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GMA Study: New Capital IT Expenditures in CPG Industry on the Rise

SAN DIEGO - New capital expenditures for information technology investment rose dramatically in the CPG industry last year, according the "Grocery Manufacturers of America (GMA) Information Technology Investment and Effectiveness Study: The State of the Industry 2004" released here on Tuesday.

Capital spending rose to 0.86 percent in 2003 from 0.41 percent of sales as reported in the 2002 study. Primary functional areas targeted for IT investment include trade promotions and supply chain planning. Other supply-chain areas such as manufacturing, distribution and transportation are all reported to be high on company priority lists for 2004, according to the study conducted for GMA by Computer Sciences Corporation (CSC).

At same time, GMA companies are making significant progress toward global data synchronization, radio frequency identification (RFID) and the electronic product code (EPC).

Two-thirds of GMA member companies report that they are actively synchronizing base item data with trading partners. Nearly as many (64 percent) report that they are in the information-gathering stage with RFID, while 38 percent are designing RFID programs, and 19 percent are actively testing RFID. Five percent report they are piloting RFID with customers, while 2 percent are implementing RFID.

IT expenses across the industry hit its lowest level since 1998, reflecting the effects of companies becoming more efficient in day-to-day operations by using newer infrastructure and applications, as well as achieving economies of scale. The study showed that IT expenses averaged 1.42 percent of company sales, down from 1.56 percent last year and 0.2 percent lower than the 1999 peak of 1.62 percent of sales.

The study also showed that there is a wide range in spending across companies, ranging from a low of 0.34 percent of sales to 10 times that number, 3.4 percent of sales. About half the companies surveyed increased their IT budgets in 2003, compared to 2002, and half indicated that they will increase spending in 2004.

GMA's benchmark study is based on data from the "Sixth Annual Information Technology Investment and Effectiveness Survey" that was collected from December 2003 through January 2004. Two survey instruments were used to collect confidential responses from 93 GMA member company executives representing 63 of the 119 GMA member companies at the parent-company level. Forty-two companies completed a quantitative and detailed survey that forms the basis of the information technology benchmarks presented in the study.
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