IDC Manufacturing Insights has just published a major new research report on Formula and Specification Management (F&SM) in brand-oriented value chains. Formula and specification management is an increasingly important issue forbrand-oriented value chain manufacturers, particularly those in the sub-segment of food and beverage where companies are experiencing the classic productivity "vise." They are expected to innovate better and faster, manage global and regional compliance obligations, and ensure th
Brand-oriented value chains, those manufacturing companies for whom the essential cadence of their business is driven by the volatility of demand for branded goods, clearly have to manage complex and varied formulae, from Research "prototype formulations," through to Manufacturing as a "commercial recipe" – all while maintaining clarity around ingredient specifications, sources of ingredients and both local and global compliance obligations. Indeed, based on a number of environmental and external factors, 2010 may prove to be a "perfect storm" for F&SM: governmental regulation is growing in complexity, retail requirements are exploding as retailers look to differentiate themselves in the marketplace, innovation rates are increasing, and outsourcing continues, as companies continue to re-define core competency and look for cost savings.
The Formula & Specification Management process has historically been fragmented, with a combination of narrow-purpose applications and manual processes combining to produce the progressive versions of the recipe. The adoption of F&SM tools has been evolving in brand-oriented value chain manufacturers in a similar manner to many other application suites before it. Companies start out by recognizing that they have a problem in a part of their business, undertake a level of process redesign and implement a point tool to solve the problem. The same thing happens in another part of the business, then again, and soon the business has a collection of disconnected point tools (the classic IT "spaghetti" chart) and spreadsheets with multiple process hand-offs, data re-entry errors and elevated business risk. In terms of overall process maturity, IDC Manufacturing Insights would put most BOVC manufacturers at this point today, with some manual, but predominantly fragmented, processes. BOVC companies that have implemented end-to-end applications are typically replacing large numbers of point solutions.
Leading companies are now managing both formulas and specification information in a centrally managed database. But, evolving best practice is not just about a single data repository, it is also about facilitating the innovation process to get the right products to market quickly and safely, with: clear and efficient functional hand-offs, the ability to quickly invent, evaluate, optimize and commercialize formulas, automation of the bill-of-materials development process, the ability to validate and approve product data for quality management and as an input to the supplier RFx process, and support for global product ranges (both management of regional formulas and labeling generation for diverse markets).
Product Lifecycle tools, and specifically F&SM, certainly have the potential to significantly help brand-oriented value chain manufacturers, but it can be difficult for organizations to understand how to most effectively use these tools – particularly as the formulation, recipe and specification process is so cross-functional. IDC Manufacturing Insights' recommendation is to not try to adopt all of the capabilities these tools have to offer at once, but rather to consume them one piece at a time, starting with the most problematic areas first.
If Formula & Specification Management is an area of interest for you, please do take a look at the research report, Best Practices: Formula and Specification Management in Brand–Oriented Value Chains (IDC Manufacturing Insights Document # MI222771, April 2010).