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Private Label Product Lifecycle Management: Calculating ROI (Pt I)

| PLM | Private label | Food industry
Posted By: Don Low


Product Lifecycle Management (PLM) solutions have been around for decades. Historically they have been considered as large investments, with long implementation projects caused by heavy customization, and slow return on investment.


This is no longer the case with many solutions being provided via software as a service, which reduces cost of ownership. Your selected vendor should also have an out-of-the-box offering which limits the level of configuration required to reduce implementation investments.


You will still need to prove that there is a return on investment. For this you need to assess your current product development and maintenance KPI’s so that you can present a financial case to your leadership and justify the purchase.


Before selecting a PLM vendor you need to review what cross functional departments the solution will support. In the case of Trace One the focus is the following:


1. Category and product development teams

2. Product quality and supplier compliance teams

3. Packaging and sustainability teams


In this blog series we will tackle four key areas of return and how these can be estimated. Let’s take a sample mid-sized retailer with an existing private brands portfolio of 3000 SKU and 300 suppliers.  They want to expand their product range by 10% per year and recognize that spreadsheets and PDF documents won’t support the growth objectives.


Please note: the figures used are just examples and the formula would be adjusted based on an analysis of the retailer’s private brands business and their strategic objectives.


Increased speed to market means products are available in stores earlier which leads to more sales and revenue

Before we can estimate the return on investment from a reduction in time to market, we need to know the current process for new product development. Seems like a straightforward question, but often the workflows are not clearly defined, have a low level of adherence, and progress is not being accurately measured. This frequently indicates that we need to spend time within the retailer’s business to complete an analysis and documentation of both current and desired process states.


There are also qualitative factors that we can’t calculate. How many more successful products could you launch if you collaborate with suppliers more effectively and free up your teams to innovate instead of firefight?


Assuming the retailer has a documented process of 32 weeks for new product development, we can use a formula to estimate the increase in profits by reducing time to market by 30% to 22 weeks.


A. New products per year = 300 SKU

B. Average weekly sales per product = $2,500

C. Average product margin = 20%

D. Reduction in time to market using Trace One PLM @ 30% = 9.6 (weeks)


A x B x D x C = $1,440,000 per year additional profits


Reduction in time to market in Trace One’s PLM solution is achieved by coordination of the retailers’ cross functional teams and external partners activity using predefined best practice workflows and monitoring of adherence to the agreed process.


In addition, faster consolidation of product information and specification approvals, and effective tracking of workflow progress to identify potential delays such that actions can be taken to compensate (e.g. reallocation of resources) has a positive impact.


Finally, right first-time specifications through validation will reduce the number of artwork errors and iterations, which is a major time saver. It also reduces artwork costs but that’s a topic for next week’s blog.


About Trace One

We spearhead a powerful global retail community at the heart of the industry ecosystem. Unified on one platform, our systems connect, streamline, and organize data, teams, and networks. This allows brand owners to overcome complexity and grasp the opportunities at every stage of the product lifecycle.


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