GMA Question #1: Considering today’s tough sales / profit environment, what, in your opinion, is the single most important e-business area or capability on which CPG industry management should focus in 2003? Why?

Companies spent $22 billion on CRM software last year, Gartner Group reports. But, the Harvard Management Update says, "experts say all it has done is enable companies to disappoint their customers faster and more efficiently." Generally, in your experience -- within
your own company, as a corporate customer of other companies and/or as a consumer -- is this true? Specifically in terms of the CPG industry, do you agree or disagree? Why?

Synectics Group Response #1: CRM evolved in the financial and health care sector where the storage of this customer information in a database could be utilized in real time to maximize business opportunities and service the client/customer more effectively. However, as evidenced by the numerous articles recently published, simply trying to define what "CRM" currently stands for and what it should evolve to, speaks volumes to the current shortfall in CRM's effectiveness in the CPG arena. If CRM is going to be effective in the CPG sector it will have to be significantly re-engineered to be mutually beneficial to the manufacturer and retailer. The CRM umbrella must include a sophisticated supply chain management tool, closed loop trade promotion application, in addition to the causal data overlay provided by handheld devices. Most CPG manufactures don’t integrate their supply chain and closed-loop trade promotion systems with classic CRM field gathered causal data. With these specific factors in mind we at Synectics Group agree that to date the CRM initiative has been a disappointment in the CPG industry.

GMA Question #2: Reportedly, at present 70 to 80 percent of most firms' IT budget goes to internal/central systems maintenance -- yet the locus of value creation, many observers insist, is at the interface with the customer. Accordingly, they say, in five years we will see a huge
" outward" shift: Back-office functions will be outsourced, and IT infrastructure will be all about driving innovation to the periphery of the organization. Do you agree? If so, how will companies avoid exacerbating the problem identified in Question 1 -- i.e., disappointing customers geometrically faster and more efficiently than much CRM allegedly does today?

Synectics Group Response #2: Yes, we agree. The CPG industry is beginning to seriously consider the outsourcing of significant backroom systems/applications. This has come to light with P&G's most recent public announcement to move aggressively in this area. This strategic decision can reduce IT overhead significantly while freeing up the time of the core development team to focus on creative solutions in the CRM/CPFR arena. This focus with CPG manufacturers should result in significant payback in the areas of; production, distribution, and trade promotion investment. The key to avoiding the pitfalls of the inefficiencies currently existing in CRM is to identify best business practices in each area and then approach your individual solution methodically, with a key group of senior management representing each critical functional area.

GMA Question #3: In light of your perspective on the above, how would you suggest that today's top industry executives proceed in the area of CRM? What questions should they ask? What CRM investments are likely to provide the greatest payoff? What results should they expect?

Synectics Group Response #3: CRM needs to be redefined in every CPG manufacturer currently deploying it. A corporate task force should be charged with this redefinition process insuring that the following areas of focus are addressed to mutually benefit both the manufacturer and the retailer. The following 3 areas are listed in priority order based upon payback potential.
• Supply Chain Management
• Closed loop trade promotion management
• Retail causal overlay data
The supply chain initiative is listed first as a result of the retailer’s aggressive push in this area. Both the Supply Chain Management and the closed loop TPM application have significant payback potential and are inter-dependant. Effective execution and training of systems in these two areas should return conservatively 3-5% of the annual investment. In the mature/margin stressed environment that both the manufacturer and retailer exist in today...this investment not only makes sense, it is a necessity.