Lean Manufacturing: Enabling the Consumer-Collaborative Supply Chain

As consumer executives move into 2007 and beyond, they face, above the traditional top line growth and margin improvement pressures, additional and unparalleled compliance pressures and challenges never anticipated by their predecessors. The need to manage the business with a single version of the truth is more critical today than ever before. Companies that create lean-based manufacturing collaborative processes with their partners will create an environment that drives both increased market share and profitability.

The ability to work with their retail partners to thoroughly understand and quickly react to the new, more demanding and challenging consumer will differentiate those companies that grow share and profitability from those that disappoint their customers, shareholders and employees.

Understanding these challenges, QAD provides an integrated set of solutions that enable executives to turn these compliance challenges into a competitive advantage, specifically:

Supporting Key Retailer Requirements – As we move into phase II of what AMR calls the demand-driven supply chain, key components such as item synchronization, RFID (ePC), GTIN standards and increased collaboration are being slowly implemented between manufacturers and both Tier I (Wal*Mart, Target, Home Depot) and Tier II retailers to improve top line growth, reduce out of stock, lower shrinkage and improve operating margins.

To date consumer companies have meet the base line of item synchronization requirements. The top 50 consumer companies continue to invest and deploy ePC sensor based technologies while smaller companies have met initial compliance requirements and are still working on defining the ROI for increased deployment. Most executives have come to recognize that achieving value goes beyond the technology and needs to focus on improving processes and people capabilities.

QAD solutions, supported by key sensor-based computing partners, enable consumer executives to move from viewing this mandate as pure compliance to seeing it as an opportunity to build a lean based manufacturing environment. Lean manufacturing, enhanced by senor-based solutions across the entire value chain, will help in the following ways:

• Drive reduction in out-of-stocks, resulting in increased top line growth and reduced consumer brand switching
• Improve margins by reducing inventory at all points of the supply, resulting in decreases in both raw materials and finished goods
• Significantly improve customer service, resulting in easier entry of new products and elimination of potential penalties

Supporting Financial Regulator Requirements – Traditional concerns about effective trade promotion and settlement management with key partners continue to overshadow with meeting the stringent rules of accountability associated with Sarbanes-Oxley. Recent surveys indicate that many consumer organizations, while understanding the implications of compliance, must continue to build out a strong reporting and compliance system. QAD’s financial solution and deployment team provide the applications and knowledge to help improve the integration of TM and financials and drive effective compliance reporting.

QAD solutions support consumer financial management team to evaluate, and where necessary modify and or replace, data quality programs and reporting capabilities needed to manage trade and associated financial commitments and settlement payments relationships with their customers.

The targeted benefits are:

• A compliant balance sheet and associated regulatory reporting
• Improved processes for trade settlement driven by a common view of information
• A more level relationship with key retailers supported by deeper product cost and profitability information

Aligning Lean Manufacturing with Consumer Instinct Driven Promotion Programs – In the past seven years, new product launches and line extensions have grown from 17,000 to over 100,000 with less than 3 percent defined as a success. This influx of products, with its high entry cost of promotion and marketing, has necessitated a strong alignment with promotions planning/management and demand planning.

QAD’s promotion management solution enables brand managers, working collaboratively with retail purchasing managers, to plot and plan for multiple geographically-based programs and then drive these programs into the product and materials plan. Coupled with the integration into the financial solutions it provides a near closed-loop lean process that:

• Reduces stock out while minimizing inventory levels
• In collaboration with retailers, quickly assesses program effectiveness and efficiency
• Supports consumer quick response programs including fast track line extensions
• Reduces the acrimony associated with trade settlement

In summary QAD is committed to enabling consumer executives the ability to build a lean manufacturing environment helping grow volume, margins and top line profitability while enhancing its relationship with retailers and suppliers. For more information, please contact QAD’s new VP of consumer products, Phil Friedman at phf@qad.com