Consumer-goods manufacturers' efficiency emphasis shifting to growth orientation, says new CSC study.

EL SEGUNDO, Calif.--(BUSINESS WIRE)--Oct. 14, 1996--

I/S budgets flat; technology application

to operations is still primary focus

U.S.-based manufacturers of consumer goods currently direct their business strategies and information-technology (I/T) investments toward helping the enterprise cut time and costs from their operations.

However, an increasing number of these companies are beginning to shift to a growth orientation, and are embracing the customer as a key to their growth during the next three years.

This is the overall finding of ``Streamlining the Consumer Supply Chain,'' the First Annual Consumer Goods Technology Study from Computer Sciences Corp. (NYSE:CSC) and Consumer Goods Manufacturer magazine.

According to the study, consumer-goods manufacturers' historical focus on efficiency and costs is reflected in participants' responses to a number of questions related to their business and information- systems (I/S) strategies, near- and long-term technology investment plans, and external market forces. For example:

-- The largest percentage of respondents (41 percent) said that

their primary company mission is ``to be the most efficient

and offer the lowest total cost.''

-- Three market forces that respondents think will have the

greatest impact on their business are ``pressure to reduce

overall supply chain costs,'' ``pressure to compress total

time to market'' and ``movement to establish alliances/

partnerships with suppliers.''

-- Respondents' most critical I/S strategies are ``integrating

systems,'' ``re-engineering business processes through I/T''

and ``connecting to vendors and/or retailers.''

-- Three of the top five activities planned for I/T application

within the next three years are activity-based costing,

product-flow/logistics analysis and productivity analysis.

However, while efficiency is clearly the principal focus of survey participants, growth and ``customer intimacy'' are becoming more of a concern for consumer-goods executives.

Nearly half of the respondents said that the primary purpose for their I/T investment is ``supporting anticipated growth,'' and 38 percent said their company mission is ``to help customers define what they want, and deliver it to them.''

Furthermore, ``customer demand for unique products and services'' was named a critical external market force, and customer-related technologies such as data warehousing and interactive multimedia were noted as planned for adoption within the next three years by one-third of the respondents.

According to CSC's Fred Crawford, consumer-goods companies' emphasis on costs and efficiency, while important, must ease if they hope to grow in a stagnant domestic market. And, he says, I/T must play a key role in their growth initiatives.

``Stymied by a stubborn top line, consumer-goods companies have embraced the concepts of supply-side re-engineering for the past several years,'' noted Crawford, managing director of CSC's Cleveland-based Consumer Goods/Retail Practice. ``They have focused aggressively on streamlining business processes and on reducing cost and time in the business cycle.

``But while cutting costs may give profits a short-term boost, it is not a sustainable strategy. Over-reliance on cost cutting and efficiency sometimes has the unintended result of robbing vitality and vigor, which can cause revenue growth to falter.

``Recognizing this, many companies now are trying to balance the desire for efficiency and profitability with the need for effectiveness and growth.

``Companies that will be most successful in this effort are those that develop their business and technology strategies together. This way, they can ensure that senior executives understand more fully what technology is available to them and how new tools like the Internet can help them invent new business opportunities.''

Other highlights of the study include the following:

-- I/S budgets for this year are fairly flat. Only 39 percent

of respondents anticipated a budget increase, and 38 percent

said there would be no change in their budgets.

-- Application development is nearly equally split between

packages and custom building. Most respondents (51 percent)

said their application development method involves using

best-of-breed software packages with minimal customization,

while 45 percent said they develop systems from scratch.

Nearly one-fourth reported using enterprise solutions.

-- I/S could do a better job of helping the company achieve

its goals. Using a scale of 1 (not very effective) to 5

(very effective), respondents rated I/S an average of 3.4

on its effectiveness in supporting corporate strategy.

-- The Internet is being used by consumer-goods companies,

but principally for image. One-third of the respondents

said they maintain a World Wide Web site, which is used

primarily to communicate corporate and product information

and to receive consumer feedback. Just 5 percent said they

use their home pages for electronic commerce.

-- I/S is seen as playing a vital role in customer service.

On a scale of 1 (not very critical) to 5 (very critical),

more than 80 percent of respondents rated the criticality of

I/S to delivering superior customer service a 4 or 5.

In addition to covering the consumer-goods manufacturing industry as a whole, the 36-page study reviews, in detail, trends and developments in the following consumer-goods segments: do-it- yourself, fashion, food and beverage, nonfood packaged goods and specialty items.

Companies represented in the study range in annual revenue from more than $1 billion (24 percent) to less than $100 million (47 percent). Of the 203 respondents, 43 percent are functional directors or managers, 38 percent are directors or managers of I/S, 8 percent are vice presidents of I/S, and 7 percent are chief information officers.

Complimentary copies of ``Streamlining the Consumer Supply Chain'' can be obtained by contacting the CSC Marketing Department at 800/272-0018. Editorial questions about the study should be directed to Bernie Thiel, CSC marketing manager, at 216/449-3600, ext. 2277, or [e-mail].

Consumer Goods Manufacturer, published by Edgell Communications, is the leading publication dedicated to addressing consumer-goods manufacturers' technology needs and challenges. Edgell Communications also publishes Retail Info Systems News, Retail Systems Reseller and several merchandising magazines.

CSC had $5 billion in revenues for the 12 months ended June 28, 1996, including 12 months of revenues from the recently acquired Continuum Co., which have been combined with CSC's revenues because the acquisition is accounted for as a pooling of interests.

CSC has headquarters in El Segundo and has nearly 40,000 employees in more than 600 offices worldwide providing clients with a wide range of professional services, including management consulting, business re-engineering, information-systems consulting and integration, and outsourcing.

CONTACT: Computer Sciences Corp.

Bernie Thiel, 216/449-3600

[e-mail]