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Five ways to leverage product information for profitsby
19th Nov 2012
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Mikael Lyngsø examines how c-level executives are looking to strategic information management technology and processes in order to drive value added initiatives.
CEOs today face an intensely competitive marketplace with unprecedented challenges and opportunities. With the emergence of a greater variety of channels, an abundance of product options and easy online price comparisons, customers now demand greater service and lower prices. The ability to ensure that the right product is available at the right place and at the right time is absolutely critical, and organisations that can react faster tend to come out on top.
As more and more companies begin to operate 24/7 through a growing number of sales channels, the volume of strategic business information rises exponentially in both size and complexity. This, in turn, increases the difficulty of successfully managing product, supplier and consumer information as this influx of strategic information must be proactively managed as it flows across organisational channels. In fact, the ability to leverage operational knowledge as a performance success tool is key to increasing business profitability, mitigating risks, enhancing agility and enabling better decision making.
Unfortunately in many organizations, operational information is typically siloed. It resides and evolves independently in multiple applications, sales solutions and spreadsheets where it cannot flow efficiently. Worse, an alarming number of critical business decisions are based on information that is most often inaccurate or incomplete.
Traditional efforts to combat the challenge - what the c-level needs to know
Previously, IT professionals would turn to their ERP system vendors hoping for a quick, cost effective solution to manage the increased volume of information. However, what they soon discovered was that the major ERP suite vendors lack the ability to manage every business unit’s strategic information as it flows across both internal and external channels. In order to emerge stronger and be prepared when the economy recovers, senior executives must take an immediate, direct approach to solve their multichannel strategic information challenges.
Today, organizations have come to realise that to strategically manage their information assets they need a combination of technology, organised philosophy and process. This new strategy must have a strong focus on using a full-cycle approach to integrating business units, vendors, product information and other critical informational assets into one repository. Strategic information management does not represent an incremental change in function or process. Instead, it is a much more comprehensive and integrated approach to managing operational information as it flows through the business.
As the today’s business environment becomes increasingly challenging, a number of c-level executives are looking to strategic information management technology and processes in order to drive value added initiatives including:
Initiative #1: Speeding time to market
Reducing the time it takes to introduce new products has become a top priority for executives. By speeding time to market, companies can generate revenue earlier, increase margins and establish a sustainable competitive advantage. In fact, studies have shown that high-performing companies on average generate 61% of their sales from successful introductions of new products and services. Furthermore, according to a study, companies that experience an 80% revenue growth from new products typically double their market capitalisation in a five-year period.
The process of developing and introducing a new product can be inherently complex. Even the simplest products today can have hundreds of attributes, all derived from multiple systems that reside both within and outside the organisation. Introducing a new product also requires the coordinated efforts of dozens of individuals within the company—not to mention multiple, geographically dispersed external partners and suppliers.
A strategic information management platform enables organisations to streamline the process of gathering all product data from its suppliers and partners. It cleanses and manages that data centrally, allows for branding and versioning of the information, and feeds all business systems needed to consume that data.
As a result, the business can share more accurate information with its websites, ecommerce applications, marketing initiatives, POS systems, customer service applications, and other channels with more speed, reliability and security. It also ensures that all sales channels have the information they need to educate customers and sell products faster and at a higher return.
Initiative #2: Reducing product returns
Product returns represent one of the most overlooked and significant causes for profit and margin reductions. Let’s look at retail for instance. The typical product return involves so many steps and has such a far-reaching impact on every area of the business that the total annual costs now affect 2 to 3% of an average retailer’s sales according to a report. And this doesn’t begin to address the significant impact on customer loyalty. A recent study has shown that 25% of consumers who return a product are unlikely to buy that brand again.
A number of recent studies, including an analysis by Accenture, discovered that most returned products do not have a defect at all, but are returned due to false or insufficient product information. Needless to say, these inconsistencies lead to consumer dissatisfaction and frustration.
Having a strategic information management process in place can reduce product returns by managing correct product information across the supply chain.
Initiative #3: Optimising inventory levels
Inventory accuracy is a staggering problem that leads to costly challenges for executives across many industries. Looking at the retail sector again, studies have found that merchants generally only have accurate inventory information on 35% of their items. Research has also shown that 47% of out-of-stock items with poor forecasts result in inconsistent, inaccurate and incomplete data being housed in supply chain, merchandising and inventory systems.
A strategic information management platform allows the organisation to centrally manage all of its product operational information and automatically feed each consuming system, sales channel and business process individually. This approach provides a single, consistent view of product information without forcing business units and suppliers to have to standardise on the same system or data format.
Optimising inventory levels starts with having one version of the truth across all divisions, departments and channels. This ensures that they have right products, at the right levels and in the best locations.
Initiative #4: Streamlining the onboarding process
There are two common obstacles an organisation faces when delivering products to market. The first involves ensuring that the product information they are acquiring from suppliers is correct. The second is supplying this information across multiple channels to support the selling of the product itself.
This on-boarding process is often cumbersome, error prone and time consuming—often resulting in a costly, manual approach to correcting the information.
AMR Research recently concluded that companies could potentially reduce their supplier management costs by nearly 85% just by improving information visibility with suppliers. For someone in retail or even manufacturing who is charged with managing hundreds of vendors and tens of thousands of products, the efficiency costs alone are staggering.
In fact, after implementing a strategic information management solution, a major global retailer was able to reduce its average on-boarding costs from more than $200 per item to less than $3 per item. Considering the tens of thousands of SKUs this retailer introduces every year, this cost savings alone can have a significant impact on business performance and competitive advantage.
Initiative #5: Improving up-sell and cross-sell conversions
By taking a holistic, full-cycle approach to managing product information, sales and marketing members have the opportunity to improve cross-sell and up-sell conversions. After all, when the business has greater operational control over product information then sales and customer service representatives have access to more timely and relevant information at the point of sale. Online channels can also provide more relevant product links, recommend complementary or similar products, and improve product categorization for easier browsing and increased sales conversions.
Additionally, this level of information flow and control helps support an improved cross-channel experience. Customers today want to use their smart phones to check local inventory. They want to research and compare products online, and receive detailed and accurate answers about an item they saw in the company’s latest catalog or website before making a trip to the store.
If product information is not being strategically managed as it flows through the business, then it becomes virtually impossible for the business to manage these growing customer expectations.
Operational knowledge as a performance improvement tool
Over the last two decades, businesses have worked feverishly to optimise their physical supply chains. Virtually every discussion about improving the supply chain has been centered on the flow of products from raw materials to consumption.
However, a growing number of companies are now taking a similar interest in optimising the flow and management of the information related to these products. In a highly competitive global economy where information is now a core enabler, using business operational knowledge as a performance success tool is paramount.
CEOs understand this and are integrating their critical data information into one management platform in order to completely change the playing field in their respective industry. Not only are they improving their overall profitability they are also breathing new life into businesses that are all too often caught in a downward spiral of reduced discretionary spending, higher customer expectations and tougher market competition.
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