Exceedra Massively problematic and over-budget SAP TPM ... PwC Prepared for Exceedra Conference A...

How global should global TPM roll-outs really be?

Peter A. Hoijtink, Strategy& - Amsterdam

Exceedra Conference

21 March 2017 Exceedra Conference

Prepared for Exceedra ConferenceStrategy& | PwC

With you today….

Executive summary

Peter leads PwC Europe’s Food and Agri Industry team

and is an experienced strategy consultant to the Food

industry

Peter has a background in the industry (Unilever and

Grolsch) and is working in the area of trade management

excellence since then

He has worked on a range of projects that include

Corporate Strategy Development, Market Assessment,

Market Entry Strategy Development, Pricing & Revenue

Management, Sales & Commercial Effectiveness and

Operating Model design

Clients that Peter has been working for include among

others, Unilever, AB Inbev, Perfetti Van Melle, Friesland

Campina, Coca-Cola and Red Bull

Peter A. Hoijtink

Consumer & Retail

Strategy& _ Amsterdam

Prepared for Exceedra ConferenceStrategy& | PwC Confidential property 2

Introduction to Strategy& TME Practice

Our perspectives on Trade Management

Approach to capability transformation

Key take aways


• Strategy& has a dedicated expert team that focuses exclusively on Trade Promotion Excellence

• Most of our TME staff have 8+ years of experience on a variety of TPE programs

• Our team is global with staff in North America, Europe, Australia and Asia

• Strategy& provides an unparalleled depth of experience and expertise

A dedicated

team with deep

experience

20+ year legacy

• Strategy& (Booz & Co) pioneered the concepts of Trade Promotion Excellence over 20 years ago …

• … and we have continually served our clients with their TME programs over the past 20 years

• Many of our early TME thought leaders are still with the firm

Capabilities from

strategy through

implementation

• Strategy& has extensive experience assisting our clients with all aspects of their TME programs

• We are the leading service provider to full range from TP Strategy capability development to technical

implementation

• Rated Best In Class Consultant by Consumer Goods Technology (CGT) Readers (Ranked #2 out of 10) - 2014

• Rated “First to Call” for Trade Promotion by AMR Research (now part of Gartner)

• “First in Customer Experience in TPM” by Consumer Goods Technology (CGT) - 2011

• Won “2007 - Customer Management Award” for TPM implementation Consumer Goods Technology (CGT)

A distinguished

track record of

results

With a 50+ team with deep expertise, we are dedicated to helping clients improve their end-to-end TME capabilities

Our TME difference

3Confidential property


Our perspective on trade management is shaped by our work with a broad range of consumer goods manufacturers…

Client examples Types of projects

1

2

3

4

Assess commercial capabilities across organization

based on internal and external best practices and

implement a capability building roadmap

Support Trade Management system selection and

implementation, focusing on usability, performance

and business alignment and support with

pilot/implementation

Optimize trade spend analytics in modern and/or

traditional trade while building both pre- and post-

event analysis capability in the organization

Develop funding framework and closed-loop

planning process to accelerate growth, enable

channel pricing alignment and support customer

planning effort

Source: Previous Strategy& project experience, Strategy& analysis


http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http://pixgood.com/heineken-logo-png.html&ei=Vwe1VPubB4r2UqiPhKAM&bvm=bv.83339334,d.d24&psig=AFQjCNFA5PQSKODn-N4Nn_3MoKNWWTa4Vg&ust=1421236421622747

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http://pixgood.com/heineken-logo-png.html&ei=Vwe1VPubB4r2UqiPhKAM&bvm=bv.83339334,d.d24&psig=AFQjCNFA5PQSKODn-N4Nn_3MoKNWWTa4Vg&ust=1421236421622747


…and complemented by our bi-annual Customer Planning & Trade Marketing Benchmarking study

Strategy&’s customer planning trade management benchmarking21 of the below manufacturers participated in the study

Good mix of F&B companies and other CPGCompanies large and small participated

by s

ec

tor

3 2 3 13 21

Food & Beverage

Personal Care

Household Care

Multipleby r

eve

nu

e

10 4 4 3 21> $30 Bn

$10-30 Bn

$5-10 Bn

$1-5 Bn

Source: Strategy& Trade Management and Customer Planning Survey 2015, Strategy& analysis






Key take aways


There is a clear burning platform for building TPM capabilities…

• Trade spend is a significant cost item that

often increases every year, driven by the

competitive retail landscape and increasing

promotion pressure

• There is lack of insights into the

effectiveness of the spend which limits

ability to optimize (ineffective)

• Managing the trade spend and promotion

calendar is cumbersome and requires

significant manual intervention (inefficient)

Need to improve TPM capabilities

Source: Previous Strategy& project experience



…however, TPM programs are difficult to get right and require investment in understanding required capabilities

Examples of Poorly-Run TPM Implementation

Company

Major Beer Mfg. &

Distributor

Leading Beverage

Company

Multinational Medical

Products Mfg.

Leading Diversified

FMCG Mfg.

Leading Household

Good Mfg.

Multinational Food &

Beverage Company

Major Consumer

Goods Company

• $14M write-off of TPM program that was substantially over budget and over a year behind schedule

• $7M overrun resulted in the selection of Strategy& to replace the original system integrator

• Poor implementation leading to a $5M write-off and a HBR; Strategy& replaced the SI;

• Global TPM program costing > $50M halted by business leader due to very poor user reception

• $105 M Siebel TPM implementation that delivered only very basic capabilities; roughly 4x the original budget

• Massively problematic and over-budget SAP TPM implementation; total cost of ~$ 80M

• $6 M write-off of problematic TPM implementation

Situation Overall Assessment

• There are two common types of implementation failure

– Failure to deliver the capabilities originally envisioned

– Major delays and budget overruns

• Two primary reason behind these failures are:

– Not investing enough time beforehand to understand the details of the specific business models and functionality needed

– Not having the right business and/or systems partner

Source: Interview of senior company executives, Previous Strategy& project experience



Building TME capabilities requires a holistic approach and is a substantial Business Transformation

• Target setting

• Funding

• Planning

• Sell in

• Execution

• Post-event

analysis and

tracking

• Predictive analytics

for merch. events

• Pricing analysis:

- EDLP pricing/

sensitivity

- Competitive price

gaps

- Channel pricing

- Regional pricing

• Development of

guidelines

• Key systems:

- TPM

- PEA

- TPO

- Retail Execution

• Enabling technical

environment:

- Data

warehousing/

architecture

- Systems

interfaces

• Roles and account-

abilities across:

- Brand

- Sales & Planning

- Revenue Mgmt.

- Field Sales

- Finance

- IT

- Demand

Planning

• Skills and training

• Aligned incentives

Embed the

“Strategic”

Processes

Install the

Analytical Engine

Deploy the

Systems

Align the

Organization

• Develop roadmap

for success

• Set improvement

targets (business

case)

• Highlight quick-wins

and reward new

behaviors

Drive Business

Transformation

1 2

4 3

5

Trade Management Framework

Source: Strategy& Analysis



A robust TPM system is the foundation on which leading/ advanced capabilities can be built…

Promotion entry

Support for all

payment /

settlement methods

Real-time

checkbook

management and

analysis

Trade funding and

budget allocation

Well-defined

approval and

spending control

processes

Post-Event

Analysis

(PEA)

Trade

Promotion

Optimization

(TPO)

Integrated

Business

Planning

Defined process for

performing post-

event analysis to

measure event-

level performance

Reporting tool that

matches syndicated

consumption / POS

data with promotion

plans and trade

events (i.e.,

facilitates ROI

calculations)

“What-if” scenario

planning with event

libraries

Analytical models

for predicting

promotion

performance

Two-way integration

with demand

planning system

Trade promotion

plans automatically

linked,

communicated, and

incorporated into

demand planning

algorithms

Customized new

item, special pack,

and club pack

forecasting

processes

Joint

Business

Planning /

Customer

Profitability

Online, interactive

plans – joint

planning with

retailers)

Focus on both

customer and

retailer profitability

Integrated planning

and execution

across all relevant

functions (e.g.,

single agreed upon

forecast )

Full-volume plan

management with

base / incremental

volume tracking

Support for monthly

forecast submission

by brand / packsize

Tracking metrics

including profit

measures

Plan / actual

progress against

performance

targets

-----------------------------

Base volume levers

Planning modes

Scenario planning

Foundational Capabilities

“Basic functions that

drive operational efficiency”

Advanced Capabilities

“Sophisticated capabilities that

drive trade spend efficiency”

Aspirational Capabilities

“Emerging capabilities that drive

superior cross-functional performance”

Trade Promotion Management (TPM)

Trade PaymentsPromotion Planning

& Sales Forecasting

Continuum of Trade Promotion Excellence (TPE) Capabilities

Advanced

Foundation



The benefits of improving TME practices are significant; typically, 1% to 2% of sales or 10% to 25% of total spend

BenefitsTypical trade spending improvement opportunityImprovement on trade spent, %

• We have run trade programs for many CPG companies ‘end-to-end’, covering all elements of trade spend and cost (including cost-to-serve)

• ROI improvements on trade spend ranges between 10% and 25%, whereas the main “buckets” of improvements are in:

– Improved effectiveness of trade spend and fund allocation for increased profitability

– Improved planning and incentives (promotions ‘optimization’, counterparts for base-driving conditions)

– Improved execution efficiency (reduction of forward buying and improved pass-through)

– Improved promotional ROI (optimizing cost/revenues for individual promotions)

– Base pricing aligned to drive brand health and positioning

25%

15%

10%

HighLow Median

Source: Previous strategy& project experience, Strategy& Analysis






Key take aways


Due to user adoption being crucial for success, TPM implementations require a business driven design approach

Approaching design via a business driven approach allows us to best address the multiple complications associated with TPM implementations and configure a solution that best meets business needs

TPM Implementation Considerations

Interaction points

Non-Standardized Processes

• Company and customer approaches to planning and funding typically are highly varied

• Lack of standardization necessitate flexibility in the system to support differences

No Comprehensive Out-of-Box Solution

• Understanding this, solution vendors have designed major TPM packages to be highly configurable

• There is no standard out-of-box solution that addresses all functional needs of the business

Multi-Stakeholder involvement

• Multiple stakeholders across various functions requires facilitation to bring perspectives into agreement or to a common understanding


1. Solution orientation of key users not always sophisticated

2. TPM is a front-end solution and in that sense needs to be tailored to Go to Market model and data availability

3. Business case is output oriented (the result of the optimisation), not process oriented (efficiency), like with ERP or planning capabilities

Trade Funding

TPM Interaction Points

Plan

Creation

Plan

Maintenance /

Forecasting

Payments

Interactions/processes are typically different by customer

Ideally approached viaBusiness Driven Design

Specifics off TPM capabilities


Successful TME capability programs progress through several phases; with substantial effort prior to implementation

Phases of a Trade Capability Transformation

1) Key Functional Areas are: 1. Master Data 2. Sales Volume Forecast, 3. Planning, 4. Payments 5. Funding;

2) For a mature market with known future vision for trade capability; Source: Strategy& Analysis

12-18 months24 weeks 8 weeks2 4 weeks 2 weeks

Phase 1 Phase 2 Phase 3


6. Build, Test,

Deploy &

Support

5. Detailed

Functional

Design

4. Program

Structuring

3. System

Selection

2. Key Design

Concepts

1. Vision

Definition

Where can we

improve our

capabilities and

drive value for the

organization?

How do we want

to evolve our

capability and

what value will

we deliver? Who will we

partner with? What exactly are

we going to do

and how will we

do it?How will it work?

Key Questions

Is it working as

planned?





Key take aways


A global TPM Capability roll out should be tailored to the different markets, GtM models and business cases

Confidential property 16

Concluding

• Many TPM implementations fail because they do not deliver the capabilities originally

envisioned and/or have major delays and budget overruns

• Each market requires different capabilities based on GtM model, maturity levels of trade

and data availability, possibility clustered via archetypes

• The Business Case of TPM is mainly build around advanced capabilities (PEA, TPO,

etc.), whereby foundational requirements is a prerequisite

• This business benefits are in essence based on “local” NPV, so TCO should also be

seen “Local”: then standardised global solutions are not always the best

This means:

• Building TPM capabilities on a global scale should take local capability requirements,

data availability and trade maturity into account as well as local “business cases”

• Working with “archetypes” could be a solution, whereby the scope of archetype specific

requirements determines the IT solution(s) selection and functionality

• This often results not in a global roll-out of one supporting solution, but in a global roll

out of capabilities, clustered by archetype, often with a blend of solutions, or a solution in

two or more versions


The combination of Strategy& and PwC can support in the full range of our clients’ trade needs

Highly focused effort to

quantify and segment the

potential benefits from

improving trade promotion

effectiveness

Program

Structuring

Systems

Diagnostic

System

Implementation(Including Our

Proprietary PEA Tool)

Funding

Program

Restructuring

Strategy Execution

Formulation of a robust, 2-3

year customer planning /

trade promotion strategy

Development of guidelines

to help customer teams

improve their trade

promotion efficiency

Focused effort to structure a

customer planning and trade

transformation program,

focused on process,

organization, analytics, and/or

system improvements

Programmatic effort to

capture trade promotion

efficiencies via improved

customer planning

Leading or supporting

implementation efforts to

upgrade out-dated and/or

ineffective trade systems

We offer our own

proprietary post-event

analysis tool: Performance

Analyzer

Assessing a client’s

current customer

planning and trade

systems, focusing on

usability, performance

and business alignment

Restructuring a client’s

trade funding program,

balancing multiple factors

Trade Strategy

“Get the

Money” (Leveraging

SWAT Teams)

Opportunity

Sizing

Guideline

Development

Range of trade related project support



Strategy Impact

www.strategyand.com

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