Sales & Volume Planning with Promax PX

The forecasting capabilities of Promax have been a core part of the application’s functionality for many years. Since the inception of the system it has addressed the need to provide a forecast of financial data to be the basis of accruals for deferred trade promotions expenditure. This soon involved the transformation of those forecasts into revenue and volume estimates for each promotion. Those estimates required the development of algorithms to calculate baseline sales and seasonal effects to further improve forecasting accuracy.

The innovation and research at Promax over the last couple of years has taken the modelling and sales/volume planning capability of Promax PX to a new level, placing it at the forefront in Trade Promotions Optimisation and Sales & Volume Planning. This paper describes best practice for the combination of activity based forecasting, statistical modelling and market intelligence to give a holistic approach to sales/volume planning for CPG (Consumer Packaged Goods) companies.

WHY ARE CPG COMPANIES DIFFERENT?

Most computer based demand planning systems were derived to solve the problems of manufacturing and purchasing organisations with large SKU (stock keeping Unit) counts and limited amount of “market intelligence” on consumer demand signals. They are typically based around statistical models derived from sales (ex-factory/warehouse) in monthly buckets. The fundamentals are there, in that they all produce a statistical forecast that reflects the seasonality of the sales and its growth or decline from the current level for each SKU. The frustration for CPG businesses is these tools do not deal effectively with those products that are highly promoted. Promotions cause large spikes in the demand, way above the baseline sales rate. The demand signal often appears confused as the spike hits the supplying warehouse well before the promotion is launched to the consumer. The incorporation of this information into traditional demand planning systems consumes endless hours of debate and consultation in the Sales & Operations Planning forum often resulting in poor forecasting accuracy, expensive and unrewarding business processes and inevitably the consequential out-of-stocks and expedition costs that are all too familiar.

The renowned forecaster R G Brown, who lays claim to have invented the statistical modelling technique known as exponential smoothing, has been asked many times by those trying to solve the forecasting dilemmas “What is the best source of data for forecasting?”. His reply, with quintessential ambiguity, is consistent “You should try and use the most reliable source of data that most accurately records consumption”. That used to be ex-factory sales from invoices/shipments but now for CPG companies there are reliable sources of POS (Point Of Sale) data that are clean and verifiable. The granularity of this data is improving with weekly sales by product/customer readily available from syndicated data providers. A number of companies are working with their retail customers to obtain data on a daily basis for each store.

The real point of difference is that CPG companies need to understand the forecast from the perspective of baseline sales and promotional uplift. This requires a multi-causal approach to modelling data that concurrently models baseline, trend, seasonality and the effect of price and other promotional factors. Furthermore the character of the customer’s buying behaviour has to be understood and modelled as the generation of a useful forecast for the supply chain requires a transformation of what the consumer will buy from the check-out to replenishment orders on the manufacturer from the retailer for re-supply. These models need to operate effectively without the need for inventory data, as this is rarely available in a timely and convenient form.

DEVELOPING AN “ACTIVITY BASED” FORECAST

An “activity based” forecast is one where events such as promotions are individually defined and modelled. To derive an activity based forecast we need to decompose the historical demand data into identifiable elements that can be used to establish the forecast.

Read more about “Sales & Volume Planning with Promax PX” by downloading the complete whitepaper

Promax PX Reporting and Analysis

Overview

Promax PX is a rich source of financial and supply chain information that provides an insight into customer and product profitability. The communication of the information within Promax is essential to the business process that tracks, predicts and optimises trade funds investment. That is why Promax has such a diverse and comprehensive reporting environment. The interactive and responsive user interface communicates information rapidly in tabular, graphical and white paper report forms. The stakeholders involved with promotion activity extend beyond the user base of Promax PX and can include the executive team, customers, supply chain and marketing to name a few. The reporting facilities inside Promax enable visibility of key information via global dashboards, web based reports and scheduled output to spreadsheets. It is this variety of communication mechanisms that facilitate the realisation of a rapid return on investment from the implementation of the Promax PX project.

In this document we review the many communication channels that Promax PX and Promax AnalytX provide.

The object orientated design of Promax PX provides a consistent and familiar interface for the selection and filtering of data relevant to the user’s enquiry. The account and product hierarchy from the core business system is reflected in Promax and updated transparently to reflect any revisions that may occur through changes in the business environment.

Read more about “Promax PX Reporting and Analysis” by downloading the complete whitepaper

What's a Good Promotion?

DEVELOPING A SINGLE QUALITY MEASURE FOR PROMOTIONS WITHIN A STRATEGIC FRAMEWORK

There are many ways of looking at a promotion and evaluating the effective and efficient use of trade funds. To address this issue we might first ask the question “why promote?” Generally, the incentive to promote is to increase the visibility and show the product in association with others which leads to new usage ideas for the consumer. There are a number of good reasons why one might choose a simple price promotion;

• Offensive sales gain – to offset competitive threats. Typically this may mean a situation where the supplier is prepared to forego short term profits.
• Recover market share – sustaining a nominated loss of contribution to gain a position over competitors
• Stimulate Sales – without a loss of contribution and hopefully an increase in overall profitability. This is probably the most common rationale for promotions. Implicit in this is that the company will increase sales revenue and thus the total profit from the promotion will be greater than if there were no promotion at all.
• Reward – for existing brand loyal users. This may be a short-term loss of profitability and may even make money if a lot of brand loyal consumers stock up.
• Switch – However, if there are a large number of promotions targeted at “deal loyal” users then they will switch brand frequently. When promoting to this group the best course of action is to make sure that the promotion is profitable as there may be no long-term future gains to be had.
• Gets new users to Trial – for new products every new trial is valuable; this incentive is premised on the assumption that the long-term value of a new user may be worth many times the cost of the initial purchase, so the supplier is prepared to invest heavily to obtain a new consumer. This may justify the high cost of a promotion. Trade promotions of new items often need to be supported by other vehicles such as demonstrations and media advertising.
• Reward to Trade. This often happens to get a buyer off your back. If however, it is viewed as being good for both parties, there should be a profit opportunity.
• Because the trade Threatens Deletion – in many instances buyers have co-op budgets to achieve. There is pressure on suppliers to maintain ranging and promotion of your products in the category ensures support for your brand.

Each of these scenarios has different parameters of cost, price point, mechanic, vehicle and incremental volume gain. In reality the sales team gets a certain amount of money to spend on promotions, some say that these funds are a “cost of doing business”. The more money that is provided the more we will sell. If only this were true! We really need to understand how we can effectively apply the limited trade funds to maximise their efficiency.

Read more about “What’s a Good Promotion using Promax PX” by downloading the complete whitepaper

Modelling Multi-Casual Data in Promax PX

Overview

Understanding the consumer’s response to a promotional activity is the foundation of trade spend management. Shopping is a repetitive requirement for us all. Keeping the pantry stocked and food on the table calls at the fundamentals of our survival instincts. Understanding the replenishment and consumption cycle and the circumstances that shape the pattern of every phase is the quest of the grocery marketer. At its core is the science of statistics. This sound and proven mathematical approach gives the planner an objective and analytical understanding of the past and a methodology with which to predict likely future consumer behaviour.

This paper describes how the modelling capabilities of Promax PX assist the leaders in consumer products to direct their precious trade funds to the heartbeat of the consumer’s response.

While this paper goes into the details of how the solution develops a model, it should be pointed out that this is all happening in the background of the solution. User operation for the statistical modelling module can be simplified down to a one step batch calculation. The only requirement on the user is to click on the calculation icon and the system will automatically determine the best model. The user doesn’t need to configure or design statistical models – they can leave that up to the solution.

Read more about “Modelling Multi-Causal Data in Promax PX” by downloading the complete whitepaper

Interfacing Promax PX with SAP

OVERVIEW

Fundemental to the implementation of Promax PX is establishing communication of essential data between its database and that of the other systems in the business environment. The efficient transfer of “back office” data makes the Promax PX a seamless part of the whole SAP business system. Developed within the Microsoft development environment Promax PX relies upon the technology of Microsoft Windows, Microsoft Office programs and Microsoft SQL Server 2005. Master file data on products, customers, general ledger, trading terms and pricing can be exchanged between Promax PX and SAP using a range of industry standard document formats as well as simple text file transfers. Promax PX has the ability to import and export data using but not limited to IDocs interfacing, stored procedures, XML, FTP & Flat file transfer.

FLEXIBLE INTERFACE CONFIGURATION

Promax PX Interfacing is flexible and user friendly. The Promax PX data interface is controlled using a component called Timed Transfers. The Timed Transfers system uses a time and/or event based excecution method to exchange data located in specified sources within in SAP or any other repository. Typically syndicated data sources like ACNeilsen, IRI or Synovate data are required for Promax PX modelling purposes.

Read more about “Interfacing Promax PX with SAP” by downloading the complete whitepaper

Interfacing Promax PX with JDE

OVERVIEW

Fundemental to the implementation of Promax PX is establishing communication of essential data between its database and that of the other systems in the business environment. The efficient transfer of “back office” data makes the Promax PX a seamless part of the whole JDE business system. Developed within the Microsoft development environment Promax PX relies upon the technology of Microsoft Windows, Microsoft Office programs, and Microsoft SQL Server 2005. Master file data on products, customers, general ledger, trading terms and pricing can be exchanged between Promax PX and JDE using a range of industry standard document formats as well as simple text file transfers. Promax PX has the ability to import and export data using but not limited to stored procedures, XML, FTP & Flat file transfer.

FLEXIBLE INTERFACE CONFIGURATION

Promax PX Interfacing is flexible and user friendly. The Promax PX data interface is controlled using a component called Timed Transfers. The Timed Transfers system uses a time and/or event based excecution method to exchange data located in specified sources within JDE or any other repository. Typically syndicated data sources like ACNeilsen, IRI or Synovate data are required for Promax PX modelling purposes.

Read more about “Interfacing Promax PX with JDE” by downloading the complete whitepaper

Interfacing Promax PX with MOVEX (M3)

OVERVIEW

The Promax solution has been implemented to a variety of ERP solutions such as SAP, JDE, BPCS, MFPRo and Movex to name a few.

This document examines the interfacing to Movex M3. It should be noted that the information provided is relevant to other versions of Movex.

Fundemental to the implementation of Promax PX is establishing communication of essential data between its database and that of the other systems in the business environment. The efficient transfer of “back office” data makes the Promax PX a seamless part of the whole M3 business system. Developed within the Microsoft development environment, Promax PX relies upon the technology of Microsoft Windows, Microsoft Office programs and Microsoft SQL Server 2005. Master file data on products, customers, general ledger, trading terms and pricing can be exchanged between Promax PX and M3 using a range of industry standard document formats as well as simple text file transfers. Promax PX has the ability to import and export data using but not limited to stored procedures, XML, FTP & Flat file transfer.

FLEXIBLE INTERFACE CONFIGURATION

Promax PX Interfacing is flexible and user friendly. The Promax PX data interface is controlled using a component called Timed Transfers. The Timed Transfers system uses a time and/or event based excecution method to exchange data located in specified sources within M3 or any other repository. Typically syndicated data sources like ACNeilsen, IRI or Synovate data are required for Promax PX modelling purposes.

Read more about “Interfacing Promax PX with Movex (M3)” by downloading the complete whitepaper

Product Inter-Relationships - Cannibalisation

OVERVIEW

This paper describes the methodology used by Promax to determine the reaction of baseline sales of one product caused by the promotion of other products and how the technology can aid the planner in developing a clearer understanding of the overall promotional plan. We deal with the concepts of historical analysis of promotion activity and the segmentation of the consumer response when there is no promotion (normal sales or baseline) and the lift in sales from the promotion.

Symptoms

Predicting what the effect will be of a promotion is a complex and involved task as there are many causal effects that need to be taken into consideration. An account manager who analyses the historical retail scan data will commonly observe that the promotion of one product can cause an effect on the baseline sales of another. A typical example is changing from the standard pack to a promoted pack when both packs remain on sale. The introduction of the promoted pack, which may contain 10% extra product, will inevitably cannibalise the base rate of sales of the standard pack. The extent to which this cannibalisation occurs is difficult to measure without sophisticated statistical analysis integrated into the promotion planning environment. Yet it is vital information for the account manager and should be easily interpreted at the time of planning the promotion.

Let’s look at the problem. We’ll use the familiar sample of baked beans to illustrate this effect. In our example, the standard pack of baked beans is a 375g can and its normal rate of sale through our sample retailer is 400 cases per week. Periodically we promote a 450g can for the same price as our 375g SKU. When we do this the sales of the 450g SKU is increased by 200% above the normal level and the 375g SKU’s sales dropped to 50% of the normal sales. If the normal retail price of the 375g unit uses $0.89 and the normal retail price for the 450g is $0.99, were we better off by promoting our 450g unit at $0.89 or should we choose another strategy?

Read more about “Product Inter-relationships – Cannibalisation” by downloading the complete whitepaper

Choosing between Promax® and SAP® CRM

This paper talks to the issues that are commonly raised in those businesses that have SAP as the core business system and addresses many of the key points that influence a decision to use the functionality of Promax PX versus an alternative of SAP CRM.

Trade promotion management is undergoing profound change and CPG manufacturers are looking for;

• a robust analytical foundation,
• integrated with transactional functionality,
• to design more profitable promotions and
• execute these promotions more intelligently with retail trading partners.

Promax PX Software

Promax PX is a specialist trade promotions planning and optimisation software application. It has been developed over 20 years through the interaction with a broad spectrum of companies in the Consumer Packaged Goods (CPG) sector and incorporates the requirements and learning of these companies for a comprehensive TPM solution.

Promax is most commonly implemented as a “best of breed” solution in conjunction with enterprise systems. Promax customers using SAP as their enterprise system represent the most common combination. Promax has extensive experience in configuring integration with SAP.

Promax PX is not a CRM package. The only commonality between CRM and Promax PX is the need to have customers and products, beyond this the fundamental design of the system is totally different.

Promax PX focuses on the need to TRACK, PREDICT and OPTIMISE the processes around deals offered by CPG companies when planning, negotiating and implementing trade promotions.

Read more about “Choosing between Promax and SAP CRM” by downloading the complete whitepaper

People/Process/Systems

The Promax solution is based on a philosophy founded on People, Process and Systems and we believe that the right solution is a combination of all three, not just software.

Delivering long-term high quality business outcomes for our customers is Promax’s fundamental goal. We believe in delivering and supporting a complete Trade Promotion Management, Trade Promotion Optimization and Volume Planning solution – a highly intelligent solution that solves real business problems. Our objective is to be the industry thought-leader, offering a world-class solution not limited by customer diversity or geographical boundaries.

Promax strives to enhance our client’s software investment to maintain their competitive advantage, through; Ongoing commitment to product development and innovation Research and exploration of industry trends Maintain software currency with the evolving business environment Listen and respond with real enhancements Continually improve product quality and stability

Content, process and collaboration management is a platform for organisational change. As with any organisational change, it must be managed wisely and carefully. It will affect the way your people work. And while these effects may not be revolutionary, the success of your project, and ultimately the return delivered to your organisation, is dependent on how well this change is managed.

Our implementation methodology has been proven to deliver projects in an effective and efficient manner. We have a highly experienced and qualified team of Consultants who will facilitate an efficient outcome at each stage of the project. Many of our consultants have extensive hands-on FMCG industry experience, so they understand and appreciate the complexities of TPM and the key stakeholders within your business that are impacted by these activities. From business analysis, to technical architecture, from project management to user training and customer support; our team of experts ensure your solution is embraced by your users and delivers your business outcomes.

It’s all about collaboration, our people working with your people.

Read more about the Promax approach to Implementation by downloading the complete White Paper “Promax Implementation Overview”.