With increased M&A among leading supply chain best-of-breed solution providers, consumer goods companies need a strategy for rationalizing their application portfolios and making their supply chain platform choices.

1. • Cognizant 20-20 Insights
Consumer Goods Supply Chain Landscape:
Is Best-of-Breed a Dying Breed?
Executive Summary such an extent that in many cases “services”
constitute the majority revenue stream. This is
Consumer goods manufacturers have traditional-
a disturbing long-term trend, since it shrinks
ly sought large-footprint solutions for their trans-
the system integrator partner ecosystem for
actional foundation (e.g., order processing, pro-
these smaller firms and could significantly
curement, finance functions, etc.). However, the
increase the lock-in effect that these product
supply chain space (covering planning functions
firms have on consumer goods companies.
such as demand planning, production/distribu-
tion planning and execution functions such as • Large-footprint vendors (read: SAP, Oracle)
transportation and warehousing) has always have, meanwhile, built up their arsenal of
been the forte of “best-of-breed” solutions. These supply chain capabilities and now seem more
have historically been stronger in their decision- attractive because of their purported “ease
support capabilities and offered richer function- of integration,” stable architectures and large
ality that accommodates more complex business skill set availabilities.
scenarios.
The impact of a typical merger or acquisition in
However, the last few years have brought about the best-of-breed space can be quite prolonged,
numerous changes to this business scenario: since it is a complex function of market liquidity,
size of the merging entities, their organization
• An increasingly accelerated spate of mergers structures, cultures, etc. It may take several
and acquisitions among leading supply chain months and even a few years for the resulting
best-of-breed solution providers (see Figure merged entity to align and communicate a unified
1) has called into question the long-term vision for its roadmap. Among the key implica-
continuity and roadmap of some of these tions:
solutions, as well as the viability of the software
companies themselves. • The consolidation period is beset with doubts
over the strategies that the solution vendor
• A tough economic environment has constrained
will adopt in future functionality/architecture,
the growth of new license sales. As a result,
as well as continuity of support.
smaller “best-of-breed” players have moved
into the services space to offset the decline of • In the case of products with overlapping func-
license revenues; in fact, this has happened to tionality coming together (e.g., JDA and i2), it
cognizant 20-20 insights | september 2011

2. Key Supply Chain Application Software Vendors:* Acquisitions 2005 to 2011
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* All logos are registered trademarks owned by the acquiring companies.
Figure 1
remains unclear as to which solution/architec- Challenges for Consumer Goods
ture will dominate the future footprint. This Companies
could have significant implications in terms of
Wednesday, August 31, 2011 The aforementioned changes pose a specific set
upgrades and support.
of challenges for consumer goods companies
• In the case of a merger/acquisition that has that are either already leveraging a best-of-breed
been funded through debt or private capital, solution or considering one. We list a few key
this change in ownership could bring about challenges from our experience:
business model changes.
• Uncertainty about the vendor’s future
• Philosophy of implementation and support precludes customers from making upgrade
could undergo significant changes in a post- decisions. But delaying upgrades comes with
merger scenario. For example, within the the risk of not being able to leverage tech-
JDA-i2 merger, while JDA was known to execute nological advancements (open architectures,
shorter projects with lower customization, i2’s faster hardware, ubiquitous access, etc.).
core strength typically was longer duration and
technically complex projects. This generated • With the changing economic and competi-
tive environment, it’s only natural that
obvious apprehension about the combined
businesses need to become more agile and
entity’s ability to handle major turnkey projects
seek system changes to do so. Moving to
and support existing complex i2 implementa-
quicker cycle times, looking at multi-echelon
tions involving customized solutions.
inventory, rationalizing product portfolios and
• Most mergers do result in a flight of talent. adapting flexible manufacturing strategies
Loss of key personnel in product firms is a risk, are examples of such changes. Being stuck
especially when it comes to teams that possess with a “frozen” system creates inflexibility for
unique knowledge of specific customer envi- adapting to such demands.
ronments.
• Ongoing support of some of the best-of-
This paper explores the impact of M&A on con- breed solutions is becoming a challenge,
sumer goods companies. It discusses strategies with ambiguity around continuation of
for managing M&A transformations and offers support for prior product releases. In
recommendations for ways to assess the impacts addition, the skill sets available in the market
in order to choose the most advantageous path. for such niche solutions have also dried up,
with resources having moved on to more
in-demand solutions.
cognizant 20-20 insights 2

3. • In most cases, moving away from best-of- be done by my existing ERP/large-footprint
breed solutions is a path to tread cautiously. solution, then it doesn’t need to be done in the
It poses significant change management best-of-breed solution.”
challenges in dealing with an organization Taking this path reduces The large-footprint
that has grown very comfortable using these the extent to which lever- vendors often offer
systems and appreciates the flexibility they aging best-of-breed solu-
offer. Especially if the move is to a larger-foot- tions is necessary and more stability, a
print solution that allows for little customiza- paves the way for an easy better roadmap and
tion, the resistance from business can be a future replacement in a better integration
significant challenge. “modular” fashion, either
with a large-footprint with the transactional
• In the case of customers evaluating best-of-
solution or with custom environment.
breed vs. large-footprint solutions, the afore-
systems. Of course, should
mentioned risks of best-of-breed providers
one decide to retain the ”core functionality”
need to be considered. But at the same time,
of the best-of-breed solution, that is also an
in many functional areas, the large-footprint
alternative.
vendors haven’t “caught up” yet with niche
providers. 4. Replace with a “custom-built” solution:
There may be a limited number of situations
Strategies for Transformation in which, especially combined with Strategy
The following are a few alternatives that consumer 3 above, it makes sense
goods companies should pursue to address the to rebuild part of the best- Taking this path
challenges mentioned above. of-breed functionality in a
custom solution and retire reduces the extent to
1. Migration to a large-footprint solution: the best-of-breed solution. which leveraging best-
There are specific areas in which large-foot- Maintaining a custom-built of-breed solutions is
print vendors have closed the gap with best-of- solution is not necessarily
breed vendors (e.g., Oracle has accomplished easier than maintaining a necessary and paves
this in the demand management space with its highly customized best- the way for an easy
acquisition of Demantra and in the transpor- of-breed installation, but future replacement in
tation space by acquiring G-Log). The large- the financials may work
footprint vendors often offer more stability, better in a model that a “modular” fashion,
a better roadmap and better integration with avoids annual maintenance either with a large-
the transactional environment. If it doesn’t contract costs. This alter- footprint solution or
come with a significant compromise of func- native could be evaluated
tionality, it may make sense to migrate to the in cases where there are with custom systems.
large-footprint solutions. unique elements to a
2. Support scaffolding: Regardless of the future customer’s business model and, in turn, the
course taken, it may make sense to sign up best-of-breed installation. Another instance
with a system integrator to support a best-of- is where leveraging industry best practices
breed solution for a few years. This strategy embedded in a commercial package solution is
is more of an insurance policy for consumer not a major consideration.
goods companies, as it covers them from the 5. Status quo: As unintuitive as it may seem,
risk of internal talent flight and market scarcity weighing benefits, costs and risks may in
of skill sets. These risks are transferred to the some instances lead to the conclusion that
system integrator, which is often in a position no change is necessary to the current setup
to handle them better because of scale and or support model. By nature, this strategy is
knowledge/skill management practices. This a time-bound one, so it may be necessary to
model could also potentially result in cost revalidate the setup or support model every
savings and free up internal resources to focus six months to a year.
on the future solution.
3. De-scoping best-of-breed: In an effort to An Approach To Determine
reduce reliance on best-of-breed vendors with the Best Path
uncertain futures, it is possible to reduce the In our experience, many consumer goods compa-
scope for which best-of-breed solutions get nies face several of these previously referenced
leveraged. The rationale here is, “If it can challenges but are unable to determine the best
cognizant 20-20 insights 3

4. path forward due to lack of alignment between Stage 1: Application Profiling
the business and IT organizations. This is where This phase is focused on collecting information
it may make sense to have the evaluation done on various supply chain applications, across key
by a “neutral third party.” We have often played dimensions. These applications are then grouped
this role with consumer goods companies. What into clusters based on the following:
follows is a high-level approach for addressing
this challenge. • Business functions and interdependencies
Our SCALERTM (Supply Chain Application Land-
• Business processes
scape Evaluation & Recommendation) framework • Key business areas, IT groups/owners
evaluates a supply chain application landscape • Geographical spread
across key dimensions and provides a variety of
insightful reports to trigger meaningful actions
• Technology needs/issues
aimed at making the landscape leaner and more • The client’s objectives
agile. The framework (see Figure 2) is comple-
mented by our team of domain and technol- Stage 2: Application Value Analysis
ogy experts, who collaborate with our clients to A value analysis is performed on the applica-
conduct a comprehensive, top-down (centered tions to determine business, technical, financial
around business priorities and industry best and strategic alignment (see Figure 3, next page).
practices) and bottom-up (application-centric) Individual applications are modularized as appro-
analysis. We use a structured approach that priate for this analysis (keeping in mind that some
involves extensive interviews, questionnaires and of the final recommendations may apply only to a
secondary research. specific portion of an application).
The five-phase methodology, which typically Stage 3: Application Dependencies
spans a period of six to eight weeks, kicks off Dependency analysis helps identify the relation-
with a one-day workshop that gathers the overall ship of the application with both internal and
context and priorities, stakeholder dynamics, external systems. The factors that are evaluated
objectives and roadblocks. This is followed for the internal and external interfaces include
by inventorying and profiling the application the number of interfaces, types of interfaces,
portfolio, as well as conducting a value and data dependency and directional dependency.
dependency analysis. Based on these analyses, Dependency analysis provides a view of how easy
opportunities are identified, and a future course or difficult it is to upgrade or replace individual
of action is recommended. The major activities in applications in the landscape.
each of the stages are shown in Figure 2.
Cognizant’s Methodology for Application Portfolio Rationalization
Application Value and Identification of Implementation
Application Profiling Rationalization Roadmap
Dependency Analysis Opportunities
Collect data on Assess the current Analyze the Understand the Identify Define the
applications in state of the IT value of the interdependencies opportunities for implementation
the IT portfolio portfolio and applications across applications rationalization roadmap for the
on functional assess the based on and utilities in of the application rationalization
and technical business- alignment terms of data portfolio. exercise.
dimensions. technology with business, exchange,
alignment of the functional, interfaces and
available services. technical and platforms.
strategic
objectives.
Figure 2
cognizant 20-20 insights 4

5. Application Value Analysis
• Overall alignment of the • Alignment with future
application functionality with technologies.
Functionality Technology
the business. Fit • Application stability
Fit
• Capability of the application compared with the criticality
to match the peak business of an application.
demand. • Technology complexity compared
with level of documentation.
Application Value
• Total cost of ownership (TCO) to
business and technology view.
• Business owners’ view compared
with the technical owners’ view on
• Financial investment compared the ability of an application to meet
with business appreciation. Financial Strategic Fit
Fit future business needs.
• Financial investment on new • Criticality of an application
functionalities compared with compared with the time-to-market
investment on regulatory changes. for adding new functionalities.
Figure 3
Stage 4: Identify Rationalization Opportunities applications. The migration plan for the applica-
The following steps are performed to identify the tion portfolio is based on the following guiding
rationalization opportunities: principles:
• Evaluate technology health score: This covers • Determining a target technology platform for
application and technical owner perspectives those requiring migration.
on dimensions such as stability, complexity, • Identifying candidates that can be decommis-
flexibility, availability, support, documentation sioned.
and security.
• Creating a phased comprehensive implemen-
• Evaluate business alignment score: This tation roadmap.
covers the business owner perspective
on dimensions such as functionality, best • Sequencing the roadmap based on application
priorities and dependencies.
practices, business objectives and usability.
• Compare high-level advantages and disad-
vantages, supporting information for each Decision Matrix
application: This can be done by categorizing
each application, as shown in Figure 4.
Year 4 ...
• Institute low-level due diligence: This is Year 3
required to inform decision-making related to Excellent Year 2
retire/maintain/reposition/reengineer for each
Reposition
application group. Asset / Enhance Maintain/
Functionality / Evolve Asset
Technical Health
Integrate
The value analysis and dependency analysis, along
with the decision matrix, will help your organiza-
tion arrive at specific recommendations for each Retire /
Re-Engineer -
Consolidate
application, as shown in Figure 4. Asset
Rewrite / Replace
Stage 5: Develop an Implementation Roadmap Poor
Low High
Based on the analyses mentioned previously, a Business Alignment
set of recommendations and a risk-minimized
migration plan is prepared for rationalizing the Figure 4
cognizant 20-20 insights 5

6. Our Experience tion/maintenance services around best-of-breed
packages (e.g., JDA/i2/Manugistics, Red Prairie,
We have worked extensively in the consumer
Manhattan), as well as large-footprint solutions
goods supply chain space and have helped
(e.g., SAP, Oracle). We bring a vendor-agnostic
many companies achieve substantial benefits
perspective to help consumer goods companies
through the rationalization of their supply
make their supply chain platform choices.
chain IT portfolios (see FIgure 5). Our teams are
focused on delivering implementation/integra-
Best-of-Breed Package Experience Summary
Demand Planning Supply Planning Supply Chain Execution
• Leading maker of branded clothing: • Global leader in household, health • Global leader in fragrance and
Provided technical solution; designed and personal care: Conducted portfolio personal care products: Manage
and developed new modules to support analysis to help improve supply planning client’s RedPrairie DLx and DM Plus
new business requirements; significantly process and reduce overall planning cycle. WMS applications and interfaces.
reduced cost of providing application
services. • Global consumer goods major: • Leading worldwide brewer:
Re-engineered the sales and operations Designed and implemented a product
• Leading cosmetic products company: planning (S&OP) process, evaluated ordering inventory net tool, integrat-
Completed a Manugistics upgrade in various solutions and provided a roadmap. ing SAP ERP; implemented reverse
three business regions – EMEA, North logistics solution to improve claims
America and Latin America; provided JDA • Leading consumer electronics process.
application administration, development, retailer: Helped build a centralized
production support and enhancement inventory management system; • Leading consumer packaging
activities. implemented Manugistics for group, the world’s leading beverage
forecasting, demand planning, can manufacturer and a global leader
• Leading auto parts retailer: Provided inventory and PO planning. in rigid plastic packaging: First produc-
space management for replenishment; tion deployment of the SAP TM solu-
integrated data for forecast optimization; tion globally; implemented dynamically
provided support and maintenance in push orders and order changes into its
coordination with a leading best-of-breed transportation optimization and carrier
vendor. selection planning processes.
Figure 5
cognizant 20-20 insights 6

7. About the Authors
Nishanth Vallabhu is a Director in Cognizant’s Business Consulting Practice. He has over 12 years of
experience in the supply chain space and has worked extensively with leading consumer goods companies.
Nishanth has led multiple supply chain programs involving both “best-of-breed” and “large-footprint”
solutions. He has worked in a line role in the supply chain space and has also served this area as a
consultant and systems integrator. While he has worked extensively across the supply chain planning
and execution space, Nishanth’s current areas of interest include inventory optimization, deployment
planning and supply chain execution (transportation, warehousing). Nishanth has made past contribu-
tions to the Supply Chain Council and is a regular speaker at conferences on this subject.
Prior to Cognizant, Nishanth worked with the consumer goods consulting group of i2 Technologies and
with the supply chain strategy group of Whirlpool Corp. As a consulting director, Nishanth advises Cog-
nizant’s clients on business-IT alignment strategies and is focused on delivering business value to clients
through Cognizant’s service portfolio. Nishanth has an MBA from the Indian Institute of Management
and a bachelor’s degree in engineering from the Indian Institute of Technology. He can be reached at
Nishanth.Vallabhu@cognizant.com.
Ravishankar Iyer is a Consulting Manager within Cognizant Business Consulting and is affiliated with
the Consumer Goods Business Unit. He leads the Supply Chain Center of Excellence, which is involved
in the development of service offerings for consumer goods customers in the supply chain space. Over
his nearly decade-long career in the supply chain consulting space, he has handled multiple engage-
ments for multinational consumer goods companies, spanning business consulting, systems integration
and product management roles. Ravishankar holds an MBA from the Indian Institute of Management
Lucknow, India, and a bachelor’s degree in engineering from the National Institute of Technology, Trichy,
India. He can be reached at Ravishankarb.Iyer@cognizant.com.
About Cognizant
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