These dynamic market conditions demand continuous improvement to existing products and a rapid introduction of new products from industry players. Strategies like efficient consumer response (efficient replenishment, efficient promotion, efficient assortment, efficient introduction) have improved the relationship between the consumer product industry and retailers. The supply chain has become the focal point in the quest to make companies in the industry competitive in the long run. Increased efficiency through implementation of an enterprise resource programme (ERP) has helped many industry participants become more competitive.

In a survey conducted by a major FMCG manufacturer in India, the following observations were made. In case a consumer asked for a particular stock keeping unit (SKU) at a retail store and did not find it there, the probability of the customer switching the brand and asking for the same SKU size would be the highest. In short, the customer is less likely to ask for another SKU size of the same brand or try another store or postpone his buying. To this effect supply chains across the industry would now compete to make their SKUs available. But this has a cost, and the cost is that of inventory carriage. Replacing inventory by information is what an ERP is all about in the entire supply chain. Therefore minimising inventory carrying cost is one of the prime concerns in the implementation of an ERP in the consumer packaged goods sector.

Apart from the business-drivers that compel companies to migrate to ERPs, companies have actually realised savings over a period of time across multiple business functionalities. I am giving below a PwC survey of consumer products goods companies who have implemented ERPs. The beauty of process change driven by new business rules and implemented through deployment of ERPs is that the change is permanent, yet flexible. Permanence is to the extent that the organisational inertia cannot bring things to status quo after the change initiative. Flexibility is to the extent that organisations are free to remodel the ERP when a better business practice is available or when an organisational restructuring is done. Companies in this industry have used ERPs to reduce stock outs leading to substantial increased sales. ERPs have also allowed industry participants to increase profits through promotion execution improvements, return and refund reductions, as well as a reduction in unsalable returns. Companies in theconsumer products industry have used ERPs to enhance revenue and reduce costs. Some companies within the industry have realised internal rates of return in excess of 40 per cent through implementation of ERPs. Companies have used ERPs as a replacement for multiple systems that support the same function. For example, ERPs have replaced up to 80 of these systems for a global consumer products company. This effort has improved the quality of companies' management reports, while reducing the number of reports by as much as 98 per cent. Consumer products corporations are also using ERPs to automate various processes. ERPs have enabled companies to secure real-time processing of postings to the G/L, automated closing procedures, and a reconciliation of data across functional areas in the organisation. There is also a high degree of difficulty in the implementation of an ERP in this sector. Distribution management is usually very complex in this sector with a need to consolidate the business rules. This is typicallydone during the "target envisioning" stage of the ERP engagement. A large number of SKUs are channeled through a myriad of production and packaging processes. Third party production coupled with tight/internal quality control over raw materials and the finished goods of these manufacturing units are difficult to model and implement. The rollout of a pilot site to other locations poses a major challenge in this industry as the geographical spread is huge and so have been the rules that used to drive them.

In the case of a global manufacturer and marketer of high-quality branded hosiery products marketing products in more than 140 nations and employing more than 100,000 people worldwide, trying to keep up with the competition was a major business issue. Consumers were questioning the value of brands and that the company must be in a position to provide price competitive products or compete on quality. The company chose an ERP for implementation. Out of the total package of benefits earned, 69 per cent were in "manage demand", 29 per cent were in "manage supply" and 2 per cent in "manage finance". The total ROI for the entire initiative (worked out on a three-year period) is estimated to be much beyond 100 per cent!

The major savings were seen in supply management. Reduced inventory at all points in the supply chain along with more efficient buying of yarn led to improved bottomline. In fact the sheer availability of data to support a more efficient production schedule led to reduced production scheduling cycle. The company was able to reduce the generation of paper documents and the numbers of support staff required to run the operations as most processes, earlier manual and paper based, were now handled through the ERP. This freed up resources for better customer service and collection tracking. On the marketing side of the operations, the organisation gained by improving improved sales force effectiveness by offering a better product mix to the clients with a better pricing strategy - all because customer demand data were now available at a single depository. Managing the financials were never better - the company was able to generate data automatically, reduce monthly closing process time to less than two days andreduce error correction significantly.

Ambarish Dasgupta is an executive director and Sagar Paul is a consultant with PricewaterhouseCoopers Ltd