2004 Industry Outlook: The Critical Business Initiatives

The Bottom Line: Because extending industry leadership in 2004 requires focusing company resources on the critical business initiatives, AMR Research identifies and aids companies with the key business and technology opportunities for each industry.

As we enter 2004, cautious optimism for the year ahead resonates through AMR Research’s spending data. In the third quarter of 2003, 47% of companies indicated that their Information Technology (IT) budgets would grow during the next 12 months, compared to only 27% of companies a year earlier. AMR Research’s industry research teams have identified the critical business initiatives facing each industry in 2004--areas where technology and business priorities intersect.

Automotive

• Early Warning Solution (EWS)--limiting liability risk while improving brand image. Product failures will result in projected 2004 warranty expenses of more than $12B. Despite the Transportation Recall Enhancement, Accountability, and Documentation (TREAD) Act’s complexity and flawed timeline, vehicle manufacturers must embrace an EWS to decrease liability exposure, reduce warranty expense, and increase market share by improving product development. An EWS provides sustainable advantage through a process and technology framework that combines integration, analytics, and automation to identify or predict defective products through an enterprise view of the manufacturing process.

• Segmented Services--growing revenue by differentiating commodity products. The Chemical industry can’t save its way to growth. Global markets and lack of any significant new chemistry has led to the commoditization of most chemicals--eroding even the traditionally higher margins of specialty chemicals. Top-line growth depends on enveloping products with segmented value-added services that enable customers to outsource key manufacturing and services tasks. The challenge is doing this while using shared manufacturing assets and supply networks.

• Demand-Driven Supply Network (DDSN)--sensing and reacting to demand signals. Consumer product companies now wrestle with how to achieve value from Point-of-Sale (POS) and, in the future, Electronic Product Code (ePC) data from retailers. Success depends on the ability to analyze and react rapidly to the real-time demand signals contained in the data. DDSN builds on supply chain management by integrating demand data into the end-to-end supply network of consumers, retailers, consumer product manufacturers, and raw material suppliers.

• House of Productivity--accelerating results by combining SCOR, Lean, and Six Sigma. Manufacturers face intensely competitive global markets operating at high levels of productivity. To thrive, companies must establish annual productivity improvements that are as much as twice the overall expected industry improvement of 10%. This means 10% lower costs, 10% faster cycle times, and 10% more consistency--every year for at least the next three years. The solution? Build a House of Productivity by integrating and coordinating Supply Chain Operations Reference (SCOR), Lean, and Six Sigma initiatives--magnifying productivity gains tenfold compared to isolated programs.

• Perfect Product Launch--speeding time to volume. Today New Product Development and Introduction (NPDI) is a 10-year, $800M voyage. Pharma manufacturers must follow a five-stage process to achieve a Perfect Product Launch--reducing the NPDI voyage to five years and $400M. The challenge is further compounded by compliance requirement like CFR 21 Part 11, requiring electronic signatures and controls for regulated products. Following the Perfect Product Launch process, companies will distance themselves from the pack by excelling at both product innovation and time to volume.

• Profitable Differentiation--balancing consumer experience with operational efficiency. Pressure. That is what most retailers feel as they are squeezed by Wal-Mart on price and small merchants on customer service. Winning retailers will use technology to incorporate rapid feedback from consumers into innovative products without sacrificing the lessons learned from cost-cutting supply chain initiatives. Profitable Differentiation combines the best practices and technologies from consumer demand management, Six Sigma store operations, responsive sourcing, and advance retail planning to make success a reality.

AMR Research analysts continue to monitor and provide thought leadership on the key industry challenges facing business and technology executives. As always, we will publish analysis of the changing industry dynamics, the business benefits of new technologies and business processes, vendor solutions, and best practices--providing the roadmap for success.

AMR Research originally published this article on 22 January 2004.