|
The major challenge in designing an effective
Demand Management process is incorporating promotional lift and
volume information into the forecast. The first challenge
is to lay the correct information channel between field sales
into the forecasting group so every change to the promotional
plan is captured immediately. In most cases, this can be thought
of a 50% win in process design.
In practice, the following challenges are very common in the
promotional planning process for a typical manufacturer:
| 1. |
Often there could be communication gaps between the manufacturer
and the customer on changes at retail. This could more often
be due to the lack of proper communication between the manufacturer's
account team and the head quarters forecasting team.
|
| 2. |
There is no easy apparatus to incorporate and communicate
changes to the promotional calendar. This is the major theme
of more advanced Customer Relationship Management (CRM) software.
But the key is for the information to be integrated into the
demandplanning process/tool.
|
| 3. |
The Baseline Sales Volume is often difficult to estimate.
This is further complicated by the fact that there is not
a single consistent definition of baseline versus lift within
the organization. |
CPFR and Collaborative-ABF have attempted to address the issue
of promotional planning. It is important design the collaborative
meetings to start with a discussion of major changes in promotional
events compared to what was used in the forecast in the previous
period. Once both parties are in the same page about the promotional
grid, then attention should be paid to agreeing on the correct
lift for the promotional events.
In summary, Promotional planning involves the following two steps:
| 1. |
Review the latest Promotional Calendar to understand changes
to key promotional plans. |
| 2. |
Incorporate incremental volume changes in response to the
changes identified from the promotional grid. |
Assuming there is technology in place for Customer Relationship
Management, here is one model of information flow in the collaboration
process for promotional planning:
Key process driver is the information-sharing
between the customer, and sales teams with the demand planning
group. It is a big process win if event changes are communicated
rapidly upto the manufacturer's supply chain. In the above model,
the CRM process contains all key data about promotions and lifts.
The collaboration process verifies the accuracy of this information,
incorporates late breaking events and achieves consensus on the
lift identified with the promotional plan.
In designing this process, care should be taken to build a correct
and consistent baseline so promotional lift volume is truly incremental
to the business. Secondly, application of exception management
is key as there will be so many run-of-the-mill promotions with
little or no true volume effect. Hence, proper thresholds should
be established to focus the process on key promotions and retail
events. If you would like to find out more details on facilitating
or developing an effective promotional planning process, please
contact us.
|