Promotion Planning for Supply Chain Planning (part 2)

In the previous article, we have developed four dimensions of a comprehensive promotion planning process. Promotion planning success depends upon the scope, the performance measurement, the accuracy of the plan and requires strong agility and connectivity to ensure the plan may respond to unforeseen demand and supply signals. Let’s now focus on the five additional dimensions of a comprehensive promotion planning.

CONNECTIVITY

Although electronic promotions data transfer between manufacturers and retailers is not new,  it continues to be a challenge for manufacturers, as the frequency of data exchange, and the depth of content increases.  This creates a range of problems for manufacturers.

Different retailers use varying formats to exchange promotions data with manufacturers.  Manufacturers require a low cost-of-ownership planning solution that may rapidly adapt to the retailers. The promotions information transmitted by a retailer to a manufacturer is often incomplete, requiring planner intervention to validate, and approve a promotion.  Retailers send various promotions, updates, and deletions requiring ongoing data maintenance by the manufacturer. Some retailers send all promotions data, including data from other manufacturers, (i.e. competitive promotions data).  This is useful information for defensive marketing tactics and needs to be considered accordingly.

SUPPLY CHAIN & PROMOTIONS COLLABORATION

Supply chain collaboration techniques have evolved enormously, in recent years, to provide a more inclusive yet targeted approach to harnessing stakeholder intelligence.  The use of workflow and exception engines combined with conversational analytics and natural language ensures informed stakeholders are making fact-based decisions.  This has effectively bridged the chasm between retailers and manufacturers, providing near real-time closed-loop data, and process synchronization.  This ensures retailers and manufacturers are using a single set of numbers to make consensus decisions in the same time frame. However, promotions collaboration equally applies to the internal functional silos that contribute vital intelligence to the promotions planning solution.  Warehouse and logistics need to be aware of stock build activity that may occur before the promotions sell-in dates.  This especially applies to promotions that use a substitution SKU to promote using specific labeling or pack configurations.  Warehouses need to allocate new bin locations and advise pick-staff accordingly.

STRATEGY ALIGNMENT

  A trade promotion is just one brick in the total trade spend strategy.  Planners need to visualize the impact of a specific promotion against the entire strategy, not just as a stand-alone initiative.  Perhaps, there may be promotions overlap when a category or customer is impacted by multiple potentially conflicting events.  Perhaps, there are gaps in the promotions calendar during key events.  Does the planner have sufficient visibility of competitor’s promotions activity to gauge the impact and mitigate effectively?  Promotions planning is hard enough without competing against yourself.

SUPPLY FEASIBILITY

A core problem, of traditional promotions management, is the sole focus on demand and finance at the expense of upstream logistics.  It is not possible to develop a comprehensive promotions strategy, without the sponsorship of production and procurement.  Perhaps, there may be planned maintenance that may reduce production capacity, during a promotion.  Perhaps, there is a new label or pack configuration of the promoted products.  Promotions planning should be synchronized with the supply planning, at all stages of its life-cycle, from draft to execution.   Failure to achieve this is what led to the infamous Hershey’s Halloween event.  This synchronization may only be truly achieved when promotions, demand and supply planning exist within the same supply chain model.  A single supply chain model enables intelligent exception management to automatically alert promotions strategies, which carry excessive supply risk.

LIFECYCLE PLANNING

Many promotions ideas end up on the cutting room floor.  In some cases, less than 10% of promotions concepts will ever progress to execution.  This is by design, to offer multiple promotions options to planners.  Without smart planning, this may consume significant resources to define and validate promotions data sets.  Planning processes focus on the lifecycle of a promotion with the knowledge that many may never proceed past a draft.  Lifecycle planning requires a structured process control mechanism, such as workflow or task list management, to progress the promotion through the stage gates.

CONCLUSION

With trade promotions, every dollar spent on promotions or to settle claims is coming straight out of profit. Many manufacturers invest in ERP and TPM (trade promotion management) solutions that focus on the financial transactions generated by the small number of promotions that make it to execution.  However, for a long time, there has been a crucial missing link in the promotions planning process leaving a long list of unanswered questions.

• How do different promotions strategies impact supply capacities?
• How do the promotions strategies impact the S&OP process?
• Which promotions strategy is the most profitable?,
• Which gives the largest market share?,
• Which best defends against the competition?
• Which has the least risk from a supply perspective?
• Which are feasible from a trade-spend perspective?

Investing in a comprehensive supply chain planning solution with native promotions planning capabilities may increase effectiveness with better planning, smoother execution, and improved visibility into promotion performance.  This will launch the right promotion at the right time, every time.