Common pitfalls and challenges in AI-driven Demand Forecasting in CPG
AI-driven demand forecasting, especially in the context of Consumer Packaged Goods (CPG), has gained significant importance lately. It promises to revolutionize demand forecasting by optimizing revenue predictions and enhancing decision-making processes. However, this journey has its obstacles. In this blog, we’ll explore the common pitfalls and challenges in AI-driven forecasting in CPG and discuss solutions to help navigate them effectively.
The promise of AI-Driven Demand Forecasting in CPG
AI-driven forecasting in CPG industries offers the promise of improved forecast accuracy, better inventory level management, and streamlined production processes for various products. It leverages AI algorithms to analyze vast datasets, historical sales data, consumer behavior, and external factors like market trends and economic indicators. This approach allows CPG companies to predict which products will be in demand at specific times, leading to increased efficiency and customer satisfaction.
Now, let’s delve into the common challenges and pitfalls that organizations may face when implementing AI-driven forecasting in CPG.
Data quality and availability:
AI models are data-hungry, especially when it comes to AI for demand forecasting in CPG. They feed on a variety of datasets, including historical sales data, consumer behavior, market trends, and external factors. However, data quality and availability can pose significant challenges.
- Challenge: Inconsistent, incomplete, or biased data can significantly impact the accuracy of forecasts. Flawed or limited input data can lead to inaccurate predictions, which, in turn, result in misguided business decisions.
- Solution: To overcome this challenge, CPG companies need to prioritize data quality and availability. Implementing data cleansing and ensuring diverse data sources are essential. Collaborating with data experts to curate the best datasets for AI-driven forecasting can significantly improve the accuracy of predictions.
Overfitting and model complexity:
Complex AI models can be prone to overfitting. This occurs when a model learns the “noise” in the training data rather than the actual patterns. These models perform exceptionally well on the training data but fail to generalize to unseen data. This can be a significant pitfall when using AI for demand forecasting in CPG.
- Challenge: Overfitted models might generate impressive results during testing but fail in real-world scenarios. Businesses might invest in overly complex models that do not provide meaningful insights, leading to wasted resources and time.
- Solution: Mitigating overfitting and model complexity requires striking a balance between model sophistication and real-world applicability. CPG companies should ensure their AI models are validated with real-world data to confirm their utility.
Changing market dynamics and external factors:
In CPG, markets are influenced by numerous external factors such as economic changes, geopolitical events, natural disasters, or sudden shifts in consumer behavior. AI models may struggle to adapt swiftly to these dynamic influences, and this becomes a critical challenge in AI demand forecasting for CPG.
- Challenge: AI models trained on historical data may not accurately predict future demand during unprecedented events. Sudden market shifts can render pre-trained models obsolete, requiring constant adaptation and retraining to maintain accuracy.
- Solution: While AI can’t predict black swan events, it can adapt. Implement mechanisms that enable AI models to continually learn from new data in the context of CPG. Combining AI-driven predictions with human intuition, such as adjusting when new information emerges, looking at outliers, and operating on an exception-based model, can create a dynamic forecasting system capable of responding to the changing landscape.
The black box syndrome:
One of the greatest challenges from a user perspective is what some refer to as “black box syndrome.” AI algorithms, especially intricate ones, can be challenging for non-technical users to fully understand. The fear of making decisions based on a system they don’t comprehend is a significant hurdle for CPG professionals using AI for demand forecasting.
- Challenge: Users may worry about the lack of transparency in AI models. They want to know how the system arrived at a particular prediction and whether it’s reliable.
- Solution: Addressing this challenge involves offering user-friendly interfaces and clear explanations of the measures in place to ensure the model’s reliability, and people’s understanding of the outcomes. Conducting training workshops to empower users with basic knowledge can also be beneficial. Demystifying the “black box” is not just about explaining AI concepts but, more importantly, explaining the metrics and processes that the software employs, making AI insights accessible to alleviate these concerns.
Loss of human control:
There’s a genuine fear that AI might lead to a loss of human control and intuition in decision-making processes. This challenge arises from concerns about becoming overly reliant on AI systems, especially in CPG demand forecasting.
- Challenge: Users may resist AI-based solutions, fearing that they will be replaced by AI or that their expertise will become obsolete.
- Solution: To counter this challenge, it’s crucial to emphasize that AI is simply a tool to enhance decision-making, not replace it, particularly in CPG demand forecasting. Encourage users to interpret AI-driven insights alongside their domain expertise to ensure a balanced approach. Human intuition and AI-driven predictions can complement each other effectively.
Resistance to change:
Change can be challenging, especially when established methods have been in place for a long time. Users may resist adopting AI-based solutions, even when they promise substantial improvements in CPG demand forecasting.
- Challenge: Resistance to change can hinder the adoption of AI-driven forecasting in CPG.
- Solution: Mitigate this challenge by implementing change management initiatives, user education, and highlighting the benefits of AI-driven forecasting in CPG. Involving users in the transition process and addressing their concerns can foster a positive attitude toward change.
AI-driven forecasting in the CPG industry has the potential to reshape the landscape by enhancing personalized product assortments, optimizing inventory levels, and streamlining production processes. However, it’s not without its challenges. Pitfalls related to data, model complexity, external factors, user understanding, and change management can complicate the adoption of AI for demand forecasting in CPG.
With the right strategies and solutions, CPG companies can navigate these challenges effectively and unlock the true potential of AI in forecasting. By leveraging Visualfabriq’s software, you can overcome the common pitfalls and challenges associated with AI-driven forecasting. Visualfabriq empowers your team to make data-driven decisions, resulting in optimized inventory management, improved customer satisfaction, and, most importantly, increased revenue.
Take your first step toward AI-driven demand forecasting with Visualfabriq today. Book a demo now and learn how our AI-enhanced solution can revolutionize your CPG forecasting.
Mastering end-of-year promotions in the CPG industry
We’re halfway through the fourth quarter of 2023, and the first signs of the upcoming holidays are already popping up around us, especially in retail. For sales teams within consumer-packaged goods (CPG) manufacturers this means some of the most important promotions of the year are coming up.
End-of-year promotions are critical to a CPG company’s success. They serve two primary purposes: to capitalize on holiday splurges; and to close any gaps between sales and targets. The success of these promotions depends on their timing and execution. In this blog, we will explore the strategic planning and execution of these promotions to maximize your company’s impact and bottom line.
Planning holiday end-of-year promotions
Timing is Everything:
The CPG industry is highly competitive, and in the holiday season, being the first to market can make all the difference. Holiday promotions, especially those tied to specific occasions like Christmas, can be remarkably effective. If your product is associated with Christmas traditions, for example, it’s likely to sell anyway. However, the goal is to encourage consumers to choose your brand over others or to buy more of your product because of the promotion.
The key objectives of holiday end-of-year promotions are capturing a substantial market share, fostering brand loyalty, and maximizing sales without breaking the bank. After all, you don’t want to overspend when customers are already inclined to buy.
Scenarios and Mechanisms:
To plan successful holiday promotions, you need to explore various scenarios and mechanisms. Consider different strategies to ascertain the most effective approach for your brand or product. This could involve discounts, bundles, or limited-time offerings. Understanding your market and consumer behavior is crucial.
Closing gaps through promotions
In cases where your business isn’t meeting its yearly targets, late-year promotions can be a game-changer. Ideally, when initially setting up a strategy, promotions are often planned from January to October, giving you time to accommodate extra volume in November or December. However, when considering gap closure promotions, a CPG needs to understand what such promotions will, or need to, contribute. Thus, organizations depend on reliable predictions and well-thought-out scenarios.
You need to understand precisely where your business stands and how promotions will close any deficit. Whether it’s volume or value, strategic planning and execution can help you bridge these gaps.
Leveraging Retailer Relationships
Alignment with retailers:
During the regular promotional calendar from January to October, alignment with retailers can be relatively straightforward: the promotions are usually part of an overarching collaboration structure. But late-year promotions, like those in November, are probably not unique to your organization. This means that, to secure a promotion slot at a retailer, you must demonstrate the value you are adding to their business.
Retailer contribution and technology:
Contribution to the retailer’s margin and market share plays a significant role in end-of-year promotions. Using software designed for this purpose can help you provide the retailer with a clear picture of the benefits they’ll gain from supporting your promotions. This collaboration can be mutually beneficial.
Budgeting and cost management
Depending on the goal of the promotion, preventing losses may be important. This requires a deep dive into budgeting and cost management. In other cases, a calculated loss might be expected or accepted. For example, the main purpose may be to push as much volume into the market as possible to block your competitor from gaining share. Whatever the main commercial driver behind the promotion is, it is always important to ensure that your promotions are delivering their goal and you’re not spending more than necessary to achieve your goals.
Optimization and ROI:
Ensuring that your promotional spend is used both effectively and efficiently is a critical aspect of end-of-year promotions. By closely monitoring the performance of your promotions and tracking the Return on Investment (ROI), you can make data-driven adjustments to maximize the impact of your holiday campaigns. This approach not only helps in preventing unnecessary overspending but also fosters a continuous cycle of improvement. Accurate ROI measurement provides insights into the success of your holiday promotions, allowing you to make informed decisions and allocate resources strategically, ultimately contributing to greater profitability in the highly competitive CPG industry.
Empowering your end-of-year promotions with Visualfabriq
Visualfabriq Trade Promotion Master is designed to streamline, optimize, and maximize the effectiveness of your promotional strategies. Here’s how it can empower your holiday promotions:
- Data-driven decision-making: Visualfabriq Trade Promotion software provides a wealth of analytics, automatically combining all your relevant data sources. It allows you to gain deep insights into customer behavior, market trends, and the impact of past promotions. Leveraging this data, you can make informed decisions on which products to promote, when to launch the promotions, and what the ideal pricing strategy should be.
- Scenario Planning: The software enables you to create and test various promotion scenarios. This is particularly valuable when planning holiday promotions, where the margin for error is minimal. With Visualfabriq TPM, you can simulate different promotional strategies, assess their potential impact, and select the most effective approach to meet your goals.
- Retailer Collaboration: Late-year promotions often rely on strong retailer collaboration. Visualfabriq Trade Promotion Master offers a platform for effective communication and alignment with retailers. As the software is capable of combining all relevant data sources provided by customers, it provides you with invaluable insights that allow you to transparently share the contribution of your promotions to the retailer. You can present a clear and compelling case for why they should support your end-of-year promotions, highlighting the mutual benefits. This collaboration is crucial in securing retailer buy-in for your strategies. Additionally, with just one click, you can conveniently download a proposal in any format requested by the retailer, streamlining the communication and approval process.
- Optimized Budget Allocation: To prevent overspending, Visualfabriq TPM assists in budgeting and allocating resources efficiently. You can set budgets for each promotion, track expenses in real-time, and ensure that your holiday promotions remain cost-effective.
- Performance Tracking: Monitoring and measuring the performance of your promotions is essential. Visualfabriq Trade Promotion Management software provides the tools to track the Return on Investment (ROI) for each promotion. This helps you assess the success of your holiday promotions and make necessary adjustments for the future.
- Flexibility and Agility: In a dynamic CPG market, you may need to adapt your holiday promotions to changing circumstances. Visualfabriq software offers the flexibility to modify your promotions in real-time based on emerging trends or market conditions, ensuring your strategies remain relevant and competitive.
End-of-year promotions in the CPG industry are a dynamic and vital component of any company’s strategy. The timing, execution, and retailer collaboration are key. Successful end-of-year promotions require strategic planning, reliable predictions, and a clear understanding of gaps and opportunities.
To stay ahead of the competition and make the most of your end-of-year promotions, it’s essential to start planning well in advance. In a competitive industry like CPG, your ability to navigate the end-of-year promotions landscape can make a significant impact on your brand’s success.
For a deeper understanding of trade promotion management and to explore powerful software solutions, learn more about Visualfabriq Trade Promotion Master. Book a demo or download our brochure to discover how this tool can enhance your end-of-year promotion strategies and drive success in the CPG industry.
The five levers to boost trade promotion effectiveness
Measuring and managing your trade spend is one thing. Measuring your trade promotion effectiveness is a far more complex undertaking.
True promotion management means moving beyond just tweaking whatever you think worked last year. It means the ability to pull together meaningful data, both internal and external, spanning the entire product range, and the ability to analyze that data, gaining and sharing insights.
But gaining an insight into trade promotion effectiveness and leveraging that insight for the future is even more challenging.
Put simply, trade promotion effectiveness is the extra volume and/or revenue and profits a promotion delivers. That and/or alone indicates how complex it is to measure. And that’s before we consider the range of tools a CPG can deploy as part of their trade promotion strategy, from deals and discounts, rebates, special bundles, and more.
Account managers need to grasp what they’re spending and investing, they need to define measurable objectives, and they need to be able to measure progress and results.
Afterall, even a promotion that doesn’t return a profit can still serve a purpose, if the objective is taking market share or establishing a new brand.
Legacy tooling, limited data resources, and largely manual processes, might have been enough to manage this in the past. However, an increasingly volatile market and rapidly improving technology has changed the context dramatically.
Nevertheless, the fundamental principles underpinning trade promotion effectiveness – what we might call the key levers – remain the same. This article will discuss what they are, and how technology can allow you to exploit them far more effectively.
Improve Trade Promotion Effectiveness
So, what are the five key levers? And how exactly do they interact?
Data cleanliness and management
Trade promotions need to be planned and optimized, and they need to deliver measurable results. This means data, and data management, underpin the entire trade promotion lifecycle.
From the outset, account managers need reliable data covering previous activity, to establish a baseline, and to measure progress and results against it. Sources can include the manufacturer’s own data, from an ERP system for example, but also, potentially from other functional teams in the organization. Third-party data and syndicated data also play an important role, particularly when it comes to measuring sell-out or consumption.
Pulling this together manually would be a tortuous process, particularly if data is in multiple, incompatible formats. Data can become trapped in silos, particularly if individual teams are using bespoke tools or even spreadsheets.
But if trade promotion professionals can pull clean data from multiple sources, without manual intervention, things look very different. They can construct more sophisticated models, free up time to analyze the outliers, evolve and test innovative approaches, and optimize their plans to become more effective.
Accurate Volume Planning
How can you understand how effective a promotion is, without a good idea what would have happened otherwise? This applies whether the objective is to generate profit, increase revenue, or drive up volume.
Whatever the objective is, achieving it will require the appropriate level of stock on hand, at the right time. Stockouts will lead to disappointed customers and partners and wasted opportunities. Overstocking will undermine profitability.
So, volume planning accuracy is critical, and having the right baseline from the outset is essential. This provides the basis for understanding previous periods, and in turn, generates the insight needed for developing new promotions, in terms of ROI and profitability. Without that reliable baseline, scenario planning becomes moot, and trade promotion effectiveness is impossible to measure.
Promotion planning and optimization
Promotion planning is a highly complex task, potentially spanning a range of multiple individual products and retail partners, over varied periods of time.
Experience is a great teacher – but it is also an expensive one. And if a big promotion misfires, a CPG might not be in a position to apply those lessons in the future.
So, when it comes to establishing ROI and trade promotion effectiveness, it makes far more sense to run “what ifs” across multiple scenarios. That requires a solid baseline, the right forecasting tools, and of course, the right data. But it also requires a platform that allows CPG professionals to easily pull all these together, allowing them to optimize as they plan.
This doesn’t just mean that promotions teams can choose the scenario that suits them best. It means they can present internal stakeholders and retail partners with multiple tempting scenarios – finetuning them as negotiations progress.
Post event analysis
Working towards trade promotion effectiveness needs focus, time, and the right tooling. But CPG is an incredibly fast-moving world. As the end of a promotion or quarter looms, it’s all too easy to get swept up in planning for the next burst of activity.
This means that post event analysis can be neglected. At best this means valuable insight into key KPIs such as lift, incremental sales, and ROI, is left on the table. At worst, it means promotion professionals are at risk of repeating strategies that are not effectively contributing to, or even undermining, their business.
Post event analysis then can be a valuable lever in ratcheting up trade promotion effectiveness. But, as always, this requires accurate, up to date data. And it requires tooling that will allow CPG to pull this together, analyze it, and swiftly generate insights that be shared, discussed, and critically, applied to upcoming promotion planning.
Pricing is, of course, central to Consumer Packaged Good strategies. But economic volatility and the cost-of-living crisis means price decisions have become ever more fraught in recent years.
When setting the optimal price for a product or promotion account teams must balance the demands of senior management and finance, the needs of their retail partners, and the real-world experience and desires of consumers.
Being able to optimize pricing and model its interplay with trade promotion activities is an important lever. It can smooth the path for mutually beneficial negotiations about prices based on data, analytics, and the ability to compare multiple scenarios/what-ifs.
Two minimal requirements
Each of these levers is fundamental to improving trade promotion effectiveness. But there are two additional factors – levers in their own right – that influence them all.
Automation ties them all together. It ensures that the required data is integrated from multiple systems, smoothly and in a timely manner. Automation also means that events, insights, results and KPIs, can be shared, ensuring all teams work with a single, accurate, up-to-date view of the truth.
Likewise, integrated analytics are crucial to ensuring that data yields accurate forecasts and insights. This can make all the difference as professionals consider multiple scenarios and optimize their plans in flight. This can’t be a one-off exercise. The world is moving too quickly for that.
Integrated approach to trade promotion effectiveness
It’s clear that the ability to manipulate each of these levers contributes to improving trade promotion effectiveness. But being able to use all of them in concert takes CPG professionals’ ability to plan and optimize for trade promotion effectiveness to the next level.
To do this effectively, and repeatedly, in a highly volatile market requires a software platform that encompasses all these disciplines. Moreover, it requires the ability to smoothly ingest and integrate all the relevant data sources – both internal and external – so that every employee is working with the same, up to date information.
This platform also needs sophisticated analytics, so that baselines can be reliably calculated, paving the way for ROI and other key metrics to be analyzed, and multiple possible scenarios planned and optimized.
Visaulfabriq’s platform features cutting edge AI to produce accurate forecasts and a high-level of automation, to allow CPG professionals to make full use of all five levers when planning, optimizing, running, and analyzing their promotions.
This high degree of integration and built-in intelligence makes the end-to-end process easier to manage, achieving gains and targets in the short term.
But it also allows team members and senior managers to move to a more optimized, holistic approach in steering the company. One where investments are smarter, optimized, and feed into more sustained, predictable growth benefiting the company, its partners, and customers.
There are five key levers CPG professionals can use to maximize trade promotion effectiveness. But doing so effectively and repeatedly requires effective automation and cutting-edge analytics capabilities.
Visualfabriq’s Trade Promotion software allows CPG professionals to pull together the required data, analyze and interrogate it, and use it to plan and optimize trade promotions that will deliver on their objectives. Effectively, and repeatedly.
This enables a shift from short-term thinking with limited objectives to more holistic programs which remove toil and benefit manufacturers, retailers, and consumers.
It also allows other stakeholders to build on this, helping the entire organization move towards a more sustainable approach to growth for the long term. To see what this would look like for your company, get in touch here to arrange a demo.
Navigating the shift in Consumer Health habits: The role of forecasting and promotion management
In a world forever transformed by the COVID-19 pandemic, the consumer health industry is experiencing a seismic shift in consumer habits and expectations. The days of waiting for the doctor to prescribe something or just “riding out the flu” are gone, and individuals are increasingly taking proactive steps to manage their well-being.
This is more than just an attitude shift; it’s also driven by changing demographics. An aging population, with, on average, better health and more purchasing power than previous generations of seniors, wants to remain as healthy as possible. This change brings with it a host of new challenges and opportunities for companies in the fast-moving consumer healthcare sector.
The evolving landscape of Consumer Health
The COVID-19 pandemic was a catalyst for a significant shift in consumer behavior. A previously passive approach to healthcare has given way to a more proactive mindset, with individuals taking charge of their well-being. They no longer wait until they fall ill; they’re actively seeking preventive measures to maintain good health. This transformation has led to a surge in demand for over the counter (OTC) products.
Consumer Health companies now find themselves catering to an expanding consumer base looking for vitamins, supplements, and other self-care essentials. And if people find themselves falling ill, they are actively seeking relief. Understanding and adapting to these evolving habits is crucial for the industry’s success.
Forecasting in the post-COVID era
The ability to forecast accurately is more critical than ever. As consumers make more informed choices about their health and well-being, the demand for specific selfcare products becomes increasingly subject to various factors, including seasonal trends and health concerns. Reliable forecasting is key to managing inventory effectively.
For example, consumers today actively try to aid recovery. If a potential flu outbreak is on the horizon, consumers may start stocking up on vitamins and supplements. However, whilst flu can race through a population in just weeks, the lead time for selfcare products is often longer. Therefore, it’s crucial for companies to anticipate these surges in demand long before “cold and flu season” starts and ensure stock is readily available to ship when needed. This means that insight into consumption drivers is crucial to forecasting. It also forces manufacturers in consumer health to be ready to “stock up,” ahead of that peak in demand. Reliable forecasting and planning are vital to meeting consumer needs promptly.
Balancing promotions and sustainable growth
The shift towards preventive self-care and the growing demand for consumer health products make the market ripe for growth. However, this growth is not guaranteed and largely depends on a company’s ability to navigate the delicate balance between promotions and sustainable growth to maintain, or preferably grow, market share.
Consumer Health companies need to devise effective promotion strategies to capture and maintain market share. For instance, in the sunscreen category, timing is critical. To secure a share of the market before the summer holidays, companies must promote their products at just the right time. Being too early could lead to missed opportunities as consumers are not yet “ready” to purchase, while being too late might result in lost market share to competitors who tempted consumers to stock-up during their promotions.
The key is in crafting strategies that align with the changing consumer health habits. Consumer Health companies must continuously adapt and innovate when it comes to their promotion techniques to keep pace with consumers’ evolving preferences and needs.
Leveraging technology and TPM Solutions
In this dynamic landscape, technology becomes an invaluable ally. Trade Promotion Management (TPM) software, such as Visualfabriq, plays a pivotal role in optimizing forecasting and promotion management. Here’s how TPM solutions can assist Consumer Health businesses:
- Insight into promotion impact: TPM software provides companies with a comprehensive view of the role promotions play in their overall revenue volume. It helps distinguish between the volume that is driven by promotions and regular sales, shedding light on what portion of profit is attributable to promotions.
- Precise ROI calculation: Accurate ROI calculation for promotions is often elusive without the right tools. TPM solutions empower companies to calculate returns on investment with precision, helping them make informed decisions and achieve higher profitability.
- Post-evaluation and learning: TPM and Trade Promotion Optimization (TPO) tools streamline the post-promotion evaluation process. They automatically gather the available data to assess how promotions are performing, helping companies to extract valuable insights for future planning.
- Scenario planning: TPM software allows businesses to explore alternative scenarios for promotions. This feature provides companies with the flexibility to test various strategies and evaluate their potential impact before implementation.
The shift in consumer health habits has ignited a transformation in this industry. Companies must be agile and forward-thinking to thrive in this transformative period. By embracing accurate forecasting, adaptable promotion strategies, and Visualfabriq’s advanced Trade Promotion solutions, Consumer Health companies can not only adapt to the shift in habits but also seize the burgeoning opportunities they present.
In a world where healthcare is no longer a passive endeavor but an active pursuit, commercial teams must leverage the right tools and insights to stay ahead of the curve. Visualfabriq’s Trade Promotion Master software is a vital resource in this effort, offering the capabilities necessary to navigate the evolving consumer health landscape successfully.
To discover how Visualfabriq’s Trade Promotion Master software can empower your Consumer Health business, book a demo today or download our TPM brochure. Don’t miss the opportunity to stay at the forefront of the consumer health revolution.
Empowering revenue growth in Consumer Health with Visualfabriq
The Consumer Health industry is in the midst of a significant transformation. As the world’s healthcare landscape continues to evolve, so do the obstacles faced by these companies. In this blog, we will delve into the unique challenges confronting the Consumer Health sector and explore how Visualfabriq is revolutionizing the industry with its tailored software solutions.
Challenges in the Consumer Health industry
The Consumer Health industry is characterized by its unique pace, with products becoming relevant suddenly and losing relevance just as fast, diverse product portfolio, and complex distribution channels. To thrive in this competitive landscape, companies must address several key challenges:
1. Retail and pharmacy dynamics
The first issue that these companies encounter revolves around the different dynamics between the retail and pharmacy channels. Retail markets typically provide a wealth of sell-out data, which is crucial for understanding consumer behavior, preferences, and demand patterns. This data-rich environment allows consumer health businesses to make informed decisions around inventory management, promotions, and product offerings.
However, when it comes to the pharmacy channel, a unique set of obstacles arises. Pharmacies are often supplied by larger wholesale groups or are part of an overarching purchasing organization, leading to a significant level of data fragmentation. Unlike the relatively straightforward retail data, pharmacy data is dispersed across various intermediary layers, making it tricky for consumer health manufacturers to gain a comprehensive view of their products’ performance in this channel.
Visualfabriq bridges this gap by providing software solutions designed to harmonize retail and pharmacy data. With Visualfabriq, businesses can efficiently manage account hierarchies, thereby gaining better visibility into the intricate web of indirect customers within the pharmacy channel. This capability empowers consumer health companies to leverage data-driven insights in both retail and pharmacy, ensuring that they can tailor their strategies to maximize performance in each channel.
2. Managing promotions
Unlike other sectors where promotions might result in negative profitability, Consumer Health products often maintain healthy margins during promotional periods. This characteristic makes investments in secondary space, such as gondola ends and ladder racks, highly lucrative for retailers and suppliers alike.
The complexity of managing promotions in this industry cannot be understated. Ex-factory stock-up may be out of sync with in-store execution periods, for example. Visualfabriq recognizes the significance of this and gives Consumer Health companies the tools they need to navigate it successfully. Its software solutions offer comprehensive support for managing commercial Profit and Loss (P&L) statements, ensuring that promotions deliver the expected returns.
Visualfabriq’s AI-driven forecasting capabilities are instrumental in helping businesses optimize their promotions. By analyzing historical ex-factory and consumption data, Visualfabriq’s AI algorithms provide insights into the most effective promotion strategies. This not only streamlines decision-making but also ensures that promotions are strategically timed and placed to maximize sales and profitability.
Visualfabriq’s software also addresses the nuanced nature of promotions in the Consumer Health industry. Different product categories may require distinct approaches to promotions, and Visualfabriq’s AI-based forecasting can accommodate specific display criteria. This high level of granularity allows companies to tailor their promotional strategies to each product’s unique characteristics and market dynamics.
3. Strong seasonality
The Consumer Health industry experiences pronounced seasonality, with product demand varying significantly throughout the year. For instance, sunscreen sees a surge in demand during the summer months, while hay fever remedies are in high demand during the spring. Understanding and effectively managing this seasonality is crucial for companies to ensure product availability when consumers need it most.
Visualfabriq steps in as a reliable partner in managing these seasonality challenges. Its software provides powerful tools for baseline prediction and long-term forecasting. By analyzing historical data and seasonal patterns, companies can make accurate predictions about future demand. This enables them to plan production and inventory levels effectively, ensuring that they have the right products on hand during peak seasons while avoiding overstocking during slower periods.
4. Managing price adjustments
Price adjustments are a common occurrence in the Consumer Health industry, particularly in highly competitive categories. These adjustments can impact both revenue and profitability, making effective management critical for sustained success.
Visualfabriq’s software offers a suite of tools for addressing the challenges associated with price adjustments. Its Joint Business Planning (JBP) and scenario planning capabilities empower companies to develop and execute pricing strategies that align with market dynamics and business objectives.
One notable feature is the ability to adjust Recommended Selling Prices (RSPs) per a specific date and to generate volume predictions using delivered price elasticity coefficients. This agility enables businesses to respond promptly to market changes, competitive pressures, or shifts in consumer demand. It ensures that pricing strategies remain dynamic and adaptable, helping companies maintain profitability and competitive positioning in high-stakes categories.
Deep dive into the intricacies of these challenges:
As mentioned earlier, the relationship between product displays, promotions, and seasonality holds great significance in the Consumer Health industry. Some products, like hay fever medication or flu remedies, experience high demand at specific times of the year. Effectively managing volumes and revenue involves not only planning promotions but also sourcing and distributing displays, ensuring product availability and evaluating product performance over these critical periods.
The route to market for Consumer Health products adds another layer of complexity. The pharmacy channel brings particular challenges when it comes to transparent data. Large pharmacy chains may be very similar to retailers, ordering directly from the manufacturer and sometimes even providing sell-out data, either directly or via a third party. But smaller chains and independent stores purchase through distributors. Whilst sometimes the relationship may be one to one (one distributor only sells to one pharmacy, who only purchases from said distributor), more often than not it’s a one-to-many, many-to-one or many-to-many relationship. The “sales” that go through the underlying pharmacies are often estimates, unless sell-through data are provided, or the pharmacies provide sell-out data. And as these estimates are done irregularly and manually, this practice hinders the ability to assess the effectiveness of promotions and displays and track the product journey accurately.
So, managing promotions and displays across various pharmacy chains is complicated by the inconsistent availability of sales data. While larger chains may provide reliable EPoS data or work with a third party to supply syndicated data, mid-sized or regional pharmacy chains and independent pharmacies often lack these data structures and thus cannot provide them to Consumer Health manufacturers. This variability makes it challenging to determine the effectiveness of promotions and displays and set out an overarching strategy to determine how to invest in different types of pharmacies.
The challenge also extends to the structure of promotions. Different pharmacy chains may have varying incentives and promotional structures. For instance, some pharmacies may prefer lump-sum incentives, while others may opt for percentage discounts. Managing these distinct structures efficiently is a significant problem.
To work around the lack of consistent data, some assumptions are made when creating offline spreadsheets. For instance, assumptions are made about the distribution of sell-through in case of indirect sales through wholesale. Another case of estimation is the redemption rates of promotions. However, not having a standardized way of creating these can lead to inaccurate, inconsistent forecasts and ROI calculations, underscoring the importance of moving to more advanced, data-driven solutions.
This all means that transitioning from legacy spreadsheets to a more advanced solution is necessary to address these multifaceted challenges. The transition is motivated by the need for standardization, removal of manual processing and scenario planning, allowing stakeholders to simulate different promotion strategies and assess their impact on sales and profitability.
The Consumer Health industry is no stranger to complexity, but with the right software solutions, businesses can not only address these challenges but also thrive in this fast-paced environment. Visualfabriq’s commitment to understanding the unique needs of the sector has positioned it as a game-changer in the industry.
From harmonizing retail and pharmacy data to optimizing promotions, managing strong seasonality, and navigating price adjustments, Visualfabriq empowers Consumer Health companies to make data-driven decisions and thrive in this ever-evolving sector. As the industry continues to evolve, Visualfabriq stands as a strategic partner committed to helping businesses succeed in this fast-paced landscape.
In a world where healthcare demands are constantly evolving, Visualfabriq’s software solutions are the prescription for success in this industry. Contact us today to learn more about our Trade Promotion Management and Optimization solution and embark on a journey toward a brighter, more profitable future.
Visualfabriq Bifrost: Simplifying data integration for the CPG industry
The Consumer Packaged Goods (CPG) industry relies heavily on data to make informed decisions, optimize operations, and drive revenue growth.
However, some CPG companies, especially those relying on spreadsheets or older tools, struggle to effectively combine different types of data due to limitations in their current way of working. This challenge becomes especially evident for those companies in the CPG industry where data is anything but uniform, arriving from a multitude of sources at a rapid and relentless pace.
The key to successful revenue management is ensuring that all data sources are seamlessly aligned, and those conducting the analysis can readily recognize and trust the data at their disposal. These seemingly straightforward requirements, however, become extremely complex in practice, particularly when organizations provide commercial teams with disparate data sources they need to combine and interpret manually.
Three critical issues tend to emerge when a structural solution for data combination and analysis, captured in an automated, integrated data source, is absent:
- Individuals within the organization start to lose trust in their revenue management software. The data becomes unrecognizable, casting doubt on the integrity of the information used to guide strategic decisions.
- Distinguishing whether a problem resides within the software or the source systems of the CPG companies becomes time-consuming and resource-intensive. These diagnostic procedures consume valuable time that could be better utilized for more strategic endeavors.
- There’s a heavy dependency on IT resources, which, while essential, do not always possess the requisite business context. This reliance can lead to further inefficiencies and miscommunications.
Unveiling Bifrost: The power of data integration
At the heart of Visualfabriq’s commitment to making data integration easier for the CPG industry is Bifrost, a game-changing data integration suite. Bifrost empowers super users within CPG companies by giving them the tools and capabilities to work with data seamlessly, so the data integration process becomes less of a black box operation.
Bifrost’s core capabilities encompass the full data lifecycle, from data acquisition to analysis, and include:
- Data Gathering: Bifrost enables users to gather all the data needed for Visualfabriq’s solutions to work optimally. This step is crucial as it ensures that the right data is available for analysis and forecasting.
- Data Loading and Processing: Bifrost efficiently loads and processes data into the Visualfabriq platform, readying it for use by other modules. This process ensures that data is clean, up-to-date, and ready for analysis.
- Data Visualization: Bifrost provides clear insights into data, making it easy for users to understand where their data is and how it’s being used. This transparency is a significant step toward demystifying data integration.
- Data Export: Bifrost allows users to export data from the Visualfabriq platform, feeding data back into their automated processes. This two-way data flow ensures that insights gained from the software can be put into action effectively.
The value of Bifrost
Visualfabriq’s Bifrost brings substantial value to CPG companies, making data integration a breeze. Here’s how:
- Ease-of-Use: Bifrost simplifies data integration by offering data-transfer-as-a-service, eliminating the need for complex development work. It also streamlines file management and standardizes access to file storage, making the process more user-friendly.
- Transparency: Bifrost’s visualization capabilities remove the black box element from data integration, giving users a clear view of their data’s journey. Centralized logging establishes data lineage, ensuring data’s trustworthiness and traceability.
- Your Data, best-in-class Software: Visualfabriq understands the importance of data security and transparency. Visualfabriq software ensures that your data remains yours, and it takes the responsibility of safeguarding the data seriously. This trust enables flexibility in a rapidly changing data landscape.
- Simplified Data Management: Bifrost empowers users to take charge of their digitalization journey by rendering data comprehensible and manageable. Through intuitive visualization, it simplifies complexity, obviates the necessity for custom software development, and grants secure access to your data.
Generating insight with Bifrost
Visualfabriq doesn’t stop at simplifying data integration; its mission is to empower customers to unlock their potential through data-driven solutions. Bifrost plays a pivotal role in this journey:
- Monitoring (Trust): Bifrost provides the tools needed to monitor data integration processes, ensuring the trustworthiness of data. When users can trust their data, they can confidently make critical business decisions.
- Metrics (Knowledge): Visualfabriq’s data integration layer offers valuable metrics that provide knowledge about data quality, performance, and effectiveness. These insights are essential for continuous improvement.
- Visibility (Insights): Bifrost offers visibility into data, enabling users to gain deep insights into how their data is being utilized. These insights drive better decision-making and help uncover opportunities for revenue growth.
Visualfabriq’s Bifrost is a game-changer in the CPG industry, simplifying data integration and demystifying the complexities associated with it. By empowering super users and providing transparency throughout the data lifecycle, Bifrost enables CPG companies to optimize operations, enhance forecast reliability, and create win-win strategies that drive revenue growth. In a data-driven world, Bifrost ensures that data integration is no longer perceived as complicated but is seen as a vital tool for success in the CPG industry.
Are you looking to improve efficiency through seamless data integration and ensure easy data integration? If so, discover how Visualfabriq’s Revenue Management Software can provide the solution you need. Learn more or book a demo today to take the first step toward simplifying your data integration journey and unlocking your business’s full potential.
Empowering CPG companies with Demand Forecasting software
In the consumer-packaged goods (CPG) industry, the ability to precisely predict demand is a must, and that’s where demand forecasting software comes into play.
As consumer behaviors shift and trends change, CPG companies’ need for accuracy in volume forecasts only increases. This is because companies have less room for mistakes and are dealing with changing workforce capabilities, with limited people capable of analyzing data using methods like spreadsheets and legacy tools.
The challenge lies in the critical need for precise forecasts at the banner and product levels. Commercial teams find themselves compelled to reconsider their volume-to-value strategies and engage in commercial activities with less confidence in their forecasts. The explosion of data sources, combined with manual analysis which is prone to human biases and constrained data cleansing, further compounds the intricacies of the demand forecasting process.
The challenges of forecasting for CPG companies
One of the primary challenges facing CPG is the shift from a focus on volume-driven strategies to those centered on creating value. This requires consistent delivery of accurate forecasts, especially at the granular levels of individual sales banners and specific products. With legacy tools, creating a forecast with this level of detail is too labour intensive, leading organizations to choose to predict with less granularity. However, this compromise is not without its hurdles, as the reliability of forecasts tends to decrease.
A significant contributor to this challenge is the proliferation of data sources in today’s digital age. With data pouring in from various channels and platforms, demand forecasting has become a more intricate process. The sheer volume of data can be overwhelming, making it difficult for teams to extract meaningful insights and make accurate predictions.
Relying on manual analysis further compounds these challenges. When humans are tasked with analyzing vast datasets, they are susceptible to biases and subjectivity, which can skew the accuracy of forecasts. Additionally, the manual cleansing of data to ensure its accuracy and consistency is a labor-intensive process that is also prone to human error.
Understanding demand forecasting software: A simple approach
Demand forecasting software is a valuable ally that simplifies processes for CPG companies. It gathers data from the past, such as which products sold well and when, and combines it with current information. Then, using smart, preferably learning, algorithms, it allows companies to predict how much of a given product will be needed in the future. This results in better planning and decisions that lead to success.
Demand forecasting software provides CPG companies with a clear view of their future product demands. It takes into account both historical sales patterns and external factors that might affect demand, offering a comprehensive perspective. This holistic view empowers companies to anticipate market trends, respond to changes swiftly, and allocate resources efficiently. The software acts as a compass, guiding them through the often turbulent seas of consumer preferences and market dynamics.
How demand forecasting software helps CPG companies
- Accurate Predictions: Consumer behavior is ever-changing, and trends can shift quickly. Demand forecasting software equips companies with the ability to predict future demand even during these fluctuations. Some software can create accurate predictions at the lowest level of detail, without requiring additional effort from demand planning teams. This empowers them to make intelligent decisions based on reliable information.
- Saving Time and Effort: Demand forecasting software takes on the heavy lifting. It automatically gathers data from various sources and compiles it, sparing teams the manual drudgery of data consolidation. This allows teams to channel their efforts into more crucial tasks, such as deriving meaningful insights from the data. Sophisticated AI models play a pivotal role in translating the available data sources into baseline predictions, enhancing the accuracy and reliability of the forecasts.
- Bringing Teams Together: Instead of different teams having varying predictions, the software fosters unity by providing everyone with the same information. This not only enhances teamwork but also leads to more informed and coherent decision-making.
- Customized Information: Different teams have distinct information needs, often varying in their required level of granularity. Demand forecasting software allows tailoring of its output to meet the specific requirements of each team, ensuring that the right data, whether at a high-level overview or a more detailed granular level, is provided to the right people. This customization facilitates better decision-making across the organization.
- Smart Promotions: While it may not always be the primary function of demand forecasting software, it often complements trade promotion management (TPM) as an add-on. However, having accurate baseline forecasts from demand software to fuel TPM significantly enhances promotion optimization. This software goes beyond forecasting; it actively contributes to promotion planning by recommending the timing and extent of product promotions. This guidance empowers companies to fine-tune their sales strategies, ensuring maximum effectiveness in their promotional efforts.
- Easy Product Changes: If a company decides to alter its product lineup, the software simplifies the process. It manages the transition seamlessly, ensuring a smooth changeover with minimal confusion.
Visualfabriq: Transforming CPG demand forecasting
Visualfabriq’s Demand Forecast Master stands out in the world of demand forecasting software. By offering reliable baseline forecasts at the most detailed levels of product and account hierarchy, it empowers demand planners with actionable insights. The integration of AI models ensures that forecasts remain accurate even in the face of changing market dynamics. This is especially important in the CPG industry, where shifts in consumer behavior and trends can have a significant impact on demand.
Visualfabriq’s solution enables different teams to work together, fostering collaboration, and promoting alignment across various departments. By providing a single source of truth for demand forecasts, the potential for confusion or discrepancies is minimized, creating greater confidence in the decision-making process. This unified approach ultimately facilitates the organization’s pursuit of predictable, long-term growth in both revenue and profit, all while maximizing operational efficiency.
Unlocking the power of AI for better demand forecasting
The heart of Visualfabriq’s demand forecasting software lies in its advanced AI capabilities. Unlike legacy tools that heavily rely on manual interpretation of historical data alone, AI can take a wider range of factors into account. These can include seasonality, external events like holidays or weather changes, and even social media trends. By analyzing these variables, AI-powered demand forecasting software provides a more comprehensive and accurate prediction of future demand.
AI removes the burden of manual data analysis and calculations. This means demand planners can focus on interpreting the results and making strategic decisions based on the insights provided by the software. It’s like having a digital assistant that handles the complex number crunching, leaving room for human expertise to shine.
Visualfabriq’s demand forecasting software is a powerful tool that empowers CPG companies to navigate the complexities of predicting demand. With its user-friendly approach and AI-driven accuracy, it transforms the way teams work together and makes informed decisions. Visualfabriq’s Demand Forecast Master empowers CPG companies to achieve better results, enhancing their adaptability, efficiency, and responsiveness in a rapidly evolving market. As the CPG landscape evolves, embracing demand forecasting software is an essential step toward achieving sustainable growth and success.
Book a demo now to learn more about Visualfabriq’s Demand Forecasting solution and pave the way to predictable, long-term growth in revenue and profit with optimal efficiency.
Exploring the next level of Trade Spend Optimization
There is no shortage of pithy quotes about how we should embrace uncertainty. Just ask Bard or ChatGPT. But inspiring as they are, they really don’t help CPG firms trying to establish the best way to invest trade spend in the short term, while positioning themselves for growth in the long term.
Commercial teams who simply repeat what they think has worked in the past are liable to get left behind. They might look to establish what return on investment a given activity will deliver and use that as a basis for planning. But individual activities happen within a much larger context, not least the long-term contracts between manufacturers and retailers. And even the most carefully constructed plans can be thrown off course by factors such as political volatility or supply chain shortages. Or just an unexpected early loss at the world cup.
But if establishing the true value of trade investments with retailers and channels is a challenge, teasing out how they contribute to a long-term strategy of sustainable growth might appear impossible.
In this article we’ll show that while a focus on ROI is a starting point, there are limits to its utility. But, by moving to a more strategic total contribution model, adopting trade spend optimization, and investing in the tools to underpin this, CPGs can improve their trade spend decisions and set the stage for sustainable growth over the long term.
The ROI Challenge
If you’re a business and you’re spending up to two fifth of your revenue on something, you’d want to make sure you’re getting value from that investment. So, in the CPG world, sales teams, finance, and senior management, should all be paying attention to the 40 percent of their revenue they typically devote to trade spend.
But how exactly do you assess whether you’re getting value?
The starting point for this is return on investment. If a discount scheme with a particular retailer or market is not delivering a benefit, why would you want to throw good money after bad? But if a particular instore activity is helping you increase market share, wouldn’t a switched-on account manager want to extend that promo period? Or roll it out to more stores? It’s a compromise CPG’s can be willing to make, depending on context.
The problem is each single promotion or discount, each SKU or family of brands, exists within a broader context. Each activity is just one aspect of a broader, often long-term, contractual relationship between manufacturer and retailer. This relationship can span multiple investments and activities, which overlap, and potentially impact each other.
Looking at the ROI of one isolated promotion might not say much about progress towards fulfilling those broader, longer term contractual goals.
And the manufacturer will – or certainly should – have a broader strategy, stretching years beyond any contractual period with any single retailer. This strategy should be designed to ensure sustainable growth, both for individual brands and the company as a whole.
ROI might be a straightforward indicator when it comes to specific activities, but establishing long-term, growth-oriented ROI is more of a challenge. Profitability, ultimately, will be what underpins a brand, a group, and a company’s success and viability into the future. Taking all this into account, marginal contribution becomes a better measure of success and a sounder basis for analysis.
Moving Beyond ROI: Total Contribution Analysis
Tracking ROI might appear straightforward. An account manager will plan a particular promotion with a retailer and look to predict a specific measurable return. Invest X amount in instore activity, or offer a given discount, and expect sales or volumes to grow by Y.
But what if this is at odds with other activities from the same CPG vendor? Or if other factors undermine the offer? Perhaps it overlaps with other activities, such as mainstream marketing or advertising.
Are there other ways to measure the ongoing success or growth of a brand or line and, by implication, the effectiveness of trade spend? Market share might be a key factor for a CPG, but here, too, it’s hard to single out one investment as a driver. A strategy which increases store visits might please a retailer as well as boosting sales of a given product, but this, too, often consists of multiple, overlapping initiatives, making ROI immeasurable
When sales professionals, and senior executives, start considering all these elements they will inevitably conclude that what’s needed is a more overarching KPI to measure success. What’s needed is a
, more nuanced view of the effectiveness of trade spend, and that is marginal contribution to overall growth.
This then creates a platform for deeper analysis of a brand, retailer, or entire channels and their total contribution to growth. And it will provide a base for trade spend optimization, ensuring the total set of activities and investments contributes to the key peformance kpi’s: profit, revenue and marketshare.
This could highlight the need for more strategic decision making. It might become apparent that an individual partner, or an entire channel, is delivering high growth but comparatively low profitability. Left to run on, this could begin to undermine profitability overall. If it becomes clear that a partner is in decline and delivering low profitability, a CPG might decide to maintain or even decrease investment.
This will be a critical consideration for the sales team, but also for other functions such as demand forecasters or finance. But it’s also important information for more senior leaders looking to discern how tactical, short-term activities translate into the long-term success of the organization.
Risks in Trade Spend Optimization
Trade spend optimization goes hand in hand with a strategic approach to sustainable growth. But there are still challenges and traps that can swallow up the unwary.
One of the biggest dangers is overinvesting in promotions. When a 25 percent price reduction has apparently delivered increases volumes, there’s a temptation to repeat it more often. Or a sales specialist might even propose to increase the discount rate to 50 percent. If the focus is on volumes, this could make sense. In the short term at least. But it could eat away at baseline profits over time.
And what is the competition doing? A rival might not be as profitable to a retailer, but could compensate with more investment in shelf space, or pricing actions, that ultimately constrain your efforts. So, how do you keep tabs on what is going on in the market, and how do you respond?
Inaccurate forecasting is a constant worry. Your model might suggest investing in one retailer with the prospect of 10 percent growth, while predicting a decline at a rival. But if the opposite happens, you have potentially wasted that investment, and fractured your relationship with at least one of your retail partners.
Likewise, short-term factors – unexpected weather, a glut of products, a supply chain disruption at a rival or across an entire category – can have a significant effect on ROI or contribution. But without visibility for both of your own products, and of the market, it can be easy to be swept away by illusory success – or, indeed, what looks like failure.
A sales team might pat themselves on the back each quarter if a promotion succeeds. But what are those efforts saying about the long-term trajectory of a product line, or a partner, or an entire channel? Are they contributing to the company’s success for the future? And are they demonstrating to the retailers that they understand their challenges?
Specific, discrete actions designed to optimize your trade spend might appear perfectly logical, considered in the short term. But looked at more holistically, it can become clear that they don’t deliver the benefits you hope for and are actually undermining your business outlook.
Truly optimizing trade spend requires a holistic view of trade activities, and of the company as a whole. And that requires the right tools.
Trade Spend Optimization Software
What tools then will allow you to begin to optimize your trade spend, and move to a total contribution analysis model that delivers predictable and sustainable revenue growth?
A feel for the market is not enough. It’s hard to scale a hunch. Hand-tooled spreadsheets or customized systems suck up time and reduce collaboration.
However, modern trade spend optimization software can give a team, and an entire organization, a common platform to analyze and optimize their trade spend.
Innovative software will be able to accommodate data from across the organization, and from partners and third parties. State of the art analytics and artificial intelligence can then produce an accurate baseline over time and provide far more accurate forecasts – taking into account the anomalies and disruptions we’ve discussed.
But CPG strategy is about more than just volumes and trade promotion spend. An integrated solution should allow different teams within an organization to share both raw data and the results thereoff, providing insights and a full, volume to value, forecast. This allows account handlers to see the impact of their activities on other parts of the business, and model and optimize accordingly.
And it should allow sales leaders, finance and senior management to take a bird’s eye or long-term view, and to drill down to specifics when necessary.
Better forecasting and analytics together with the automation of manual processes means human bias is removed. But that doesn’t mean the human factor is removed altogether. Sales team members are freed up to focus on innovation and relationship building with retail partners. It’s one thing to propose a new pricing scheme or in-store promotion as part of a long-term strategy. It’s another to present a category manager or purchaser at a retailer with both a plan, and the data to support. Decision making suddenly becomes much easier, and much quicker.
A modern solution allows the organization to optimize trade spend and other activities. But it also enables more personal fulfilment for both account handler and client as they shift from separate, discrete promotions, towards collaboration, knowledge and shared goals as the drivers of future category growth.
Visualfabriq’s Trade Spend Optimization Software
Visualfabriq’s Trade Spend Master gives CPG companies the data integration, visibility, and AI-powered smarts they need to optimize their trade spend in the short to medium term and deliver sustainable growth in the long-term. Additionally, the Trade Promotion Master provides the required insights into promotional performance and uses embedded AI to optimize promotions to drive performance.
As a highly configurable, the software as a service (SaaS) gives commercial teams, and their counterparts in finance and senior executives, full visibility across their promotion, pricing and contract strategies, at both a granular and strategic level. Because they are part of Visualfabriq’s broader poffering, with an audit proof workflow, they allow the entire organization to coordinate actions for maximum efficiency and impact.
The result is that commercial professionals can optimize as they plan, meaning more impactful trade spending, and the ability to analyze the contribution of individual activities, retailers, and partners to the overall success of the company.
When it comes trade spend, considering the ROI of individual promotions or activities is just the first step in ensuring that your investments contribute to overall growth. Investments – and their results – need to be understood within the broader context of contractual relationships with retail partners, and the long-term strategic goals of the CPG. This means adopting an integrated approach to trade spend optimization and adopting a total contribution approach to brands, categories, retailers and entire channels. To see how Visualfabriq’s platform can help you optimize trade spend in the immediate term, and position you for sustainable growth long-term, book a demo today.
Holistic Enterprise Planning in Consumer packaged goods
The higher you go, the further you should be able to see. But time horizons in the consumer packaged goods industry can be highly compressed, with some functional or brand teams forced into a short term, reactive mode rather than thinking beyond next year, or even next quarter.
However, those entrusted with safeguarding the success of the company in the long term, by delivering steady and sustainable growth, must try and see years ahead.
They need to ensure the individuals and teams focused on specific tasks such as trade promotion management, forecasting or marketing all have the tools – and data – they need to do their job.
But they also need to be certain that the information coming out of those teams is accurate and reliable. And they need to understand how all those tactical activities contribute to growth and strategic development overall, both in the short term and over the longer term.
Striking that balance is the object of holistic enterprise planning (EPx) in the CPG industry. This assumes the free flow of data throughout the organization, with everyone working on the same view of the truth, and a high degree of automation enabling greater efficiency throughout the business.
In this blog we’ll examine the impediments to this approach and map out the path to true holistic enterprise planning.
The challenges addressed by holistic enterprise planning
Before senior management can think about holistic enterprise planning there are a myriad of hurdles that must be overcome. To a large extent, these are the same problems that prevent teams operating as efficiently as they can at a purely tactical level.
For example, sales, finance and demand teams are often bogged down in manual tasks. Does revenue or demand planning mean pulling data manually? Does constructing an annual operating plan (AOP) mean pouring data into hand-tooled spreadsheets?
This all shrinks the amount of time and mental bandwidth teams can apply to problem solving or innovation – and raises the specter of simple mistakes which can have catastrophic results.
This reliance on manual tasks also makes it harder to address inefficiency at multiple levels in the business whether that is in supply chain processes, cost management, or pricing strategy. And firefighting across all these areas distracts teams from making more accurate volume forecasts or strengthening relationships with customers.
Related to all of these challenges is the question of visibility. When information is manually compiled and held in siloed applications, it tends to stay there.
This paralyses process improvement, whether that’s consolidating and sharing insight and learnings from different teams or establishing meaningful monthly review meetings. Assessing trade promotion management (TPx) and Retail Execution (RetX) becomes difficult, if not impossible.
Siloed, unconnected data also means live dashboards and updated reports become difficult to achieve. This further undermines collaboration, and makes it hard for senior management to grasp what is really happening at a tactical level.
That is why having a single version of the truth is critical, with well-founded baselines, which in turn lay the groundwork for more accurate forecasts. When accurate reporting is brought into mix, CPG companies can gain a true picture of the progress or their promotions or other activities and optimize accordingly.
If this is then combined with well-founded artificial intelligence, companies can move to another level.
A journey to improve efficiency and effectiveness
So what does this journey look like?
Trade promotion management and trade promotion optimization are areas that can quicky benefit from a more joined up approach. Simply automating data collection and integration frees up professionals to focus on planning and more accurate forecasting, meaning they are better prepared for negotiations with retailers.
But the use of AI opens up the possibility of not just more accurate forecasts, but the ability to model entirely new strategies, and optimize plans right at the start of the planning and implementation process.
Potential uplifts can be better predicted, as well as ROI, both at a category level, and at a department or companywide level, thanks to standardized, fact-based calculations.
This means trade promotion teams can present their retail partners with multiple scenarios and programs, and their likely impact, making a long-term win-win approach far more viable.
And because all departments, and categories, are working on a single version of the truth, outlooks and models for the entire organization are improved.
With a view of all the relevant functions, and access to AI-led planning, senior executives can begin to drive optimization across commercial teams, taking a more strategic approach to growth.
This sets the stage for revenue growth management, where integrated data and shared insights allow companies to better balance their various functions – promotions, assortment, trade investment – and guide sustainable revenue growth from one year to the next.
The next strategic evolution – holistic enterprise planning
But the ultimate benefit from these actions comes from the ability to help top executives steer the company over the long term. That’s because it opens up the possibility of truly holistic enterprise planning, or EPx.
This is where all the work done in increasing automation, tuning workflows, and ensuring seamless integration and sharing of data and insights, really begins to pay off.
If they are sure their teams have the right tools, combined with trusted AI and machine learning algorithms, C-level executives can be confident about the actions their teams are taking – and the results they are seeing.
When the organization is working to a single source of truth, the headline dashboards the C-suite relies on become more meaningful, but also more actionable. The top line view becomes a portal from which they can drill right down to regional operations, individual promotions, or a specific retail partner. If necessary.
But they can also carry out their own modelling and optimization, taking into account not just short-term factors or uplifts, but longer-term opportunities and risks. So, instead of spending half their workday trying to figure out whether the numbers they see are really true, they can contemplate what the numbers mean in terms of future actions and directions.
This means C-level executives are better able to articulate their strategic objectives over years long timescales and to plot the steps they can take to reach them. And that benefits everyone.
By enabling CPG organizations to work with a common truth as well as cutting edge AI, Visualfabriq changes the question from “is this correct?” to “how can I make this better?”
What begins with automation and optimization of key pillars such as trade promotion and revenue forecasting, lays the groundwork for revenue generation management, and ultimately holistic enterprise planning.
To see how Visualfabriq can help your organization make this journey to a more sustainable future, get in contact today and arrange a briefing.
Visualfabriq has proudly achieved best-in-class distinctions in Enterprise Planning Integrated Business Planning (IBP) S&OP Capabilities, recognized by POI.
What is Revenue Growth Management?
Every business wants to increase revenues. But for consumer packaged goods (CPG) companies there’s a big difference between ramping up sales at all costs, and achieving sustainable, managed revenue growth that benefits the manufacturer, its retail partners, and their consumers.
CPG firms face considerable challenges in achieving sustainable top line growth. Their supply chains are long and complex. A manufacturer will have many individual brands, and these will be offered in a variety of formats and packaging, at different price points. The retail landscape is also incredibly diverse – with a range of consumers buying from convenience stores, supermarkets, and big box retailers, across multiple geographies. That’s a lot to get right.
The current economic climate makes life even more complicated. Manufacturers face rising materials and energy costs as well as supply chain disruption. Those same factors are contributing to rising inflation rippling throughout the economy. Consumers are acutely sensitive about pricing, while retailers are extremely protective of their profit margins.
This is why more and more firms are embracing a modern revenue growth management (RGM) approach. Put simply, RGM is the discipline of driving sustainable revenue growth through the methodical and holistic management of all the functions at the manufacturer’s command, including promotions, pricing, assortment, and trade investment.
In this article we will examine the benefits CPG companies, and their various teams, can reap through effective revenue growth management. We’ll also address the challenges they face in implementing RGM and highlight how an integrated platform approach can overcome these.
The benefits of Revenue Growth Management
As we’ve seen, the retail and consumer environment for CPG firms is complex. But a CPG manufacturer’s own internal landscape is incredibly diverse too. A variety of distinct functions and teams all contribute to revenue growth, from demand forecasters and marketers to sales teams and trade promotions professionals.
Each has a critical role to play, and they are often complementary. But it’s all too easy for different functions to operate as individual silos, working to different objectives, often relying on different data and tooling, and even pulling against each other.
By taking a revenue growth management approach, CPG manufacturers aim to bring different teams’ tactics and strategies together under a comprehensive commercial plan aimed at securing sustainable and profitable growth.
RGM is often conceptualized as spanning five pillars, namely: promotion management; pricing; trade spend; commercial planning; and assortment/mix optimization.
When all these functions are working together in harmony, with a common objective, and a shared version of “the truth”, it becomes easier to plan and review the impact of promotions and other activities. It is then easier to optimize them, and to spot growth opportunities in the short or longer term.
It also makes it easier to fine-tune and coordinate budgets and spending to ensure trade spend and promotions are more efficient and deliver the biggest possible impact.
And it results in improved revenue forecasting and optimization, leading to more sustainable revenue growth both in the short and long term. That doesn’t just mean hitting targets, but meeting them in a predictable way, with different functions – and their spending – operating together to deliver the maximum possible benefit.
What does each team need?
It’s easy to say that different units within a CPG manufacturer have different roles to play when implementing revenue growth management. But what does that that look like in practice? And what might be holding them back from playing their part?
Sales teams want to achieve results, and they want to build the commercial relationships that will help them achieve these. But this is about much more than building a rapport with retail partners. It’s about developing a strategy for growth
, that encompasses trade promotions, pricing optimization, and trade investments.
In the modern market, this needs to data-driven, giving execs access to a wide range of information sources, and delivering rapid actionable insights into pricing and promotion activities. They can then optimize their current programs and develop well-grounded forecasts and innovative plans for the future. To be able to do this reliably, and at speed, they need workflows that give them the approvals they need but doesn’t hold them back.
Marketing events and activations are critical to revenue growth. Creativity and innovation are part of this, but so is building and maintaining the trust of both consumers and retailers.
Marketing teams also need to have workflows that work for them, so they can gain approvals and move quickly, and track activations and campaigns over time. But they must also ensure that their activities are in sync with other teams. A creative campaign might go to waste if there is not sufficient stock in store. A campaign that is out of sync with trade promotion activity can undermine both.
This all requires precise planning, careful budgeting, and efficient procurement. So, again, accurate information is essential.
CPG is a complex and fast-moving business, and for the finance team, just keeping up is not enough. It must keep ahead of things, if the organization is going to implement revenue growth management successfully.
Producing up to date estimates and forecasts and developing analysis of investment and pricing strategy can involve a vast range of data, generated by multiple departments, potentially in different applications and formats. For finance to deliver an accurate picture to senior management, and beyond, it needs to have a grip on everything that is going on, both within the company and out in the market.
Revenue growth management can’t be a guessing game. Demand teams need to be able to create accurate baselines and statistically sound forecasts.
The onset of AI has raised the bar when it comes to modelling data, and can free up forecasters, and their colleagues, to focus on exceptions and outliers. But that assumes demand teams are working with accurate historical and up to the minute data. They must have clear insight into the activities that underpinned results in the past, and which should shape the business in the future. And they must have the right tooling to make the most of the data.
Each team needs different tools to carry out their roles, but they all rely on timely, accurate data. The IT team is central to a CPG organization’s ability to implement revenue growth management.
If tech can deliver a common underlying platform, which easily integrates data from multiple sources, they can break down silos and free individual teams from bespoke spread
How shared software enables Revenue Growth Management?
Revenue growth management holds the promise of predictable, sustainable revenue growth.
However, there are all too obvious barriers to achieving this. Each teams’ contribution and influence on the overall plan, as well as their required data and tooling will be subtly different. Often, they will evolve bespoke spreadsheets to underpin their functions.
Just getting information into legacy tools can be a challenge. Automated data integration might not be possible. Manual processes are time consuming and can mean mistakes.
When data lands in silos or standalone applications it can become stale. Teams might not have the most appropriate tools to analyze it. But worst of all, changes and insights can be locked into individual departments and not shared with the organization at large. This undermines efficiency, and the reliability of forecasts.
But by opting for Visualfabriq’s software, CPG manufacturers can give their key teams the tools and workflows they need, along with the common data to power them, in a single
Demand forecasters and sales teams alike can use cutting edge AI to analyze and model data, producing more accurate forecasts, gauging the impact of trade spend, and unlocking opportunities for innovation or growth. Marketing teams can ensure their activities are aligned with sales teams’ programs and speed up the approval process.
And RGM and finance specialists will benefit from a holistic view of the myriad of activities and programs their organization is running. This is in turn, will ensure that the drive towards sustainable growth is embedded in every fiber of the organization – and that all of these are pulling the same direction.
There’s a cultural aspect to revenue management in the CPG world. Each team needs to understand its role, and its contribution to delivering sustainable growth, as well as the importance of working with their peers and their partners in retail to achieve this.
But this will be far easier if they are all using software that supports the key processes and teams that contribute to revenue growth management. A solution that ensures they are working with and sharing common data, and can deliver insights, instead of questions, wherever you are in the organization.