IBM Software Helps Consumer Products Manufacturers Win Customers and Reduce Costs

Pepsi, and Crocs Improve Business Results with IBM Industry Solutions and Frameworks

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Jan 11, 2011, 08:05 ET

ARMONK, N.Y., Jan. 11, 2011 /PRNewswire/ -- Today at the National Retail Federation conference in New York City, IBM (NYSE: IBM) announced a new Consumer Products Industry Framework that can help clients reduce costs and increase revenue through improved consumer relationships, supply chain analytics and e-commerce capabilities. Companies winning business and lowering overhead with these IBM solutions include Crocs and Pepsi Beverages Company (PBC).

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IBM Consumer Products Industry Framework

The IBM Consumer Products Industry Framework is designed to meet the key challenges faced by consumer products firms, including:

Helping consumer product companies build and enhance relationships with consumers, and translate understanding of consumer behavior and preferences into more effective and efficient marketing, supply chain, and retail channel collaboration capabilities;
Improving trade promotion effectiveness through collaboration with retail customers and channel partners;
Capitalizing on demand data and other information to drive improved predictive analytics to increase product on-shelf availability;
Aligning manufacturing and distribution strategies -- from raw materials to finished goods -- to reduce inventory levels.

One of the world's largest confectionary companies is using the new IBM Consumer Products Industry Framework to improve network, transportation and inventory performance. As a result, the company was able to test various factors from raw material projections, labor costs, carbon emissions, environmental sustainability and fuel prices to obtain the optimal combination for their distribution network. The company consequently reduced supply chain costs by up to 9 percent by consolidating warehouses and shipment capabilities.

Another IBM client, Pepsi Beverages Company (PBC), is using the IBM Consumer Products Industry Framework to bring manufacturing flexibility to its supply chain. Market data showed that consumer preferences shifted from carbonated drinks to noncarbonated drinks and from cans to bottles. However, PBC produced these newly preferred products in a limited number of plants leading to service problems during periods of peak demand. To build the desired level of manufacturing flexibility into the supply chain network, PBC matched production sourcing decisions with consumer preferences each trimester. In this strategy, sourcing decisions were based on total supply chain costs including manufacturing, transportation, and warehousing costs as well as customer service requirements. The transformation of the supply chain was remarkable:

Pepsi reduced raw material and supplies inventory from $201 million to $195 million;
Pepsi cut 2 percent transport miles even as revenue grew;
An additional 12.3 million cases of Pepsi beverages became available to be sold due to reduction in warehouse out-of-stock levels.

To put this in perspective, the reduction in warehouse out-of-stocks effectively added one-and-a-half production lines without any capital expenditure by Pepsi.

Acquisitions Expand IBM Retail Industry Framework

In 2010, IBM made a number of key acquisitions, including Coremetrics, Sterling Commerce, Unica and Netezza, to help retailers deliver a smarter shopping experience and create smarter merchandising and supply networks.

As part of today's announcement, this software technology has been added to the IBM Retail Industry Framework. The framework can now provide real-time product recommendations to shoppers by combining Sterling Multi-Channel Selling and Coremetrics analytics capabilities. It will enable precision marketing by combining Unica Campaign with WebSphere Commerce and Sterling Commerce order management capabilities. The framework is designed to improve distribution and transportation network processes and inventory planning by integrating Ilog Optimization with real-time data from Sterling Selling and Fulfillment Suite.

For example, Crocs, a world leader in innovative casual footwear for men, women and children, has implemented IBM software to create a smarter supply network.

"Crocs is looking holistically at our supply chain operations to gain both customer and operational benefits," said Scott Crutchfield, Senior VP of Global Operations, at Crocs. "With these efforts, we have enhanced our global inventory visibility across our direct and wholesale operations and improved the accuracy of our available-to-promise information. This visibility enables us to meet our commitments to our wholesale customers, including major retailers, in a timely and accurate fashion."

Today's announcements represent the continued expansion of IBM's leading portfolio of industry solutions and frameworks to help companies capitalize on these new customer buying patterns. Industry frameworks provide a configurable platform to speed deployment of business solutions. They extend IBM's service oriented architecture (SOA) middleware with industry-specific features and specially designed process templates. IBM industry solutions and industry business partner solutions build on the value provided by these industry frameworks to deliver a comprehensive, customized solution for each client.

The IBM Retail Industry Framework and the IBM Consumer Products Industry Framework help clients build an integrated platform for all of their operations based on industry standards. They combine IBM's entire software portfolio including WebSphere, Lotus, Information Management, Tivoli and Rational products and full range of IBM server and storage products, industry-specific offerings and consulting expertise of IBM Global Business Services.

For more information on the IBM Frameworks or for details on how IBM is helping retail and consumer products clients and Business Partners to make smarter, faster decisions, visit: http://www-935.ibm.com/services/us/gbs/bus/html/bcs_retail.html.

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