors.
What best practices should consumer goods firms embrace to ensure a healthy return on trade promotions investment?

Well, it's pretty hard to get a good return on your investment if you don't have a good handle on what you're spending, where and what is the customer/consumer response to those programs. Information integration and visibility is the key to improved performance. Many companies continue to use spreadsheets and point solutions to manage this critical process. I'm quite sure Microsoft never intended to be a serious provider of trade promotion management solutions. The first level of best practices and trade promotion productivity increase simply comes from efficiencies gained in capturing promotion plans, funds allocated, programs executed, deductions settled, etc. in a single system with transparent visibility up and down the organization. Of course, this visibility and accountability of process control becomes a requirement with Sarbanes-Oxley. In order to accomplish this, the system must seamlessly integrate cross-functional areas of trade management, finance and accounting, order management, pricing and sales execution. This is a pre-requisite for productivity gain and very costly when you knit disparate applications together. The second level of productivity gain comes from integrating consumer insight or demand response into the process. Gains in promotion effectiveness come from understanding which customers/consumers respond better with incremental purchases to specific account and store level events, segmenting them into profitability classes and aligning internal resources to produce product, distribute and execute in collaboration with your trading partner accordingly.

Are some of these challenges unique to the consumer goods industry?
The CP environment in general suffers from a chronic inability to organize information in a manner that leads to more effective, profitable business decision making. The historical roots of this are disconnected business processes that have resulted in highly fragmented information silos. One of the greatest disconnects has been the lack of integration between internal production and distribution systems and events occurring in the real world at the point of purchase or consumer demand. Historically, there has been an enormous waste of resources in new product introduction and related promotion practices largely due to a lack of visibility into consumer purchasing behavior and the inability to rapidly adapt. Integrated access to customer POS data, consumer loyalty information, promotion event response, i.e. demand signal, is the critical linkage to enable segment driven marketing and a more profitable utilization of resources.

Where do you see consumer goods firms maximizing RFID investments?
It's time for another data explosion. Every decade or so the industry gets a new level of information precision that challenges IT departments but provides a great opportunity for market insight and understanding by business managers to refine their business processes. In the 90's we moved from market to account/store level information and everyone said how are we going to handle all this data? The use of advanced algorithms and expert systems was pioneered at IRI and Oracle to sift through these mountains of data to find actionable information that enabled marketing and sales managers to fine tune their account planning process and gain competitive advantage. A very similar approach will be required to glean meaningful insights from the massive amount data generated as we move from UPC to EPC. Equally important insights will allow supply chain efficiency improvements as we watch product flow from plant to back room in a continuous flow that will allow for course corrections along the way. Beyond basic slap and ship compliance the question becomes do you have the right information architecture to allow you to integrate advanced exception and alerting capabilities with your existing business processes and overall information flow? The long term value proposition for RFID stems from the ability to collect data, more frequently at more granular levels of detail at a reduced cost. To realize maximum return on this information and this investment you must design business process that can be triggered by real world physical activities and react to change at the speed of information.