Article sponsored by: Plante Moran
Authors: Joe Puglia, Principal, and Ashley Eaton, Manager
We hear from consumer packed goods (CPG) clients frequently that they are spending more and more on trade promotion management (TPM), but not seeing revenue increase proportionally. Does this sound like your company? If so, there’s a more effective strategy: digitizing and optimizing TPM efforts using Industry 4.0 tools and technologies to drive increased revenue and higher margins.
Why digitize TPM?
- Manual processes leave money on the table. Many companies rely heavily on individual spreadsheets and manual processes to manage trade promotion spend. However, this is a time- and labor-intensive process that’s error-prone and produces low-quality data for post-promotion analysis. Adding new sources of data is time-consuming and burdensome. These disadvantages severely limit a company’s ability to be nimble and responsive to shifting consumer behavior and changing market conditions.
- Consumers’ purchasing habits have fundamentally shifted. Sales channels have become more complex and are increasingly less reliant on traditional brick-and-mortar shelf space. The omnichannel model — offering more ways to penetrate households — has introduced more intricacy in interpreting lift in one channel versus cannibalization in another. Manual tools and methods can’t effectively support this level of sophistication.
- Data inundation overwhelms many CPG companies. We live in an increasingly data-rich environment. Without the tools and strategies to extract meaning from large datasets, many companies don’t know where to start and often waste resources chasing down a narrowly focused analysis that misses the bigger picture.
- Many CPG TPM programs are disconnected from overall demand planning and performance management efforts. Effective TPM inherently impacts demand planning, so better forecasting and scenario analysis will help gain efficiencies in production scheduling and managing inventory levels. Digitizing and incorporating TPM into a holistic view of overall planning helps executives make better strategic decisions related to trade spending.
In short, TPM is so tightly woven into key business processes that manual planning is difficult at best and wasteful of valuable resources at worst. Leveraging the right technology is essential to realizing improvements.
The path to digital TPM
At first glance, TPM modernization can appear overwhelming because it’s deeply interconnected with business processes, while the complex technology improvements seem like a barrier to transformation. But creating a TPM strategy that works for your company doesn’t need to be out of reach; you can drive toward the results you want at your own pace, structuring the initiatives and investments in a way that makes sense for your business.
These five steps will help you create a successful TPM modernization program.
1. Articulate your vision.
Incorporating TPM into your larger enterprise planning vision is necessary to create a clear omnichannel view across your entire customer base. It provides the foundation for baseline forecasting, supports scenario planning, and enables what-if analysis for data-centric decision-making processes. For example, if you have the excess line capacity enterprise-level data, the analysis will help you determine what product to run, whether there should be a corresponding promotion, and which channel to target. Effective what-if analysis will enable you to compare multiple scenarios quickly to help answer these key business questions. It can also help drive your business goals by looking through multiple dimensions such as margin, revenue, product line, net new customers, penetration percentage, etc.
These questions will help you articulate a vision for your company:
- What new channels are you planning to launch in the next five years?
- What consumer trends will impact your business? What new product lines will you be launching?
- What are your most important retailer and distributor relationships now and in the future?
- Are there technology investments that you are already planning? Can they be included in your TPM strategy?
2. Build a data strategy.
Look at your current data sources and assess how well the data from the disparate systems will tie together. Ask:
- What tools are you using to access data?
- Is your master data structured in a way that allows you to tie records together across systems?
- Do you currently have a data warehouse?
After you’ve evaluated your internal data, consider how to include supporting data from external sources such as distributors, retailers, and consumer studies.
3. Assess your technology needs.
Your company’s transactional systems — including enterprise resource planning (financials and operations data) and customer relationship management (customer data) — is the heart of your TPM program and provide the foundation of your master data management. They support the reporting and advanced business analytics that let executives drill in on data to identify trends and real-time insights that enable the business to scale and nimbly adapt to differences in the plan versus the actuals.
Other systems for your assessment could include:
- Enterprise performance management (budgeting and forecasting)
- TPM system (your stand-alone solution for TPM)
- Business intelligence/reporting tools
- Ecommerce platform
- Point-of-sale system
Questions to ask:
- What tools are already in place to help you achieve your TPM vision?
- How well are you using those tools and are they sufficient to carry you forward into the future?
- What pain points can be solved?
- What gaps remain?
- What level of effort is necessary to address these gaps?
4. Set up a roadmap.
Establish a clear roadmap for your TPM initiative that includes each task and key dependencies. A comprehensive roadmap will ensure you extract maximum value out of each milestone and reduce the amount of rework that needs to be done on subsequent rollouts. Your plan should adopt a continuous improvement mindset as TPM is never truly finished — there will always be adjustments as you continue to adapt and improve.
5. Assess your people.
Execution of a TPM digitization project requires the right balance of people who understand the business processes, technology, and intricacies of project and change management. Executives frequently rely on software vendors to define what’s needed from technology or lean on key resources within the organization who may understand the business but don’t have the skills to effectively oversee the implementation of complex technology. You need an independent, balanced project team to succeed.
In conclusion, Industry 4.0 technology has fundamentally transformed how CPG businesses can manage their trade spending. TPM automation saves labor, and the ability to analyze enterprise data leads to deeper business insights that can be leveraged to set the stage for negotiations with your retailers and drive increased revenue and higher margins. For a closer look into how Industry 4.0 technologies can transform your business, learn more about Plante Moran’s Industry 4.0 services here.
As a leader and a change agent, Joe has over 30 years of experience in the food and beverage industry. His expertise includes business process reengineering, needs assessment, and system selection and implementation services. His clients appreciate that he gets to know their businesses and becomes a trusted team member, helping them make informed decisions. He received a bachelor’s degree in industrial engineering, a master’s degree in management engineering from the New Jersey Institute of Technology, and an MBA from the Crummer School of Business at Rollins College in Florida.
Ashley has over seven years of experience in technology consulting, advising clients on their enterprise technology needs, specializing in ERP and HRIS. She specifically focuses on providing clients with detailed needs assessments, changes readiness assessment, software evaluation and selection, process reengineering, and master data management strategy. She holds a Bachelor of Arts degree in sociology from the University of Denver and a master’s in business administration from the University of Colorado, Denver.
About Plante Moran
Plante Moran is among the nation’s largest accounting, tax, consulting, and wealth management firms and provides a full line of services to organizations in the following industries: manufacturing and distribution, financial services, service, healthcare, private equity, public sector, real estate, construction, and energy. Plante Moran has a staff of more than 3,300 professionals throughout the United States with international offices in Shanghai, China; Mumbai, India; Tokyo, Japan; and Monterrey, Mexico. Plante Moran has been recognized by a number of organizations, including Fortune magazine, as one of the country’s best places to work. For more information, visit plantemoran.com.