Supply Chain Opportunities in the Upturn: David Johnston, JDA Software Group

According to the Manufacturers Alliance/MAPI, there are enough economic indicators to forecast an eventual, though modest, recovery following a long recession. While a predicted 2.1 percent rise in gross domestic product and 3.2 percent rise in manufacturing production in 2010 are promising, manufacturers must have a solid foundation to effectively and profitably leverage opportunities in a recovering economy. This month, David Johnston, senior vice president, supply chain, JDA Software Group, offers strategies and insights to consumer goods (CG) manufacturers to manage and anticipate supply chain opportunities in the economic upturn.

How can CG manufacturers quickly respond to opportunities associated with the economic recovery?

Johnston: Manufacturers that continue to free up unnecessary inventory will have more flexibility to change business strategies or respond to market surprises. Companies can strengthen cash position by continuing to rationalize inventory levels against the changing product mix across the entire supply chain, aligning levels with current consumer demand. Manufacturers can also realign the supply chain to achieve financial goals by taking control of financial and operational strategies with a revised approach to sales and operations planning (S&OP). An integrated business planning approach goes beyond aligning supply and demand, and integrates time-phased strategic revenue, cost and margin plans with a company's operational plans. This not only improves collaboration and responsiveness to market change, but also enables executives to set financial expectations for all sales, marketing, promotion, inventory and capital expenditures plans, which is a critical element for success in any economy.

Can you explain some of the technology enablers helping manufacturers execute these strategies?

Johnston: Disconnected business functions can hinder supply chain execution and the realization of supply chain opportunities in the new economy. While traditional S&OP processes have helped manufactures tactically balance supply and demand, a next-generation, integrated business planning approach will transform this into a process that integrates the entire business and enables company executives to confidently deliver on strategic objectives. Technology such as the JDA Executive S&OP Workbench supports collaboration cross-organizationally and provides key metric graphs and charts to visually represent the aggregated state of business for more informed decision making at the executive level. S&OP in the new economy is less about simply balancing demand with supply on an ongoing basis and more about anticipating issues and opportunities and taking proactive steps to capitalize on them in the most profitable ways. Total supply chain integration, collaboration and visibility will enable manufacturers to transform business practices, adopt new strategies and seize opportunities that arise in the economic recovery.

What changes in consumer behaviors should manufacturers anticipate in the new economy? How should they use this information to capitalize on new opportunities?

Johnston: Although there's speculation on the rate of the economic recovery, what's certain is that there will be long-term effects on new consumer habits. History shows that those who can afford to invest during an economic recovery come out winners by capturing market share. Even as the economy rebounds, consumers will continue to be more spend conscious than ever before. Successful companies will seize these opportunities to create a strategic advantage by frequently aligning and rationalizing product offerings with the changing preferences of the new consumer. By weeding out poorly performing products, positioning the right assortments on store shelves, and setting the right pricing and promotional strategies, manufacturers can drive market share and profitability. Catering to consumer demand will also enable manufacturers to build market share and long-term brand loyalty, even as consumers find themselves with more discretionary spending income in the future. Additionally, establishing closer collaboration with retail partners can provide insight into point-of-sale and SKU data, enabling manufacturers to better respond to shifts in market conditions, inventory production planning and scheduling beyond the current economic cycle.