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Process manufacturing

For high-volume process and other repetitive manufacturing and distribution companies, the marketplace has been transformed by numerous dynamics in the supply chain, in customer expectations and practices, and in compliance requirements. For example, supply chains are becoming extended to include new suppliers, strategic partners and customer worldwide.

Traditional relationships with customers are being changed dramatically by the emergence of new channels, the consolidation of power among a few top customers in some supply chains, and the opportunity to serve new customers in emerging markets. Also contributing to this uncertainty and challenge are emerging new compliance requirements that add cost and complexity to business operations.

Based on Infor’s industry analysis and direct feedback from Infor’s 3,500 customers in process industries, the market landscape is being driven by the following trends:

More demanding customer requirements

With major retailers and other customers often demanding customized products, additional service or additional services without price increases, process manufacturers are facing greater pressures on their profit margins. In response, these companies are looking to increase sales, control costs and boost profits by improving operational visibility and increasing service levels while minimizing expenses. To improve promotional and trade fund spend effectiveness, manufacturers are implementing different order-to-cash processes for replenishment and promotional items. They are increasing operational visibility to reduce out-of-stock situations and better replenish items and coordinate promotion and new product introduction shipments. Some companies are leveraging LEAN processes to reduce order-to-cash labor costs and improve the management of promotional pricing, trade funds, and deductions. Companies that serve major customers face similar issues of increased service expectations with limited pricing capabilities.

More demanding compliance and GMP requirements

More stringent regulatory and legal reporting requirements are exposing most companies to significant risk, including fines, product recalls or withdrawal, and tarnished company and brand images. For example, companies in the food and beverage industry, must comply with the traceability requirements of the U.S. Bioterrorism Act, as well as with HACCP (Hazardous Analysis and Critical Control Point), a regulation to protect against food-borne illnesses. The life sciences industry, which includes biotechnology and pharmaceutical companies, is stringently regulated by the Medicines Control Agency (MCA) and the Food and Drug Administration (FDA). Chemical companies are regulated by the Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OSHA), FDA, and their international counterparts. In addition, regulatory control and enforcement in areas such as Good Manufacturing Practices (GMPs)—and more specifically the electronic signature requirements of Article 21 CFR Part 11—are increasing overhead costs for many companies. Companies that take a holistic approach to compliance and have integrated compliance into their enterprise processes have transformed compliance from a “tax” to a competitive advantage.

The need to improve quality without adding cost

Companies are expected to implement quality standards among other GMPs. With razor thin margins, improving first batch success rates reduces rework costs, and significantly enhances available capacity and perfect order rates. The ability to manage, record, and track quality information throughout the supply chain and manufacturing process is critical, as is the ability to recognize and act upon early warning signals for out-of-spec materials and processes. Companies are implementing LEAN and Six Sigma methodologies to reduce time, waste and focus on customer needs that directly improve quality and minimize the cost of quality, and increase perfect order rates.

Additional challenges

Process manufacturers must also deal with a number of additional challenges, including consumer migration across channels; changing demographics; retailer, supplier and customer consolidation; and the need for retailer and customer joint value propositions. Other challenges include private label threats, increased outsourcing, effective assimilation of acquisitions, aging workforces, expansion into new markets and channels, extended supply chains with supply risks and complexity, and shorter product lifecycles. In the face of this reality, manufacturers must move from a departmental focus to extended enterprise processes that will lead to unparalleled levels of innovation, growth, scale, and profit opportunities.

As supply chains are extended and partnerships are increased, companies need to increase interoperability and extend core manufacturing systems by building strong bridges across the supply chain and providing secure access to relevant ERP data. They must continually seek new and better ways to manage raw materials, work in process, or finished goods to meet marketing claims and demands from customers and regulatory agencies. And this must be accomplished without adversely impacting growth and profitability. To be successful, process manufacturers must continually produce consistent products from variable materials more cost-efficiently, while meeting fluctuating demand. For process manufacturers, the bottom line need is to become more demand-driven, improve quality and service, operate leaner, and accelerate new product introductions.