IBM Global Business Services
Thought Leadership White Paper
Improving business performance
and competitive advantage through
the implementation of standards
Findings of the Consumer Goods Forum Global Compliance Survey
January 2011
2
Improving business performance and competitive advantage through the implementation of standards
Executive summary
The industry has invested a considerable
amount of money and resources in implementing standards. Is it beneficial? Yes!
The consumer goods industry continues to experience an
unprecedented amount of change, both in terms of the degree
of change as well as its pace. Dynamic evidence of this can be
seen in the global supply networks that are the lifeblood of the
industry. Because of the demands made by informed and
connected consumers, the products themselves are increasingly
becoming customized for local markets and micro-segments to
deliver innovative lifestyle solutions to end users.
The many facets of the industry’s complexity will likely
continue to increase in the foreseeable future. Companies
able to turn this complexity to their advantage—through a
combination of analytics, collaboration and decisive action—
will be successful in this environment. In 2006, the Global
Commerce Initiative (GCI), now part of the Consumer Goods
Forum (CGF), published an outlook report titled “2016, the
Future Value Chain”, which challenged the consumer goods
industry to:
•
Redefine the 2016 value chain by addressing new
requirements of the physical flow of goods driven by forces
like volatile energy costs and a growing population density.
•
•
Share information so that trading partners, in their bi-lateral
relationship, must more readily and freely share information
while embracing the concept that the best way to manage
increasing complexity is through transparency.
Develop new ways of working together, including
sustainable changes in culture, collaborative business planning
and new measures and rewards.1
One core capability that enables collaborative
processes is the adoption and utilization of
GS1 standards to develop and deliver
consistent business results.
Each year the Consumer Goods Forum asks its members and
partner organizations to participate in a benchmark survey
that measures the implementation of GS1 standards and
industry utilities as well as the business results they deliver.2
This year’s record-breaking participation showed that 5,624
KPI scorecards and over 2,100 capability assessments were
submitted from approximately 5,280 companies across
50 countries. As a result, this across-the-globe data provided
informative insights. The growing number of survey
participants demonstrated that not only are new companies
interested in standards and joining the process, but repeating
participants also increased participation across their divisions
and geographies year after year.
IBM Global Technology Services
This year, IBM Global Business Services (GBS) was asked
to begin an annual assessment of the scorecard findings.
We examined 4,400 key performance indicator scorecards
submitted by consumer product companies and observed
relationships between the usage of the GS1 standards,
technology and business results. As seen in Figure 1, this
assessment demonstrated that there are many relationships
to improved business results by utilizing standards.
5.2% points
savings of
distribution costs
+ 1.9% points
increased
invoice accuracy
+ 5.9% points
increased
fill rates
-61 hours reduced
lead time
5.8% points
reduced
out-of-stocks rate
Figure 1. Using GS1 standards for consumer goods companies and
associated benefits
3
An example of this would be a more efficient supply chain
through better fill rates, reductions to distribution costs,
improved on-shelf availability/reductions in out-of stocks rate
and better invoice accuracy among companies implementing
the GS1 standards.
Companies implementing a larger number of standards, or
standards on a higher level, can see even better business results.
The potential for impressive cost reduction, revenue growth
and supply chain flexibility benefits was confirmed by exploring
the survey responses. Despite the clearly demonstrated link
between standards and improved performance, there still
remains a greater potential for consumer product companies to further
embrace standards to create and sustain a competitive
advantage. This report summarizes our findings, key insights
we derived from them and the compelling benefits that
standards implementation can bring.
4
Improving business performance and competitive advantage through the implementation of standards
Global Scorecard
The global scorecard allows companies to measure their
current performance and capabilities using a global standard
set of measures. This permits a company to benchmark itself
against other groups within the same geography, the world and
distribution channel or product category. Performance gaps
can be identified and plans put in place to close gaps or even
break away from the crowd with the action planning tool. You
can also monitor progress against specific actions, as well as
long-term goals. The global scorecard is supported by Consumer Goods Forum and hosted by IBM Global Business
Services. The survey, analyses and annual report are created
and prepared by IBM Global Business Services in cooperation
with the Consumer Goods Forum.
The tool measures:
•
•
•
•
•
•
•
Standard capability assessment (a qualitative assessment
measuring the status of implementation)
Demand
Supply
Enablers (item identification, electronic messages and master
data synchronization)
Integrators
Business measures (quantitative measures such as service levels,
inventory, out-of-stocks, lead time, costs, invoice accuracy)
Implementation measures (quantitative measures such as the
level of implementation for Item and location identification,
electronic data interchange (EDI), global data synchronization)
Table 1 shows the standards measured and provides an explanation for each.
Measure
Explanation
% of consumer units allocated a GTIN
% of cases/cartons/inners allocated a GTIN
The GTIN (Global Trade Identification Number) is a globally unique number
to identify trade items (in databases), and is therefore the foundation for
global e-commerce.
% of pallets/unit loads labeled with SSCC
The SSCC (Serial Shipping Container Code) is used throughout the SC as
entity identifier for item tracing.
% of shipping or receiving locations that have been allocated a GLN
% of orders transacted via EDI
% of invoices transacted via EDI
The GLN (Global Location Number) is used to identify physical locations.
Transmission of orders between organizations by electronic means.
Transmission of invoices between organizations by electronic means.
% of shipments for which a dispatch advice was transmitted
via EDI
Shipments, which are accompanied by an electronic dispatch advice
message transmitted by electronic means.
% of shipments for which a receiving advice was transacted via EDI
Shipments, which are accompanied by an electronic receiving advice
message transmitted by electronic means.
% of sales with synchronized master data between trading partners
via the GS1 GDSN
The GDSN (Global Data Synchronization Network) is an internet-based,
interconnected network of interoperable data pools, that enables companies
around the globe to exchange accurate, compliant, standardized and
synchronized supply chain data with their trading partners using a
standardized Global Product Classification.
% of SKUs with master data loaded into a GS1-certified data pool
The proportion of manufacturers' SKUs (Stock Keeping Units) whose master
data has been loaded into a GS1-certified data pool.
% of active SKUs where the master data has been synchronized
using the GS1 Global Data Synchronization Network
SKU (Stock keeping units) where the master data has been synchronized
by GDSN
% of GTINs that are catalogued consistently with a GS1 Global
Product Classification brick code
Enabler for GDSN
Table 1. Standards to be measured
IBM Global Technology Services
5
What the global scorecard can do for you
The key capabilities of the CGF Scorecard are:
Submitted scorecards
6.000
•
•
•
•
•
•
•
•
•
•
•
Reports “as-is” status on individual companies, country/
regional and global levels
Assesses key process performance relative to peer companies
Demonstrates gaps in performance levels
Helps to support the business case for improvement projects
Provides a report building tool that can be customized
according to your specific requirements
Helps to measure success
Helps to establish priorities. Are you on the “bleeding edge”
or are there advanced practitioners among your trading
partners to help you get started?
Provides results and effects (business impact and value) of
scorecards as demonstrated in the annual report including
information across geographic regions and business types
Provides on-line action planning tool that gives visibility of
agreed actions and progress
Allows for the ability of multinational corporations to manage
global and regional programs
Data is anonymous and is treated as highly confidential
5.000
4.000
KPIs
3.000
Standard
Capability
Assessment
2.000
1.000
0
2002
2003
2004
2005
2006
2007
2008
2009
Current survey data submitted from January 1, 2009 through April30, 2010
Figure 2.
Number of submitted KPI scorecards
Revenue in m $ of survey participants
2.500.000
2.000.000
KPIs
1.500.000
Standard
Capability
Assessment
1.000.000
Participation in the measurement of section of 2009/2010 was
greatly improved, as shown by the extremely higher number of
KPI scorecards submitted in comparison to previous years.
Although the following charts (Figures 2 and 3) indicate that
the total revenue of businesses participating in the global
scorecard survey was strong, the final figures for 2009 do
exhibit a decline versus those in 2008. This was partly due to
the fact that four very large CGF member companies only
marginally participated in 2009 compared to prior years.
Yet the respondents represented a total revenue of 1.8 billion,
including 10 percent of the largest global companies listed in
the Fortune 500 for 2009. Among the CPG companies listed
in this Fortune 500, 34 percent participated in the survey.
500.000
0
2002
2003
2004
2005
2006
2007
2008
2009
Figure 3. Revenue of submitted scorecards
Common identification standards are a vital
basic enabler to permit efficient and effective
communication about products, including
replenishment and business data between
trading partners.
The greater the number of scorecards submitted, the more
relevant the results obtained, so it is critical that as many
companies as possible participate.
6
Improving business performance and competitive advantage through the implementation of standards
Key insight results
Well over 2,500 chief information officers (CIO) from
leading organizations around the globe have highlighted the
importance of information and analytics for making faster
decisions by taking action to optimize processes for more
predictable outcomes in the IBM 2009 Global CIO study.2
Companies utilizing standards can see a
flexible supply chain and improvements in
costs and revenue.
Analytics can help your business to:
The importance of common data
•
The consumer product industry is highly competitive, fastmoving and rapidly changing. With margins under constant
pressure, the globally integrated consumer goods enterprise
needs something powerful to withstand the increasing complexity
to gain a competitive advantage. The consolidation and integration
of quickly accessed and accurate data sources is the key for the
information-based company of tomorrow.
•
•
•
•
Efficiently access large volumes of information
Improve the timeliness and accuracy of plans and forecasts
Translate vast troves of structured and unstructured data into
valuable business insights
Aid in rethinking business processes and providing better
control to companies via improved transparency
Measure and monitor performance and benefits
CP industry:
• Highly competitive
• Fast-moving
• Rapidly changing
To overcome
complexity and gain
competitive advantage
• Margins under pressure
• Increasingly complex
More than 2,500 CIOs focus on Analytics*
83%
Business intelligence and analytics
Virtualization
76%%
71%%
Risk management and compliance
68%%
Customer and partner collaboration
Mobility solutions
68%%
Self-service portals
66%%
Application harmonization
64%%
64%%
Business process management
Service-oriented architecture/Web services
61%%
Unified communications
60%%
Note: CIOs were asked to select all applicable answers to the questions, “What kind of visionary plans
do you have for enhanced competitiveness?”
Business Analytics
Consolidated
data
Quickly
accessible to
be analyzed
Powerful
insights
Using standards is the key for all activities
Figure 4. Visionary plans for enhancing competitiveness for the chief information officer
IBM Global Technology Services
Standards are a prerequisite; thus data
standards drive data quality…which in turn,
drives data sharing…which can ultimately
drive better business results.
Consumer products companies are preparing to
share data
In the global scorecard survey, the Enablers’ score of the
participants for global data synchronization/data quality has
improved to values 3.1 and 3.3 (on a scale from 0=Nothing
planned to 4=Fully implemented) for manufacturers, retailers
and wholesalers, respectively. This means that the average
company is already in the implementation phase.
A practical illustration
Industry heavyweights are using standards extensively because
of the benefits that they are experiencing. As an example,
Wal-Mart and other apparel retailers recently announced an
initiative to put sophisticated RFID tags in all their clothing
throughout their stores—which is the largest of such adoptions
worldwide. Wal-Mart expects significant savings from this
initiative. Beyond more efficient recalls, loss prevention and a
better inventory oversight, RFID tags could help eliminate
checkout lines.3
7
In 2007, a similar pilot at American Apparel Inc. found that
stores with RFID technology saw sales rise up to 14.3 percent.3
On November 1st, 2010, a group of leading retailers,
manufacturers, suppliers, industry associations, technology
providers and academics introduced a broad-based initiative
to guide the adoption of RFID in retail. They believe it will
foster innovation, improve business efficiency and lead to a
better consumer shopping experience. According to research
done by the University of Arkansas, the technology has
delivered compelling benefits to the retail industry, such as
an inventory accuracy rate of more than 95 percent up from
an average of 62 percent and an out-of-stock reduction of up
to 50 percent.4
The scorecard results indicate that companies are just starting
to use the electronic product code (RFID); however, those who
are in roll-out or full implementation phase for categories like
apparel show better business results, such as a 15 percent
reduced out-of-stocks rate.
8
Improving business performance and competitive advantage through the implementation of standards
Development of the standards
Manufacturers
Manufacturers
Retailers &&Wholesalers
Retailers
Wholesalers
2007
2008
2009
2007
2008
2009
IM01 % of consumer units allocated a GTIN
97.1
96.8
92.0
91.7
97.3
96.6
IM02 % of cases/cartons/inners allocated a GTIN
82.9
87.6
86.6
77.4
82.6
87.0
86.6
IM04 % of pallets/unit loads labeled with SSCC
45.9
49.4
67.2
51.1
49.4
71.6
IM05 % of shipping or receiving locations that have been allocated
a GLN
a GLN
43.9
41.2
51.1
64.3
74.5
87.5
IM06 % of orders transacted via EDI
52.4
51.7
47.0
68.8
70.4
75.8
IM07 % of invoices transacted via EDI
41.5
47.7
45.6
63.4
67.1
78.6
IM08 % of shipments for which a dispatch advice was transmitted
via EDI
22.5
27.6
35.5
28.0
22.4
58.7
IM09 % of shipments for which a receiving advice was transacted
viavia
EDI
EDI
7.1
12.0
16.0
29.8
13.9
58.4
IM10 % of sales with synchronized master data between trading
partners via the GS1 Global Data Synchronization Network
13.5
19.0
24.4
9.4
17.0
42.4
IM11 % of sales with master data loaded into a GS1-certified data
(%)
pool
pool
(%)
37.7
41.6
**
2.9
7.0
26.5
IM12 % of active SKUs where the master data has been
synchronized using the GS1 Global Data Synchronization
Network
IM13 % of GTINs that are catalogued consistently with a GS1
Global
Product
Classification
brick
code
Global
Product
Classification
brick
code
45.7
47.2
71.0
** insufficient data available to produce a benchmark, n<5
Figure 5. Three-year results for implementation measures worldwide (revenue-weighted averages)
We observed a positive upward trend in almost all of the
standards. As a result, companies are continuously improving
their standard implementation levels, which indicate that they
can see the benefits. These findings can be supported by the
fact that a “panel sub-sample” (companies who have
participated in all surveys) showed a reasonable increase trend
over the past several years.
9
IBM Global Technology Services
Cost, revenue and a flexible supply chain
Competitive advantage
Customer
satisfaction
• Improved client relationship
• Improved customer satisfaction
• Better information availability
•
•
•
•
•
Time saving
Cost reduction
Improved supply chain operations
Improved visibility
Increased understanding of retailers
needs and become preferred
collaboration partner
• Increased sales
Store Service Level
•
Annual Revenue Growth Rate
•
Out of stocks
•
GTIN on cases/cartons/inners
SSCC
EDI for orders
EDI for despatch advice
Invoice accuracy
EDI for invoices (manufacturers)
•
Distribution costs
•
Order to delivery cycle time
GTIN on consumer units
GTIN on cases/cartons/inners
Improved Image & Brand
Less Waste
Optimized usage of resources
Better overview of inventory
GTIN on consumer units
GTIN on cases/cartons/inners
SSCC
EDI for orders
EDI despatch advise
Sales with syn master data
GTIN on consumer units
GTIN on cases/cartons/inners
EDI for orders
Sales with synchronized master
data via GDSN
Supplier Service Level
•
•
•
•
•
•
Sustainability
Improved quality
• Improved data quality
• Fewer invoice-disputes
Efficiency
As seen in Figure 6, the top-right quadrant represents
organizations with 6-10 standards implemented that have
an average minimum implementation level of 51percent.
Companies in this group reported lower distribution costs
in comparison to their peers with fewer standards adopted
and lower average implementation levels. Industry leaders
(companies that have implemented at least six standards at
an average implementation level of above 50 percent—
manufacturer as well as retailer and wholesaler) profit from
reduced distribution costs.
Roll out and full implementation
of Trading partner performance
standards (E401)
100%
Industry leaders
Figure 7. Competitive advantage chart
50% 51%
Distribution costs:
6.5%
-4
3%
Distribution costs:
11.4%
1%
Average implementation level of
standards implemented
Industry leader, companies (in dark blue quadrant) which have implemented at least 6 standards at an
average implementation level of above 50% - manufacturer as well as retailer and wholesaler - profit
from reduced distribution costs.
1
5 6
Number of standards implemented
10
Figure 6. Distribution costs and the usage of standards
As shown in Figure 8, the out-of-stock rate (the extent to
which the product is available when the consumer wants to buy
it) is much lower among companies who have implemented the
Serial Shipping Container Code (SSCC) standard or used EDI
for orders. Both actions could lead to better serve consumers
who benefit from fewer out-of-stocks and earlier access to new
products. It is essential that consumer value and satisfaction are
met to maintain shopper loyalty, not only for the brands, but
also to the retail store in order to increase sales and category
profitability.
Figure 7 illustrates that there are many beneficial relationships
between the usage of standards and business measures.
On-Shelf/POS out-of-stocks with the use of SSCC
No Implementation of
SSCC
7,8%
Difference:
-52%
Implementation of SSCC
Figure 8.
3,8%
Lower out-of-stock rate with the use of SSCC
10
Improving business performance and competitive advantage through the implementation of standards
Figure 9 illustrates that companies utilizing synchronized
master data for sales on a higher level between trading partners
with Global Data Synchronization Network (GDSN) showed
reduced distribution costs. The GDSN is an internet-based,
interconnected network of interoperable data pools that
enables companies around the globe to exchange accurate,
compliant, standardized and synchronized supply chain data
with their trading partners using a standardized Global
Product Classification.
Distribution costs with of GDSN for sales
Using GDSN for sales
1-50%
8,9%
Difference:
-44%
Using GDSN for sales
>50%
Figure 9.
5,0%
We observed many examples indicating that the higher the
implementation levels, the greater the potential for savings and
improvements. As seen in Figure 10, additional incremental
benefits are available as companies drive implementation levels
even higher. Hence, companies using more than one measure
at the same time are seeing even better results.
50 – 100%
1 – 50%
implementation implementation
level
level
Delta
Suppliers Service Level/Fill rate with
Consumer units allocated a GTIN
91.6%
94.3%
+2.7%
Invoice accuracy with
EDI for invoices
95.3%
97.2%
+1.5%
Suppliers Service Level/Fill rate with
GTIN on case/carton/inners level
93.1%
94.3%
+1.2%
Distribution costs with
EDI for orders
10.6%
5.4%
- 5.2%
12.5%
7.7%
- 4.7%
Distribution costs with
GTIN on case/carton/inners level
Distribution costs with
GTIN on case/carton/inners level and GDSN
5.1%
Distribution costs with
GTIN on case/carton/inners level and GLN
4.8%
Figure 10. Example for improved business results after boosting the
Lower distribution costs with the use of data synchronization
Companies using EDI for orders or GTIN (Global Trade
Identification Number) on cases/cartons/inners level on a
higher average implementation level, survey results showed
lower distribution costs.
implementation level
IBM Global Technology Services
Challenge your company
•
There can be benefits observed when standards
are implemented—why then, are they not being
implemented by more companies?
Companies who have implemented standards have
exhibited higher performance results compared to those
who have not done so. Boosting the implementation level
demonstrated greater results versus doing it on a lower
level. Continuing to implement standards can mean
“ongoing” improvement.
We close this report by posing several key questions:
•
•
•
Many large companies already use standards extensively.
Correlations between standards and business results identified
in this report are independent of company size. Collaboration
allows industry leaders to share experiences and contribute to
improving their business process. Why is your smaller
company missing out on such a great opportunity to
collaborate with them and gain advantage?
Retailers and wholesalers implement standards at a
higher level than manufacturers do. Results show wide
implementation of product identification standards
revealing a high potential for manufacturers. As a
manufacturer, why not implement standards at a higher level?
Companies dealing with fresh and perishable food show a
shorter lead time than those without fresh food—all the more
reason to utilize standards to remain competitive and profit
from shorter lead times. Why not take the opportunity to
•
11
profit from shorter lead times?
There are many GCI companies among the industry leaders
who firmly believe in the use of standards. Although
2008/2009 was a challenging period, survey results did reveal
a reasonable revenue growth rate of 2 percent. What factors
are preventing your company from matching or exceeding the
implementation rates of your peers and therefore gaining the
same competitive advantage these companies are achieving?
Significant discrepancies can exist in the implementation
levels across comparable different geographical regions. What
concrete steps can you take to drive standards implementation
levels higher locally and globally?
The results are clear: Standards are
invaluable and can be the basis of your
ability to gain an edge over the competition.
For more information
For additional insights about the global scorecard, visit
http://globalscorecard.net/ where you can view case studies,
conference presentations and reports and detailed results of the
GCI 2010 Compliance Survey:
http://www.globalscorecard.net/live/download/ecr_related.
asp
For further information please contact Rüdiger Hagedorn from
Consumer Goods Forum (r.hagedorn@theconsumergoodsforum.
com) or David McCarty from IBM (mccartyd@us.ibm.com).
IBM welcomes the opportunity to discuss your specific
standards implementation needs. Leveraging extensive
experience in the consumer goods industry, IBM Global
Business Services provides consulting services to Consumer
Goods Forum on the subject of developing and using
capability scorecards. Please contact your IBM marketing
representative, or visit the following website:
http://www-935.ibm.com/services/us/gbs/consulting/
About the Consumer Goods Forum
The Consumer Goods Forum is a global, parity-based industry
network, driven by its members. It brings together the CEOs
and senior management of over 650 retailers, manufacturers,
service providers and other stakeholders across 70 countries
and reflects the diversity of the industry in geography, size,
product category and format. Forum member companies have
combined sales of EUR 2.1 trillion.
The Forum was created in June 2009 by the merger of CIES
- The Food Business Forum, the Global Commerce Initiative
(GCI) and the Global CEO Forum. The Consumer Goods
Forum is governed by its Board of Directors, which includes
50 manufacturer and retailer CEOs and chairmen.
The Forum provides a unique global platform for knowledge
exchange and initiatives around five strategic priorities—
emerging trends, sustainability, safety and health, operational
excellence and Knowledge Sharing and people development
—which are central to the advancement of today’s consumer
goods industry.
The Forum’s vision is: “Better lives through better business.”
To fulfill this, its members have given the Forum a mandate to
develop common positions on key strategic and operational
issues affecting the consumer goods business, with a strong
focus on non competitive process improvement. The Forum’s
success is driven by the active participation of the key players
in the sector, who together develop and lead the
implementation of best practices along the value chain.
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1
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IBM 2009 Global CIO study
http://online.wsj.com/article/NA_WSJ_PUB:
SB10001424052748704421304575383213061198090.html
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http://www.vics.org/docs/KSurvey/press_releases/pdf/Nov_1_2010_
Press_Release_Item-Level_RFID_FINAL.pdf
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