Sage ERP I White Paper

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1 Blytheco - The Premier Provider of Effective Business Software Solutions National Presence, Local Touch BLYTHE I White Paper Critical Success Factors for Consumer Electronics Return to Growth: For Sage Prepared exclusively for Sage by Cambashi, Inc.

2 Table of Contents Speed... 3 Operating Risk... 4 Business Insight... 5 Set the Trends... 6 Cambashi Inc. Critical Success Factors for Consumer Electronics Return to Growth Cambashi has used a wide variety of sources that represent the best information available to Cambashi for this paper. This report includes our interpretation of information in the public domain or released by responsible officers in relevant organizations. Some information is from sources we cannot verify. We survey judgement samples, and results are not statistically significant unless so stated. Cambashi cannot guarantee that the report is accurate or complete. Information changes with time. The analysis, opinions, and estimates in this report reflect our judgements as of writing but are subject to change without notice. Cambashi shall not be liable for any loss or injury resulting from use of this information. All trademarks are the property of their respective owners. Cambashi may have a consulting relationship with a company being reported on. It is not an offer to sell or a solicitation of an offer to buy any securities. Cambashi, its staff, their families, and associates may or may not have a position in or with respect to any securities mentioned herein. Critical Success Factors for Consumer Electronics Return to Growth: For Sage 2

3 Blytheco - The Premier Provider of Effective Business Software Solutions National Presence, Local Touch BLYTHE What will a return to growth look like for the electronics industry? How has the global recession and industry downturn changed the landscape not only for the global-brand design corporations that cater to peoples dreams, but for midsized enterprises, contract manufacturers, suppliers, and distributors? High-tech electronics manufacturers faced squeezed margins amid the downturn yet had to conserve adequate resources for research and development and new product introduction (NPI). In the recovery, new leaders powered by improved return on investment and market position are appearing. Their cash-conversion cycle will be strong because of well-managed inventory, receivables, payables, and supply chain. They can invest to improve focus and differentiate themselves from the competition. Globalization and extensive outsourcing have led to complex, multitiered supply chains. Multiple overlapping product cycles must be planned from ramp-up to end-of-life. Increasing product complexity must encompass the intangibles of swift-changing fashion and consumer tastes. Some electronics industry suppliers believe rising costs in China may level the global playing field. Others see cycle times tightening even more as demand grows and excess capacity contracts. All want to know what will separate winners from losers. Finally, a return to greater demand begs the question, are the processes and systems in place up to the challenges of growing the business? Is the information at hand to make good decisions? Can employees and managers of diverse functions collaborate among themselves and with others for real-time decision making? Is it easy for them to gain the insights that promote speed and reduce risk? Some of the critical success factors (CSFs) for consumer electronics, appliance, and computer suppliers and distributors are: Speed of decision and action, always of the essence in electronics. Fast changes in technology and market trends require companies and their value network of customers, suppliers, and partners to keep up effectively. High operating risk on many fronts. Parts-shortage and inventory-liability risks heighten with shortened lifecycles, volatile demand, and global supply chains. Regulatory regimes are increasingly complex. Quality issues require immediate attention. Customers and channel partners have many options for supply. Challenging business insight. Lack of visibility into status of customers, suppliers, and partners is only one element; many companies still stumble on divergent internal data. These disconnects threaten both speed and quality of decisions throughout the business. Speed Electronics companies work quickly to incorporate technology advances whether a nextgeneration chip, industry standard, or feature/function. Because marketing remains as much art as science, late recognition of shifting consumer tastes and interests can force turning on a dime. So can new global competitors. Entering a market may require little capital investment, just innovation and outsourcing partners. The bigger question is why market innovators in one product category often aren t fast enough to catch the next big wave. Yet some do so repeatedly. Critical success factors to maintain speed include: oo Effective and cost-efficient trading-partner supply chain processes. oo Networks to develop products for new market segments. oo Speedy NPI and guaranteed customer service design, procurement, production, distribution, sales, and service. Critical Success Factors for Consumer Electronics Return to Growth: For Sage 3

4 oo Smooth new-product ramp-ups and obsolete-product phase-outs. oo Demand-change recognition coordinated for partner speed of response. Integrated enterprise solutions span departments and enable trading-partner collaboration, as shown in the top section of Figure 1. Capabilities range from demand planning and EDI to multisite operations planning, logistics and distribution planning, and real-time event notification. New kinds of planning scenarios take place at the intersection of operations and finance. This integrated planning approach drives parameters for revenue and profitability into production, distribution, and design. Integrated systems streamline collaboration to help electronics companies work as quickly as they must. Operating Risk Growing companies must be alert for that moment when expanded sales, production, and warehousing as a company grows to service broader markets necessitates improved risk management. Risk from inventory, regulatory compliance, costs, and product quality are all very real. Obsolete inventory is not only caused by economic downturns; each design change and every new product cycle heightens exposure. The flip side of overstocks is stock-outs, devastating in their own way. Even successful products fall from favor when viable alternatives are available. Heavy reliance on suppliers makes B2B integration a strategy for risk mitigation. Brand owners, top-tier suppliers, and others must track supplier performance and gain visibility into supplier operations and inventory. Sound business processes hedge the risk of a major write-off or stock-out. Critical Success Factors for Consumer Electronics Return to Growth: For Sage 4

5 Critical success factors for mitigating risk include the following: oo End-to-end inventory management to minimize both obsolescence and stock-outs oo Book and ship within 24 hours based on high-yield, flexible production, or efficient distribution oo Demand-driven replenishment based on vendor-managed inventory (VMI) oo Collaborative demand planning and sourcing among departments and trading partners oo Contract-based procurement, order, and billing management to ensure risk is shared as agreed and supplier and customer are treated appropriately The mix of suppliers, channel, and logistics partners included in a particular project can vary by product, technology generation, and local market for production and sales. Integrated functions from inventory and replenishment to production and distribution management are a foundation for role-based collaboration, as shown in the second segment of Figure 1. Business Insight As the risks suggest, companies need more than data they need insight into how their business is running to keep speed high and risk low. Many companies are deploying balanced scorecards based on consistent metrics and common data. This enables a focus on business issues such as improved margins, customer satisfaction, and operational efficiency rather than reporting issues. The challenge is how to gain insight across the complex and frequently changing operations and partners involved. The common approach is to create a business intelligence (BI) layer of information systems. BI can be described as the aggregation of information from disparate systems, delivered in context. There are two main aspects to that: analytics and performance management. Analytics promise greater ability to address queries that shed light on the meaning of data that sit in quick-growing data pools. Performance management leads to the availability of key performance indicator (KPI) data through dashboards and scorecards. Once companies act on the need to derive greater value from the information locked in transactional systems, a natural progression often occurs. oo First is the presentation of data to users to make fact-based decisions. oo Next is optimizing operations using the data. oo Ideally, the next step is to move from a backward-looking view to a forward- looking view that supports well-informed generation of forecasts and plans. oo With these capabilities in place, day-to-day management based on defined metrics culminates in a closed-loop system, helping everyone to see status in relation to planned targets. BI-based performance management fits seamlessly within planning processes with which industry professionals have been long familiar. Still, today many companies perform needed data consolidations using spreadsheets. As marvelous a tool as spreadsheets are, the ongoing validation of operations, finance, and accounting spreadsheet data is extremely unwieldy and undermines management s confidence in the numbers. Critical success factors include: oo Identification of which metrics actually drive company performance and the creation of a system of metrics from operational details through aggregation to company performance. oo Financial and operational data pulled from systems of record for budgeting and forecasting. Critical Success Factors for Consumer Electronics Return to Growth: For Sage 5

6 oo Integration of operational and financial planning for insight into resource requirements scenario testing. oo Understanding of how changed production volumes impact cash flow, distributions, and financial statements. oo Conducting of what-if modeling to analyze changes in parts, suppliers operating costs, exchange rates, and commodity prices. oo Streamlined reconciliation with companywide strategic financial plans, managing consistency between top-down and bottom-up plans. Analysis tools and business scorecards can help speed new product development, improve global value chain efficiency, manage costs and profits, and streamline manufacturing processes. When all employees gain business insight, they can make better, faster, and more relevant decision. This in turn spurs performance improvement, particularly when everyone is leveraging a consistent set of data in making those decisions. Set the Trends Companies that supply the consumer electronics and appliance industry need speed and agility, as well as a better view of inventory, regulatory, and other types of risk. Many companies in this industrial segment must move at least as quickly as their product lines and business partners. Companies that still rely on disconnected and piecemeal systems or even spreadsheets are at a severe disadvantage. Technology, regulatory, supply chain, and product life-cycle complexity make this an obsolete practice. The market is back in growth mode, rife with opportunity. To gain customers and cement a place in the consumer market, companies must have integrated enterprisewide systems that allow them and their global supply and distribution networks to react quickly and be in a position to set trends. Critical Success Factors for Consumer Electronics Return to Growth: For Sage 6

7 Blytheco - The Premier Provider of Effective Business Software Solutions National Presence, Local Touch BLYTHE About Sage North America Sage North America is part of The Sage Group plc, a leading global supplier of business management software and services. At Sage, we live and breathe business every day. We are passionate about helping our customers achieve their ambitions. Our range of business software and services is continually evolving as we innovate to answer our customers needs. Our solutions support accounting, operations, customer relationship management, human resources, time tracking, merchant services, and the specialized needs of the construction, distribution, healthcare, manufacturing, nonprofit, and real estate industries. Sage North America employs 4,000 people and supports nearly 3.1 million small and medium-size business customers. The Sage Group plc, formed in 1981, was floated on the London Stock Exchange in 1989 and now employs 13,100 people and supports 6.2 million customers worldwide. For more information, please visit the website at or call About Cambashi Cambashi, based in Cambridge UK and Cummaquid MA, USA provides independent research and analysis of the business reasons to use of IT in industry world-wide. Its specialist fields include Engineering, Enterprise, Plant, and Supply Chain applications and the infrastructure to enable industrial firms to use IT effectively. Cambashi publishes market size estimates in the Engineering Applications Market Observatory and multi-client studies in Cambashi s Industry Directions. Its clients vary in size from small to large and include most of the leading software vendors and many pioneering IT users. Cambashi is a member of CATN, an international association of consultants. Critical Success Factors for Consumer Electronics Return to Growth: For Sage 7

8 The information contained in this material represents the views of Sage on the issues discussed herein current as of the date of publication. As market conditions are always subject to change, the information contained herein shall not be interpreted as any commitment from Sage. This material is for informational purposes only and Sage makes no warranties, expressed or implied. Sage Wireless Way Suite 120 Richmond BC V6V 0A3 tel I fax Sage Software, Inc. All rights reserved. Sage, the Sage logos, and the Sage product and service names mentioned herein are registered trademarks or trademarks of Sage Software, Inc., or its affiliated entities. All other trademarks are the property of their respective owners /10