When it comes to IT, the first decision is usually between buy versus build. The ABC allocation model is more or less standard; the Off-the-shelf (OTS) ABC software have matured during the last decade; and building an advanced ABC model is too cumbersome - are the strong arguments in favor of buy option. The build option should be considered only when there is a very strong reason for this. Like - the ABC model is too simple or highly customized or is required to be monolithically integrated with other in-house systems etc.

Talking about the OTS option, the choice can be between specialized ABC software and ABC module of ERP packages. ABC module of ERP package is ideal where ABC is required for operational decision making and most of the data is available within ERP itself.  

However, specialized ABC software should be considered in the following cases:
1) ABC is required for tactical or strategic decision making.
2) Multi-dimensional analysis of overheads are required
3) Underlying data is stored in heterogeneous systems
4) ABC model is required to be flexible as frequent changes are expected.

SAP suite of products has both the offerings - SAP ERP has a sub-module for ABC in SAP Controlling (SAP CO-ABC). SAP BusinessObjects Profitability and Cost Management (SAP PCM) is specialized software for ABC from SAP suite of products.

Right tool selection plays a very important role in the success of ABC. In the subsequent blogs let’s look at some of the important evaluation criteria for ABC software selection, implementation methodology and other related topics. In the mean time, please leave your comments and suggestions .

In the previous blog I have highlighted the reasons why the spending in digital marketing is accelerating and the areas in which an extensive use of digital marketing channels could mainly impact the organization.

Now let’s look deeper at the impacts of digital marketing on the company information systems.

 CRM systems are requiring new functionalities for managing the campaign across multiple channels, capacity to gather from multiple sources new types and higher volumes of information regarding the consumer or the customer, tools and repositories to enable an effective digital asset management.

 Web: the trend is to define and implement new platforms that facilitate the development and hosting of the web initiatives,  increase the capacity to deliver personalized multimedia content, promote the reuse of existing assets for the initiative creation
 
 Reporting and analytics: here the  key element is to develop and elaborate new indicator and scorecards to track the effectiveness of the web initiative, monitor consumer/customer behavior in the web and integrate these measures with the traditional marketing indicators.

How SAP is currently supporting these areas?

We need to look into mySAP CRM.
With the CRM suite SAP addresses multichannel campaign management and allows the interaction with the client via web making available some of the functionalities through the internet channel (e.g quotations and order management, actions) 
But overall at the moment I think it does not provide very specialized E-marketing functionalities.

Campaign management
 Marketing activities can be executed through different interaction channels: direct mail, e-mail, phone, web, fax, and SMS.
 Online marketing channels to plan, develop, and execute e-mail marketing campaigns.

Web Channel management
 Support campaign execution on the web. E.g. the system uses campaign IDs and coupon codes to determine products flagged for campaigns in SAP CRM and to determine campaign pricing in the Web shop. Also create private campaigns for specific target groups or public campaigns for all Web shop visitors. 
 Manage customer loyalty processes via Internet

Web channel analytics
 Perform analysis on the use of web functionalities in order to track the behavior, target the customers and drive future marketing activities.

Digital Asset Management
 Within the marketing resource management a central repository for the digital assets (photos, videos, or text documents) can be maintained. To each object properties and authorization concepts can be assigned to each object in order to manage it efficiently and secure direct web access. Besides the systems tracks the download information and provides specific reporting for each asset.

What is your point of view on this topic? Your thoughts would be highly appreciated and more than welcome.
Is SAP developing any innovative solution with the social CRM?
I will discuss on it in my next blog.

The first thought that always comes to mind whenever someone makes a mention of CPG industry - the traditional manufacturer-distributor-retailer business which works in tandem to deliver the goodies to the God in the entire chain - The Consumer! This traditional CPG-retailing is pretty well set over the ages and is perhaps one of the most revenue and employment generating businesses around the globe.

To many of us, hair care translates into an application of shampoo and conditioner in the bathroom! But the fact is that there is whole lot of art-work that can go on your head and translates into much bigger revenues than just shampoo and conditioners!

Professional Hair Care is more a multi-billion dollar global industry and growing steadily. This fact is realized by the major CPG manufacturers and they have acquired big stakes in the Professional Hair Care by way of acquisitions during the last few years.
While the Hair Care industry gets a boost from the major CPG players to ride on the well established volumes and scales of the CPG logistics, there is also a different approach that the manufacturers have to take when it comes to marketing and selling these products.

Style matters!

Hair Care Salons are the place where the hair care products get consumed. But this consumption is not a simple “buy” from the end consumer, un-like the traditional retail store. These salons are run by artists who perform coloring and styling on the clients. The bottom line here is CLASS and STYLE! The more effective and customized the style for the client, the more repeat business and personal relationship it generates.

The same stands true for the manufacturer – salon relationship. It needs the personal touch. This is catered to by sales representatives from manufacturer / distributor paying scheduled visits to the salons and interacting with them constantly.

Incentives - Key business generators

Promotions, in this industry, are an essential growth driver. Salons are not volume-based retailers. While class and quality remain their key areas, they also depend on the offerings and discounts to maximize the cost saving opportunities. Promotions, like buy-1 get-1 free, get discounts or bonus on meeting certain volume or targets, new launch initiatives, etc. contribute heavily towards the sales to salons. Salon setups and customizations, which are big investments for salon owners, are also provided by the manufacturers as a financial aid, thereby winning over customer loyalty for future product sales – a win-win solution for both.

......will look at this business from a technology enablemnet perspective in Part-II of this blog

Save time and money:
And achieve predicted results
Fewer risks:
Avoid common e-Business beginners‘ mistakes
Fast track:
To extending your business solution with new business processes
No trial runs:
Start straight off with a fully documented prototype that is fully reusable
Failure is not an option!
It works: what you see is what you get for implementation
Communication:
Among project team members and executives becomes more effective
Consistent approach:
Focusing on integrated end-to-end business processes

Conclusion
Adopt Industry Best Practices for better ROI, but ensure you do the home work during planning phases; else the project can be a financial and business disaster.

1. Business Challenges:

a) Identification of Purpose: The most important step towards implementing ABC is to identify the purpose of the Activity Based Costing (ABC) and Profitability analysis. The purpose can be operational, tactical, strategic or a combination there-of. We call it operational - if the profitability analysis has to support the day to day decisions like - is the sales order profitable or how much to charge the customer for a particular sales order?  It can be tactical if it is to segment customers based on profitability or to identify the best product. We can call it strategic if it helps us identify the right investment opportunity.  
b) Design the ABC process: The next important step is to design the ABC process that suits the needs and purpose of a particular organization. This involves identifying the resources, activities, drivers etc and defining the rules for allocating the cost.

2. Behavioral Challenges:

a) ABC system will affect different business units and staffs differently. It is wise to expect staff resistance and plan for handling this resistance. A proper change management  and communication plan should help us address this challenge.
b) Starting with one unit and subsequently rolling out to the others will help us anticipate the challenges to expect and buy us time to prepare to address them.

3. Technical Challenges:

a) Data Collection: ABC requires lot many additional data than traditional costing. This additional data needs to be captured by the system for processing.
b) Data Processing: ABC requires data processing based on complex rules and calculation.
c) Reporting: Finally, actionable information based on ABC must be presented to the decision makers in the form of reports and dashboards.

While business needs to focus on the Business and Behavioural challenges, the good news is IT can help them in addressing the third challenge. There are sophisticated software available for ABC and profitability analysis.

How IT can help in ABC implementation, what are the software available for this purpose and considerations in software selection. Please wait for the next blog.

SAP BPC is integrated with MS office (Excel, Word & Powerpoint), it reduces training cost and gets easily adopted by business users. With the above examples and my project experience in SAP BPC, I can safely say that SAP BPC reduces maintenance effort considerably as compared to other SAP planning tool( IP & BPS ) or any other third party tool.

Fast close increases trust and provides competitive advantage. I discussed the business drivers behind fast close in my previous post “Fast Close – Business Drivers”. If fast close is so useful then why it isn’t the norm rather than exception? The answer to this question is in understanding the various business challenges that hinder the close process.

Close process from data processing perspective can be split into data collection, data consolidation and data reporting. Each of these stages has their own unique challenges that impose a time bound hurdle towards fast close. Business and IT staff spend so much time during close cycle in resolving these issues that a targeted fast close becomes impossible to achieve. Let’s discuss some of these challenges in detail.

Data Collection

Data collection objective is to collect data from all the data sources and translate it into one common view (data normalization) on the basis of common set of definitions.

a)      Mixed IT Environment

Global Organizations often utilize multiple ERP and legacy applications. The data across these applications is often not standardized (like GL Accounts, Plant codes, etc). Mixed IT environments with non-standardized data definitions result in data mapping, transfer and reconciliation effort.

b)      Data Accuracy

Period close involves data from multiple functional areas (like financial, forecasting, budgeting, etc). A lot of organizations still maintain most of the non-financial data offline in excel spreadsheets. Offline maintenance and manual entry raises data accuracy concerns.

c)      Complex Business Model

Complex business models and global operations lead to complexity in data collection by multiple teams. There can be processes that extend outside the organization to supply chain partners and customers that complicate the data collection process further.

Data Consolidation

Data consolidation objective is to process the normalized data according to the accounting rules provided by the relevant accounting bodies.

a)      Foreign Subsidiaries

Subsidiaries in different countries have different reporting needs that are based on currency translation.

b)      Inter-company transactions

Inter-company reconciliation and eliminations is a time consuming task.

c)      Accruals and other closing adjustments

Data Reporting

Data reporting objective is to provide internal (management) and external (statutory) reports on the consolidated data. The data reporting complexity arises due to the diversity of reports (Financial statements, cash flow, tax, inventory, etc) that are required by various countries in different formats, currencies and according to different accounting standards.

The various business challenges have a cumulative impact on close timelines. The reason why majority of the organizations have not been able to achieve fast close is because of the drain these challenges impose on resources and timelines. However, these challenges can be resolved from people, process and technology perspective. Wait for my next post on what SAP has to offer to automate and resolve these challenges.

In this post I will explain how the Food Safety and Traceability needs can be addressed by SAP.

Today companies must increase efficiencies, reduce costs, and ensure compliance with food regulations over the whole supply chain. Hampered by a legacy of nonintegrated systems that impede visibility and perpetuate inefficiencies, many companies recognize the need to standardize on a single platform.

SAP has the necessary features already inbuilt for handling food safety and traceability. Safety measures can be implemented in the whole process chain, right from procurement of raw materials from supplier, during production of goods in the plant till the delivery of the finished product to the customer / end consumer.

SAP can help the CPG industry with:

• Track, monitor, and trace batches and inventory
• Streamline procurement, production and sales processes
• Manage sales returns
• Enable targeted product recalls

Lets take a look at the solutions available in SAP to address all of these challenges.

1) Batch Management:
Following are some of the features of batch management process in SAP:

• Batch Number Assignment: You use this function to assign a batch with a number that uniquely identifies it.
• Batch Specification: You use this function to describe each batch uniquely using characteristics and characteristic values. You specify the permitted value range in the allocated material master record.
• Batch Status Management: You use this function to indicate if the batch is usable or unusable, manually in the batch master record/during goods receipt or automatically in the usage decision in QM.
• Batch Determination: With this function you can use various search criteria to search for batches that are in stock, eg. When posting goods issue, when creating a delivery, etc.
• Batch Where-used List: The batch where-used list shows the path of the batch from its procurement to its delivery to the customer.
• Active Ingredient Management: You use this function to administrate and process materials with active ingredients that are to be handled in batches.
   

2) Quality Management:
In order to align with legislation and regulations around food safety by FDA and other authorities (e.g., EU Dir. 178/2002, the U.S. Bioterrorism Act of 2002) SAP can help in maintaining quality standards on food safety.

In order to comply with HACCP (Hazard Analysis & Critical Control Points) a regular planned SAP quality inspection of the food processing during procurement, production and delivery can ensure the safety of the food products.

SAP can help Food safety through Quality planning, Quality inspection, recording of laboratory analysis, Quality reporting and Quality improvement.

Benefits:

• Reduced penalty risk
• Decreased risk of food-safety compensation payments
• Reduced risk of bad reputation
• Lower operating costs

3) Handling Unit Management:
Due to the increased global networking of manufacturers, forwarding agents, merchants, and consumers, the communication between all those involved in the supply chain is becoming more and more important. A common numbering standard that is defined by the international standardization organizations (UCC, EAN International) forms the basis for efficient processing in this field.

These standards include the UCC/EAN128 and one of its sub-components, the Serial Shipping Container Code (SSCC), which can be used to identify the handling units that were shipped. Within the supply chain, handling unit data can be transferred from one section to the next, for example, through EDI with EDIFACT or EANCOM standards using the UCC/EAN128 and the SSCC.

A handling unit is a physical unit that consists of the packaging materials (load carrier / packaging material) and the goods contained therein. A handling unit is always a combination of materials and packaging materials.

In SAP Handling Unit Management (HUM) for Food Safety the SSCCs assigned as unique numbers as the handling unit is created. These numbers then serve to identify and track the handling units. The EAN128 numbering system is integrated in the SAP packing function (Handling Unit Management).

In SAP, Master Data can be maintained for packaging instructions and packaging instructions determination records. Handling units can be created at the time of packing in Process Order or at the time of creating a delivery in the sales cycle.

4) Batch Recall:

When a food item with a defect batch is identified then it must be recalled from customers and prospects who received / could receive the batch.

SAP has the functionality to find and recall a defective batch already delivered to a customer and trigger batch specific returns processing.

After the customer has received his order and he realizes that the batch is defective, he notifies the vendor. The vendor creates a sales activity to begin a direct mailing to all recipients of the defective batch. Once the mailing list is determined, the letters are printed. This action automatically completes the first sales activity and subsequently creates individual follow-up sales activities per customer, like creation of returns document and returns delivery.

The quality inspection takes place after the returned goods have been received and booked into Returns. During GR for returns a quality inspection lot is automatically created. After quality inspection, the further handling of the returned goods is decided, like transferring the goods to unrestricted used stock or blocked stock.

The origin of the defective batch can be identified all the way up to the vendor who supplied the raw material.

5) Customer Returns:

The process of Customer Returns or Sales Returns can also be handled in SAP.

The returns order and delivery are created while the goods are in blocked storage. The credit memo is created based on the analysis results of the lab. The optional credit memo or full goods depends on the analysis results. Thereafter, the subsequent order settlement is done.

Food Safety and Traceability is one of the key challenges in the CPG industry. To effectively compete in this environment, the CPG companies must address the food safety and traceability requirements of various markets/geographies. SAP being the market leader in the ERP technology space, addresses all the challenges posed by the food safety and traceability needs of the CPG industry.

Do share your views on this and also if you are from this Industry then let me know how you are addressing this issue.

 First of all the Internet has enriched its early phase tools (e.g. email, banner ads, dedicated websites, pop up ads, sponsored content, paid search) with emerging “vehicles” such as social media platforms, virtual worlds, blogs, online gaming, wikis, and widgets.

 Secondly Mobile channel is going beyond SMS and MMS allowing mobile web, video and content download, and dedicated applications.

 Finally we can also consider digital outdoors like digital video displays and interactive kiosks.

Market forecasts are confirming this growth, predicting that digital market spending should reach up to 20% of total advertising expenditure by 2012-2013 from the current 10-12 percent.

What is relevant is that the spend increase should come not only from the industries that have been until now the pioneers and big spenders in digital media (like financial services, computer and communication, and automobile) but also from industries that have dedicated until now limited resources and a small percentage of total spending.

Particularly CPG industries that are among the top advertisers in traditional media are now also going to focus on digital marketing and increase in a relevant way their investments.

What are the reasons that are accelerating the use of digital channels?
In my opinion there are four main reasons:

 The economic downturn is pushing for innovation in an attempt to explore and adopt cheaper and more effective ways to reach the customers.

 Internet and mobile device population as well as the amount of time spent by the user on the Internet or using mobile applications are constantly increasing. 
What’s more, digital channels are going to represent the 1st choice of communication media among young people.

 The consumer is doing more and more pre-shopping on line: gathering information, consulting blogs, reading expert opinions and user feedbacks.

 Digital channels allow interacting with the customer in a very personalized and targeted way and, in case of the mobile, in real time.
These characteristics could allow for the development of very innovative approaches.
For instance through the mobile channel a CPG company could recognize the presence of its customer in the shop when he is buying and reach him with a timely and personalized instant message and promotion.

In which areas will an extensive use of digital marketing channels impact a CPG company, or which capabilities will the company need in order to obtain best results?

 Multichannel Campaign management: With digital marketing we see a proliferation of channels. The marketing campaign will be more and more executed across a mix of traditional and digital channels.
Therefore it will be critical to have processes and platforms that support preparation, execution and control of the campaign across channels and as well as tools that allow comparison of the effectiveness of each channel.

 Customer data management: In the digital world quality and quantity of information available on the customer (e.g. demographic attributes) will dramatically increase.
Also the customer data will come from different sources because of the proliferation of communication channels.
A company needs, therefore, to improve its capability to collect, manage, and integrate the digital data with traditional media data and to make it available for sophisticated analysis.

 Direct and personalized communication: Direct and personalized communication with the consumer such as the use of emails will constantly increase as will the possibility to provide other types of content (e.g. videos, gadgets, dedicated promotions) according to the specific characteristics of the customer.

 Digital content creation and management: Content will be highly personalized, used and consumed faster, while being made available in different formats and through different channels.

 Data analysis: Digital channels provide huge quantities of highly measurable customer data.  On this subject, two aspects will be key. Firstly, specifically for the Internet channel, the capacity to analyze navigation behaviour of the customer on the web is critical. Secondly it is necessary to maximize the capacity to analyze customer data gathered from multiple sources in order to define a model of customer behaviour along the complete purchasing process.

What is your point of view on this? Your thoughts are highly appreciated and more than welcome.
I will blog again providing more thoughts on digital marketing impacts going deeper into the aspects related to information systems and how vendors are ready to support them.

Why is Food Safety a key issue today?

Food safety is a worldwide issue affecting hundreds of millions of people who suffer from diseases caused by contaminated food. The World Health Organization (WHO) calls it "one of the most widespread health problems and an important cause of reduced economic productivity".

• Annually, over 3 million children under the age of 5 die of diarrheal diseases among approximately 1,500 million episodes of diarrhea in developing countries. 70% of these incidences are attributed to food borne illness.
• 6.5 million to 80 million cases of food borne illness occur annually in the United States.
• About 13 million children under the age of 5 die each year from infections and malnutrition, most often attributable to contaminated food.
• Serious and chronic health effects of food borne illness present an additional burden on the health care system, and affect an estimated 3 of every 1,000 prenatal infants.
• The estimated annual medical costs/productivity losses due to the 7 major food borne pathogens range from $6.6 billion to $37.1 billion, according to USDA and Centers for Disease Control and Prevention (CDC) figures.

You can refer to some of the most high profile news articles related to Food recall in US from the recent past:

http://www.fda.gov/Safety/Recalls/MajorProductRecalls/Peanut/default.htm

http://www.fda.gov/Safety/Recalls/MajorProductRecalls/Milk/default.htm

http://www.fda.gov/Safety/Recalls/MajorProductRecalls/Pistachio/default.htm

Having looked at Food Safety, lets understand what do we mean by Traceability in the food industry.

What is Traceability?

“Traceability” means the ability to track any food, feed, food-producing animal or substance that will be used for consumption, through all stages of production, processing and distribution.

Why is Traceability needed?

• Traceability is a way of responding to potential risks that can arise in food and feed.
• It is vital that when national authorities or food businesses identify a risk they can trace it back to    its source in order to swiftly isolate the problem and prevent contaminated products from reaching consumers.
• In addition, traceability allows targeted withdrawals and the provision of accurate information to the public, thereby minimizing disruption to trade.
• Safeguards against Bioterrorism.
• Fights product counterfeiting.
• Protects and serves brands through quick and accurate access to information.

With food safety issues being identified almost every month in the EU countries and US, the authorities of EU and US have formulated some strict regulations to contain and eradicate the problem.

The European Union passed a General Food Law in 2002 – Regulation EC/178/2002. The details of it are available at the European Commission website - http://ec.europa.eu/food/food/index_en.htm. They have also provided guidelines on the implementation of traceability in EU. It is published on their website: http://ec.europa.eu/food/food/foodlaw/guidance/index_en.htm.

Similarly, US Food and Drug Administration (FDA) has comprehensive guidelines on product specific safety and traceability regulations. The guidelines are available at the FDA website - http://www.fda.gov/Food/FoodSafety/default.htm.

In my next post I will throw some light on how SAP can help address this issue.

Sales pitch of many ERP Vendor is that they provide the Business solution based on the Best Practice in your Industry. Many of the Industry leading ERP Vendors are providing bolt-on Industry specific Business processes based on Best Practices in that industry. Some of the leading ERP Vendors provide Best practice base lines products which include Detailed System and process documentation along with pre-configured systems.

Because Wisdom can not be told; it is important to weigh the cost and benefit of adopting Industry Best practices. Especially in case of COTS products, any deviation from configurable process steps leads to Custom Development, which is always a costly proposition. In a away, when you adopt a COTS product, it is advisable to go with best practices inbuilt in the package. This reduces implementation time and subsequent maintenance cost. But this has to be compared with cost involved in organizational change management.

The success of your complex IT or ERP Projects primarily depends on the Project Initiation and Project Planning Phase. Unfortunately many companies rush through the Project Initiation & Project Planning Phase. As part of adopting Best Practices from the industry, following are some of the key activities during the Initiation & Planning face:
- define the future (TO-BE) business process keeping the strategic business objectives in mind
- using consulting support, identify the suitable IT/ ERP Vendor based on your unique needs
- Overlay the Business Best Practices to your proposed TO-BE processes and create an alternative fitment/ development needs need
- Considering high-value and High-impact processes, create Justification and Return on Investment for modifying the proposed TO-BE Process to converge to Best Practices
- Develop an organizational change management, communications, and training plan
- Forward looking implementation strategy with Project Plan including internal and external resource identification and deployment, project budgeting, contract negotiations, and quality assurance (QA) planning

In the third and final post we will see what are the key success factors and benefits that we can get out of it.

So what is so specific about the industry?

Global setup: The supply chain of an apparel and footwear industry is truly global in nature. Different partners involved in the supply chain e.g. designers, marketing team, manufacturers, raw material suppliers, customers etc. are spread across the globe.

Focus on Design: There is a constant focus on design as there is a need to come up with cheaper and innovative products which meet the customer taste and requirement, in order to stay above the competition

Lead Time: Lead time for product development is high. However there is a constant pressure to shrink the lead time and respond faster to changing market demands

High Volumes: The product volumes handled are high. This comes from the fact that one single product may have multiple dimensions like different colors, sizes and styles.

Complex Forecasting: Long lead times, global setup and high volume of products make the forecasting process complex and long drawn. On the other hand growing market pressure forces the companies to reduce the lead time for a new product introduction into the market. In addition forecasting has to be accurate to the SKU level

Complex Customer Demand: Customer demands are complex and varies based on various criteria like geography, culture, Pricing, period of the year etc.

Seasonal: Demand is seasonal

Multiple Distribution Channels: Multiple distribution channels exist in the product distribution. Shrinking margins has forced many of the companies to come up with own retail shops. Web based ordering is also catching up

Samples Handling: With customer demand becoming complex and with increasing competition companies are having to come up with more and more new products each season. As a result companies have to procure a high number of samples each season. Also the fact that the percentage of samples which end up on the shelf for sale is low does not help the companies.

Collaboration & Flexibility: The changing retail industry practices combined with the global nature of the supply chain necessitates high degree of shared information and systems integration, flexible manufacturing strategies, stronger planning systems and highly sophisticated order allocation capabilities to meet customer service requirements, both in terms of fill-rate and on-time delivery

Even with all these challenges and unique setup apparel and footwear industry is growing. Leading software companies like SAP have come up with industry specific solutions (SAP-AFS, SAP APO etc.) to cater to the specific needs of the industry.

Having said that the collaboration and flexibility requirements combined with the unique industry characteristics is putting pressure on apparel and footwear companies to move from their complex legacy applications based system architecture to a leaner and flexible system architecture which supports them in their growth. This in turn is putting pressure on software companies like SAP to constantly improve their products and also come up with new solutions.