Consumer Goods Overview
Consumers are fickle, displaying little or no brand loyalty when new products hit the market. Local tastes are different. Patterns of seasonality vary by region. There are huge differences in the discretionary income in different parts of the world, affecting pricing strategy. Consumers are bombarded with thousands of marketing messages and thousands of new products are introduced every year in hopes of becoming the next big thing, making it hard for you to stand out in all the noise. Only those with flexible, adaptable supply networks have survived; only those whose systems are designed to keep pace with these rapid changes have thrived.
Consumer Goods Key Processes
Consumer Goods manufacturers are being pressed to introduce new products faster than ever before. Customers insist on having the latest and greatest – but at low cost and with high quality. The
CP companies face additional pressure with impact of seasonality where much of consumer product is purchased at holiday time if toys or summer furniture in the spring. This has put pressure on manufacturers to utilize design talent wherever they find it – at suppliers, at customers or at outsourced design firms. The need for collaborative design tools has skyrocketed – traditional methods of new product introduction are too slow, too costly and don’t provide the visibility needed in today’s fast paced manufacturing environments. Manufacturers are grappling with:
Consumer Goods Design Issues
- Rapid and timely new product introductions are required to remain competitive
- Design for manufacturability is key to cost control and modern manufacturing methods like lean and six sigma
- Shared raw materials, standardized components help to reduce inventory costs and potential stock outs
- Effective phase-in and phase-out of products can make or break the profitability of many short, seasonally impacted, life-cycle products
- Global design teams and supply chains make visibility and communication more important than ever
Consumer Goods Design Metrics
You can’t improve what you don’t measure, and analytics and process measurements are basic to modern manufacturing methodologies such as six sigma or lean. Many people say the design process can’t be measured – it’s too creative. But effective design processes show up in many common business metrics:
- Reduced obsolescence due to more effective phase in and phase –out processes
- Lower inventory and fewer stock outs due to shared components
- Fewer suppliers to deal with as the number of components becomes more manageable and suppliers become part of the design team
- Higher quality products as design for manufacturability eliminates many potential errors
- More consistent products produced by multi contract manufacturers
Planning provides the roadmap to manufacturing success. From high level sales and operations planning to ensure that the company’s strategic objectives can be met, right down to production schedules for each day at each work center or cell, planning is the heart of manufacturing. For consumer goods companies’ planning also means a closer alignment with their customers’ replenishment process using scan based trading data as input across the entire planning process.
Consumer Goods Plan Issues
The one thing you can count on is that actual consumer and customer usage of a product rarely is in perfect alignment to the plan. So it’s important that you start with the best possible plan, and that you have visibility to react quickly when things go wrong. Your key customer calls in with an urgent replenishment requirement that must be met in days, direct or indirect materials are late; tooling breaks, workers call in sick – the list of potential pitfalls is nearly endless.
- Inaccurate forecasts may lead to excess inventory – or worse yet, unhappy customers who don’t get their products on time. For seasonal based consumer products late means writing off excessive finished goods
- Poor planning can result in excessive unnecessary costs due to unplanned overtime or special freight charges to bring inventory in sooner.
- Not taking demand seasonality or sales promotions into account can leave you without inventory to meet orders
- Inaccurate inventory records can cause factories to go idle
Consumer Goods Plan Metrics
The results of poor planning can show up in virtually every performance measure:
- Excess inventory from materials stocked to meet demand that never materializes
- Large WIP caches in queue at work centers
- Poor on time customer order delivery performance as unneeded jobs make prioritizing harder
- High freight bills and expediting fees
- Frequent unplanned overtime, high cost variances
It’s well understood that industry leading companies have the most effective supply chains. In these companies, materials are intelligently sourced and many suppliers are treated like partners – integral parts of the design and delivery process. Suppliers are chosen based on a myriad of criteria, possibly including their proximity to the manufacturing facilities, the price of the item, trade terms, their design expertise, and their delivery and quality reliability. Each supplier’s performance is continuously measured and usually shared with the supplier.
Consumer Goods Source Issues
Effective sourcing is a complex balancing act that involves weighing the relative merits of a host of complex details that may not always be quantifiable up-front. With limited time for analysis, buyers use their “best guesses” to estimate the impact of a particular factor in a sourcing decision. Coupled with the mandate on limiting the number of suppliers that so many companies enforce, it’s no wonder many buyers skip the analysis and place orders with their tried and true vendors.
- Trade terms and prices can have a major impact on product profitability
- Late deliveries or poor quality can affect your ability to meet customer promise date on orders
- Suppliers with specific domain expertise may offer design assistance that existing vendors cannot – and this expertise may result in significant cost savings in manufacturing
- The cost and difficulty of managing off-shore suppliers may dwarf the cost savings in prices
- Higher safety stocks or expedited freight charges may be needed to respond to fluctuating demand
Consumer Goods Source Metrics
Not so long ago, the only metric applied to the purchasing department was purchase price variance (PPV). Today, manufacturers better understand the effect that sourcing decisions can have on every aspect of their business. For example:
- Supplier performance ratings can help determine if a supplier should be replaced or if contracts should be reallocated to multiple suppliers
- Safety stocks are a function of lead time – so if lead time increases with distance, overall inventory levels may rise
- Poor quality materials may not show up until WIP, resulting in high rework or scrap charges
- Purchase price variance is part of the story – but landed costs and the costs of managing remote suppliers needs to be factored in as well
Numerous studies have shown that better performing companies have almost universally adopted a “modern” manufacturing methodology.The surprise is that it makes no difference whether it’s Lean, Six Sigma, TQM or something else; what matters is the commitment to a methodology for continuous improvement. But when faced with the demands of day-to-day manufacturing, very often this commitment becomes secondary. Effective enterprise applications can help you to maintain this commitment by giving you the visibility you need to manage your manufacturing processes.
Consumer Goods Make Issues
If everything went according to plan, manufacturing would be easy. Unfortunately, there are a nearly infinite number of things that can go wrong. Perhaps your customer is responding to changes in their demand by changing order quantities or due dates. Machines break down. Parts are missing or deliveries are delayed. Almost every decision made in your organization affects your shop floor. How you respond to unforeseen events can make or break the company’s profitability – and possibly your career.
- Inaccurate inventory records result in parts shortages – and missed completion dates
- Unexpected customer demand results in changed production priorities and may result in excess inventory or missed shipments
- You want to utilize lean manufacturing techniques like kanban and back-flushing to streamline reporting from the shop floor
- You need specialized process capabilities that require you to out-source some or all of your manufacturing process
- Ramping up for new products may have steep learning curves affecting efficiency and utilization rates – and costs
- Unexpected machine breakdowns or tooling defects require unplanned schedule changes or re-routing of orders
Consumer Goods Make Metrics
Almost everything that happens in an organization affects what eventually happens in manufacturing. The challenge is in understanding the cumulative effects of all these decisions and achieving your goals despite unplanned events.
- Design decisions affect both cost to manufacture and quality of the final product
- Inventory management decisions affect the ability to complete orders as planned
- Forecast errors result in excess finished goods or late customer deliveries
- Breakdowns and tooling or set-up problems can result in late orders and escalating WIP levels
Every time you interact with your customers, it’s an opportunity to cement your relationship – or not. Some research has shown that customers rate the ease of doing business with suppliers and the access provided to information about their orders as nearly as important as the actual products they buy. Your business processes and the enterprise systems that support them can make or break any customer engagement by making it seem effortlessly easy.
Consumer Goods Engage Issues
- Poor business processes or inadequate systems contribute to loss of market share by frustrating or annoying customers.
- Customers want quotes to compare prices and trade terms to other possible suppliers as part of their sourcing process.
- Customers also want to have custom configurations that provide exactly the features they need – but they can’t be expected to understand the intricacies of your product engineering
- If things go wrong after installation or a product needs repair, customers expect things to be quickly fixed the first time a technician comes to call
- Customers want to be able to quickly check the status of their orders by themselves
Consumer Goods Engage Metrics
If you treat customers well, you’ll be rewarded with repeat orders and word of mouth referrals. But treat them badly and watch your market share melt away. Beyond measuring calls to the complaint line, how can you be sure your systems and processes are not sending your customers straight to your competitors?
- Conversion rates of quotes to orders show that customers appreciate your products and the ease of doing business with you.
- Repeat order rates may show that customers are not satisfied after engaging with you. Measuring repeat order results may help you understand what you’re doing right.
- Customers understand that sometimes things go wrong. They do not understand when service technicians have to make several trips because they don’t bring the right parts or don’t have the right skills or tools. Completed service call rates can help you understand if you’re annoying your customers or using the opportunity to cement the relationship.
- Sometimes a customer just needs the answer now – they want to check their order status or place an order by themselves. Sometimes they want to talk to a CSR in your call center. Measuring call volume and self-service visits can help you satisfy your customers varied needs by providing the right tool and the right service levels.
- Quote to order conversion rates can help you understand if your customers like your products and pricing, but they may also reflect whether your business processes are too slow or cumbersome to meet your customer’s needs.
Even if you do everything right – you’ve got a great product, high quality, the price is on target – you may not achieve the market share you deserve if you consistently miss promised delivery dates or if you short ship items or ship the wrong items. This is more critical in consumer products companies that have to deal with tough retailers that assign shelf and dollar penalties to missed orders. Fast, efficient, consistent and accurate are the hallmarks of great companies’ delivery systems.
Consumer Goods Deliver Issues
When the end-of-day or end-of-month crunch hits, your team wants to perform. They try their best to fill all orders quickly and perfectly, but system errors or cumbersome processes can get in their way. Drop shipments and direct deliveries to multiple addresses are challenges in themselves. Customers increasingly demand special packing or pallets, special labeling or even bar codes and RFID chips.
Consumer Goods Deliver Metrics
Even beyond the obvious – are orders going out on time without errors – there are clues that can help you streamline your business processes and improve profitability while delighting your customers with perfect orders. You need to measure your performance and then dig in to the underlying causes if you miss the mark.
- Perfect orders make customers happy. Late deliveries point to problems in inventory or production management - or maybe poor forecasting.
- Shipping the wrong items may point to materials stored in the wrong locations or mismarked inventory. Bar-coding or RFID can help solve this problem and improve performance by identifying materials correctly at picking and at put away.
- When your inventory record shows an item is in stock but the bin is empty or the count is off, short shipments happen, followed by unhappy customers. Inaccuracies in finished goods inventory is a good predictor of future customer satisfaction issues.
- Freight charges can be better controlled when you have visibility into all of a customer’s orders and the costs of different shipping methods.
- Pick lists generated to maximize picking efficiency can make your team more productive without adding more steps to the delivery process – and increase your throughput without adding headcount.
When the inevitable happens and your product needs maintenance, it’s a perfect opportunity to make your customer glad they chose to buy from you. From the time the customer places the service call until the time the technician leaves their premises with the product back up and running, the clock is ticking. Most of us hate when things break down because of all the annoyances associated with service calls - even besides the fact that our equipment isn’t working. Give your CSRs easy information access to your customers installed records so they can speak intelligently as soon as they answer. Dispatch the nearest technician with the right parts and the right skill set the first time, every time. Provide accurate estimates of arrival times. Then leave your competition in the dust.
Consumer Goods Service Issues
It’s costly to provide excellent service to products and equipment at customer sites, but it’s REALLY costly to provide bad service. When the CSR has to annoy the customer by asking for information that should already be in your system, you’re slowing down your call turnover time. That costs money through increased headcount. When you send out a technician who doesn’t know how to fix the product the customer has, so you have to send another tech out for a repeat visit; it costs you time and money. If the tech brings the parts for an older or newer revision than the customer has, it costs you money. When the tech brings the wrong part, it costs you money. Even worse than the out-of-pocket costs is the gamble you take with losing that customer forever.
Consumer Goods Service Metrics
By treating your customers’ goodwill like the valuable resource it is, you can cement that relationship and save money in the process. Good service can win you that customer for life. But how do you know you’re needlessly spending money and squandering customer goodwill?
- Measuring the elapsed time from when the customer first logs the call to its final resolution can show you the effectiveness of your service organization
- Skills tracking along with measuring training completed can ensure that you have technicians with the right skill set available in a reasonable time frame.
- A high level of repeat service calls for a single incident may mean that your techs don’t have the right parts with them the first time they go on-site. Maintaining the as-built, as maintained records of your customer’s equipment can help you save money by minimizing repeat calls due to wrong parts.
- Warranty costs can show you not only how reliable your product is, but how well your service is satisfying your customers.
Modern manufacturing methods put as much stress on the financial systems as they do on the manufacturing side of traditional restrictive enterprise applications. Traditional cost accounting with its emphasis on work order variances and detailed material tracking and operation reporting doesn’t cut it when you’re back-flushing materials from open storage locations and replenishing by kanban rather than pre-pulling inventory by work order from closed secure stockrooms. Vendor managed inventories mean treating a supplier like a trusted partner when nobody checks that actual receipts match the invoice quantity. Electronic payments have largely replaced traditional paper checks, so accounts receivable has no hash totals to reconcile cash against. Mergers, acquisitions and intra-company supply and demand mean finance needs flexibility like never before. Consolidations and eliminations, multi-currency, and automatic allocations are just a few of the items on your accounting team’s wish list.
Consumer Goods Finance Issues
Government compliance mandates have put strict new controls on the finance team, but the business requires streamlined processes to remain competitive. Finance teams struggle to find the right balance between controls and the business’s emerging needs. New ideas like vendor managed inventory render traditional payables processes obsolete when the supplier processes both the receipts and the invoices. The global economy means international business is the new normal while frequent mergers and acquisitions make chart of accounts and general ledger flexibility mandatory. Varying compliance regulations require localizations; multi-currency transactions affect profitability; cash management is crucial; and reporting has to be quick and easy.
Consumer Goods Finance Metrics
The finance team is used to metrics - much of accounting is designed to measure and report the business’s performance. But compliance regulations means new measures, new reports and new controls need to be put in place or the company and its officers can be at risk. Finance often struggles to put the right checks and balances in place to allow the smooth running of the business and still ensure traceability and confidence in the numbers.
- Measuring inventory and COGS can be tricky if inventory is consigned at the customer’s site, if a supplier drop ships goods or if part or all of production is outsourced.
- Intra-company shipments and orders require careful reporting to ensure profits and revenue are not over-stated
- Cash flow projections can show whether DSO is on target and that out-going payments are in line with actual inventory levels
When shopping for new enterprise applications, savvy buyers don’t just focus on long lists of detailed functionality. It’s more important now than ever that the infrastructure and architecture of the system is flexible and adaptable so that the business can react to changes quickly.
Consumer Goods Enable Issues
Companies today run a mix of applications from multiple vendors and their ERP system is usually the core or backbone of it all. The infrastructure and architecture of the ERP system are crucial. Master Data Management capabilities are key to ensuring consistency of data among disparate systems. Quick implementations are required because the lean and mean manufacturers of today don’t have the resources to do long involved implementation projects and lots of training. That means the systems have to be intuitive and easy to use. And since business processes are the real key differentiators among competitors in the age of rapid product introductions and short product life-cycles, the ability to hone these processes through cost-effective simple customization is essential.
Analytics and business intelligence are also important to enable all the measurements you need to run your business well.
Consumer Goods Solution
||Support for ECOs /ECNs
Product Change Control (PCC)
Master Data Synchronization
Bill of Materials
Features and Options
Time-phased planning, costing and execution of capital project
Costing using Enterprise Edition
|Product Design Specification (PTC)
Product Lifecycle Management (PLM)
Sales and Operations Planning
Rough-cut Capacity Planning
Product Line Planning
Distribution Network Design
Materials Requirement Planning
Master Production Scheduling
Capacity Requirements Planning
Materials Requirement Planning
Master Production Scheduling
Capacity Requirements Planning
Supplier Collaboration Portal
Purchase Order management
|Supply Chain Portal (SCP)
||Manufacturing Execution Workbench
Production Scheduling Workbench
Lot Serial Traceability
WIP Lot Trace
Shop Floor Control
Process visualization with full kanban support
||Manufacturing Execution System
Automated Data Collection
||Customer Relationship Management (CRM)
Customer Self-Service (CSS)
Customer Schedules APM
Lot/serial allocation at order time
Buying groups Questionnaire for configured items
Features and options
||PO to third party to drop ship to customer
Standard shipping from the warehouse
Inventory Control (min/max)
QAD Consignment Inventory
QAD Supply Chain Portal (SCP)
Returns process including RMA, warehouse, and accounting orders
||Service and Support Management (SSM)
Mobile Field Service (MFS)
Installed Base Management
Vertex Sales and Use Tax Interface
||Support for Sox, GAAP, IFRS, MMOG/LE, ISO 9000, RoHS, WEEE, ELV
QAD Business Intelligence (BI)
QAD Quality Management EDI eCommerce
Enterprise Asset Management (EAM)
QAD Trade Management System (TMS)
Customers and Supplier Schedules