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TPM's Role in Demand Planning

12/12/2011
During the 2011 Consumer Goods Business and Technology Leadership Conference, a group of consumer goods (CG) executives joined together for a lively discussion about Trade Promotion Management (TPM). Specifically, they tried to answer the question: What is TPM's role in demand forecasting? Finding the answer, however, was not that easy.

It was found that trade promotions can be taken in the context of market mix and trading, as well as analytics. In addition, forecasting cannot justify planning a promotion because the same data can be sliced different ways, and everyone sees that data differently. If Ahold says that the circular is dead, then what are we doing? Although the consensus seemed to be "my word against yours", the group was able to compile a list of best practices when it comes to TPM's role in demand planning. Here is what they had to say:  
 
1. When it comes to category management at the store, sales generally want to do a bill back because it is the easiest route. The better practice however is to pay for shoppers to buy instead of getting the retailers to buy.
 
2. It is not about the technology — it is about getting people to embrace new technology! You cannot change your system without explaining to your salesforce how it would change their roles.
 
3. Have a very realistic, actual forecast so you know how much money you have. One member explained how an execution meeting is often needed. The trade budget was usually planned late, but the best sales people at the organization figured that out, and were able to put their money to work. Although it may be frustrating dealing with sales people, in this case, they were not the enemy.
 
4. Try to have a salesforce that doesn’t function the way CPG functions. “We forgot to do things,” one member said. “We changed systems, but didn’t explain what it would do to the sales role.” By doing this, a couple members said they had to do a re-launch.
 
5. Get the forecasts in on time (although it was expressed to be a constant battle). One organization would send a compliance e-mail, just to bring awareness to what was going on.
 
6. You have to simplify forecast accuracy. You have to show when baselines are good so there is no need to override numbers, thus creating more work. Have sales focus on the incremental side and getting events into the system. Get into the habit of looking into that number with them to show that there is no rational for overriding that baseline number. Show them that in the end the number they got was the same number they were overriding to get to. 
 
7. Look at your risk analysis process. One organization every so often would say “we need to know what your forecast is”, and sales could not say that they had risk if they had 10 percent of their budget left.
 
8. Make it part of your culture and cross-functionally. They’ll know that every month there is a deadline because it feeds into demand planning system. They’ll know if someone didn’t put a plan in there until it becomes "the right thing to do". Make sure everyone has visibility. For example, use Outlook — when the Friday deadline is due, send a reminder on Monday. These little things just help it to become part of the culture.
 
9. Do not put it incentive plans or annual reviews for sales. Hold them accountable for putting their plans into the system.
 
10. Get rid of offline spreadsheets. When you eliminate this majority of behavior, you free up more time. When you use spreadsheets, your system never gets smarter.
 
11. Keep trade promotion analytics separate from trade promotion management, instead of a "one size fits all" solution for the company. Also, when possible, automate some of the post promotion analytics.
 
12. One of biggest challenges is justifying a system, proving a business case and then communicating to executives who may or may not have a clue what you’re doing so they ask for metrics. What metrics are you using? Here is what members said:
 
--We roll up gross margin ROI, share and spend rates depending on our objectives.
--We use GP — gross profit, circling around ROI.
--We look at spend per volume: Sales growth divided by trade growth rate.
 
13. Change your tool to match spreadsheets to make it look like what users were seeing. When the system looks like Excel, it is a good start at least for the design team, so it is not a huge shock.
 
14. You need senior-level buy in. This is the biggest piece. Reconciliation happens, but you have to accept the right number in the tool. Honor that system. “No” is a big word, and you need your bosses to back you up.
 
15. Always go to a sales person that is open to change — start there, so they become your advocates.
 
16. The front line folks must design the process. Conduct workshops. One member used this example: Use a stack of Post-it notes and have sales guys go through each part of the process and write down the issues on the Post-its. Stick them all up on a wall and go through them. Some may still remain up there in the end, but most of the Post-it notes end up on the floor.
 
17. Everyone wants to think their account is unique, but they’re not that unique. If you have a set of standards to build against, you can challenge unique.
 
18. Don’t discount integrated systems.

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