It’s that time of year again when companies are frantically planning production to fill those large holiday purchase orders received from retail partners. Poor coordination and delays in production often result in late deliveries, empty store shelves, and the potential for consumers to switch to a competitor’s brand. Because stockouts cost retailers approximately 4 percent of annual sales and manufacturers lose an estimated $24 million for every $1 billion in sales, everyone in the supply chain is looking for ways to minimize the problem.
Based on current industry trends, there are a few major areas where technology can help: information technology (IT) efficiency, operations, and supplier management.
IT infrastructure is a key hub for managing business processes. Companies implement enterprise systems to manage financial transactions or customer relationship management tools to track customer interactions. However, these disparate solutions often silo information and require time-consuming report manipulation to identify trends or issues at a granular level.
By integrating systems and automating manual or paper-based processes, organizations can leverage data across the entire enterprise and identify issues earlier in the process. The latest technologies are incorporating built-in analytics to easily sort, group, and summarize large amounts of data; search and uncover trends; and find the root cause of problems in less time. By proactively managing materials received for production, quality testing samples, and reviewing work-in-process materials, it’s possible to reduce the cost of rework, scrap, and costly product recalls.
Another area in need of change is quality management, which still lags behind other parts of the business in regard to how it is tracked and managed. It is not uncommon to see quality assurance directors and managers using spreadsheets to manage incidents, root cause analyses, or even change controls. These static records lack the ability to track and manage issues effectively or query data for regulatory or customer audits. There also is no visibility into trends occurring in the production process to support various parts of a product investigation triggered by consumer complaints. Companies need to streamline this data collection to better track issues and provide the reporting necessary to meet regulatory audits in the event of a product recall.
Another big concern is that the pressure to drive cost and performance improvements has resulted in the adoption of a complex global supplier and co-manufacturer network. With more than 50 percent of production happening outside the brand owner’s facility, the risk to product quality and brand integrity has increased significantly. It is estimated that 52 percent of recalls are a result of supplier and contract vendor issues. And with costs to the company of about $90 million or more per recall—not including the impact on market share, share price, or legal fees—investment in quality and safety is long overdue.
The complexity of business operations likely will increase with additional suppliers, co-manufacturers and packagers, and even a company’s own global facilities. Collaboration and harmonization of processes across the value chain is imperative in order to successfully meet the demands of consumers, stay competitive, and keep off the CEO’s “naughty” list.”
Kelly Kuchinski is an industry solution specialist at Sparta Systems. With more than 20 years of product management and marketing experience, with a focus on consumer packaged goods, she helps Sparta’s clients understand industry trends, needs, and requirements. Kuchinski may be contacted at firstname.lastname@example.org.