Building a Business Case for Trade Solutions
Webinar recording hosted by trade solutions expert Joel Cartwright
What You’ll Learn:
- What you need to prepare internally for a trade solution business case
- Your current challenges and pain points
- How the system can create value across the planning lifecycle
- Estimate ROI and measure the value of the system
- Decide what you want to fix and what habits need to be changed
- Identify the current TPM process and where the gaps exist
- Identify the outcomes you want to improve and quantify them
- Determine the resources and investment needed for the initiative
- Identify the departments and individuals that are required to evaluate and decide on the system
- Understand if there’s funding available – if not, what is the approval process for budget
- Set a pragmatic timeline
- Decide when you want the system to “go-live”
- Ensure that the timeframe take into consideration annual planning timeframes
- Quantify the return on investment
- Identify the ROI of deploying a system
- Plan the work (and work the plan)
- Identify an executive sponsor that will provide the leadership to push the project through the end
(video time: 6:45)
Addressing Current Challenges and Pain Points
Do these challenges sound familiar?
PROFIT IMPROVEMENT OPPORTUNITIES ARE HIDDEN
- Poor alignment between sales and demand planning (resulting in excess inventory)
- Low visibility to sales, trade spend, promotion ROI plans, actual performance
- Undesirable activities taking place (resulting in customer overspending)
- Can’t understand indirect customer plans and performance
- Profit leakage due to invalid deductions
- Inaccurate trade spending and balance sheet
EVERYTHING IS MANUAL
(video time: 9:50)
- Create, update, collate planning templates
- Planning output data levels are limited (PPG or SKU)
- Creating merchandising calendars
- No automated workflow
- OI allowance, deduction credit memo/GL adjustments
- Records in different systems / places
Ready to increase trade effectiveness?
Value Proposition Across Your Annual Planning Process
(video time: 12:08)
Planning – Customer and Products
- 25% to 30% reduction to the planning period — more time for plan and promotion analysis
Planning – Direct and Indirect Customers
- Improved control and efficiency on indirect trade spend
- Represents a direct improvement in annual net sales
- Indirect spend accuracy improves spending accrual
- Indirect volume forecast improves production planning
Alignment – Top Down / Bottom Up Plans
- Plan product mix for contribution
- Multiplan calendar for alignment to retailer
- Plan at multilevel — approval at multilevel
- Align plan to drive category share
Once the plan is in place, you can understand and forecast to S&OP. You can course correct on this event type, product, or SKU.
Deployment: Align plan to retailer calendar
Control: Approve spend by margin, total cost, percentage of list price
Accrual: Spend accruals to general ledger
Plan: Corrections or additional allocation of funding
(video time: 21:20)
The last component on value creation is understanding the settlement process.
Order to Cash Cycle: Deductions
From deduction aging standpoint, you want to have 90% of your deduction balance in under 30 days to improve your accrual accuracy.
- Reduce invalid deductions (typically 3.7%) and shorten deduction processing by days
- 3.5% of your overall trade budget is a lot – you should be getting that money back from the retailer
- Speed up the settlement process time and improves operating cash flow
Invalid Settlements: Capture and repay
Estimate Return on Investment
(video time: 23:50)
I want to improve – not maintain. Look at it as projected benefits vs. cost.
Overall trade system project benefit:
- Sales and net revenue lift
- Cost reductions
- Streamline settlement processing
- Forecast accuracy
Use a project analysis to compare benefits: *Your trade promotion system provider should be able to provide numbers
- Net Value Impact = Projected benefits – cost
- Projected Value Creation: 3 to 5 year projection
- Calculated ROI
- Payback years
Looking for a value assessment? (video time: 28:50) These numbers are build around a customer with $60 million in gross revenue. Their retail business is roughly around 25% trade rate.
💰 Increase in net margin at 2.4% ($363k) in year 1. (Year 1 refers to the first year fully utilizing the process and application.)
💰 Increase net revenue by $2.1 million dollars over 5 years.
💰 Replicate successful events and prioritize profitable products.
💰 Optimize inventory costs with more accurate volume forecasts.
💰 Lower write-off tolerance.
Allow the process to take hold. Allowing trade promotion and optimization systems to their work — you’ll gain financial efficiencies.