12/20/2017

Industry Relations: Bridging the Divide Between Vendor-User Perspectives

Lora Cecere, Supply Chain Insights

When it comes to managing channel performance, consumer goods manufacturers lag behind high-tech industries, where there is greater discipline and alignment between business users and their technologist partners. In that field, both sides are clear on “what good looks like.”

This is not the case in consumer goods. Despite a slide in margins over the last decade and an increase in channel complexity, 62% of business users in this industry believe that their processes for revenue management are effective. But only 23% of technologists and consultants agree that processes at a typical consumer goods company are effective (see Figure 5). And that sizeable gap in perception is a critical barrier to driving greater value for trade tactics going forward.

The differences are many. The first is analytics and the time required to sense trade promotion effectiveness. As seen in Figure 6, technologists/consultants believe that trade spend can be evaluated in two weeks on average while line-of-business users report four weeks. This time gap is an opportunity. Companies need to mine demand insights and evaluate trade effectiveness faster.

A second difference involves the use of trade analysis to identify effectiveness. Only 17% of technologists/consultants believe that most sales teams take appropriate action after noting changes in revenue and trade spending impact; 40% of the line-of-business users believe this happens (see Figure 7).

The third difference involves measurement. While technologists/consultants are more focused on the use of trade management tools to improve volume, business users zero in on spend effectiveness. That’s a disconnect because those are different goals.

All trade promotion techniques increase demand error and accelerate the velocity of items on the shelf. As this happens, there’s a higher probability of out-of-stocks. These gaps cannot be measured unless processes start at the shelf and transmit shortages along with the lift from deployed tactics. Shelf performance needs to be taken into account in trade evaluation.

This isn’t happening today, when (as noted earlier) finance is motivated by spend effectiveness, sales by volume, marketing by share and, therefore, no one is aligned on goals. This internal focus on siloed goals prevents a more holistic outside-in, customer-centric view.

To foster process improvement, technologists and business users need to be more aligned. The over-arching problem is that the technologist view tends to be more academic and theoretical. Many technologists espouse solutions without having the experience influenced perspective of their clients’ companies, and they overlook the organizational complexity across account teams, sales operations, marketing and finance.

With the evolution of advanced analytics and outside-in processes, the opportunity to close these gaps is here. It will require open dialogue, with the technologists taking a “walk in the shoes” of the business user.

The gaps between functions must be closed through the design and implementation of technologies delivering outside-in digital transformation. Companies need to understand the power of real-time demand insights and the value of sense and respond capabilities to the shelf.

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