Are your trade promotions PLACED correctly?

 

Have you been wondering as to Why your sales promotions are not delivering the planned lift? Why do you take longer to launch new promotions while the competition is quick at it? Why are your channel partners generally unhappy with the trade promotions launched and exhibit a lack trust in claims settlement? 

 

In case you have realised any of the above as real issues, its time you look at revamping the trade promotions function at your organisation.

 

     Some of the common challenges that may lead to the above issues are:

 

·       Inadequate process and technology enablement to design promotions at the lowest granularity of geography, product hierarchy and channel hierarchy.

·       Inability to collaborate with the channel partners effectively (distributors and retailers) for planning trade promotions bottoms up.

·       Inability to measure promotions efficacy accurately and identify levers for trade optimization for the next cycle .

·       Asynchronous promotion activities at regional and corporate level.

·       Poor execution of trade promotions at various levels of the organisations including field sales force , logistics and channel partners.

·       Delayed and inaccurate claims settlement blocking channel partners’ working capital.

 

To address these challenges IBM proposes a comprehensive trade promotion framework across trade promotion management, post event analyses and optimization

 

    ©2022 IBM Corporation | IBM Consulting 

A typical CPG organisation’s spend on trade promotions range close to 12~18% of the gross revenue . This makes the performance of trade promotion business function a critical contributor to both top line and the bottom line for the organisation

 

Addressing the abovementioned challenges have the potential to show immediate and long term benefits in the form of :

 

a.     Increase in the average lift achieved from each type of promotion.

b.     A clear view of performance and gaps to enable design the most optimised trade promotions in each subsequent cycle. 

c.     Ability to defines schemes with complete flexibility and a superior in market execution.

d.     Enable collaboration across all stakeholders for planning trade promotions.

e.     Maximise benefit to consumers & channel partners and fostering a greater trust of channel partners towards the principal organisation.

 

IBM Trade promotions management framework enables organisations realise the maximum potential of their trade promotions spend through a comprehensive integrated approach addressing all aspects of the operating model, people, process and technology.

 

 

 

 

Rajesh Bhambani                                 Associate Partner - Distribution Sector                       IBM Consulting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

And the Store Next Door – Wins!

  

As the second wave of Covid 19 receded, more than ten million Kirana stores of our country yet again re-enforced the fact they are indeed the lifeline for the Indian CPG industry. Although the profitability of general trade channel is lately dented due to rapid digitization of retail, the Kirana stores however were quick to adapt to the changing business environment and helped sustain the supply chain and distribution for the industry during the most testing times of the pandemic. 

 

1.     Adaption of Digital Sourcing by Kirana Stores

 

The CPG industry have always laid a significant emphasis on distribution through facilitating distributors with sophisticated distributor management systems, sales force automation and tools enabling the distributor sales force with enhanced market coverage. However, during the pandemic the beat/route coverage of the distributor salesperson got complemented with alternate channels like tele ordering and retailer ordering applications. Hindustan Unilever Limited (HUL) ‘Shikhar’ and ITC “Channel Kart” applications enabled the retail outlets to seamlessly place orders and make payments. Besides the retailer apps, tele-ordering channels were also established as efficient alternate secondary sales channel.

 

Industry Considerations: 

·       The fact that a Kirana owner has to transact on multiple retailer applications (provided by every CPG organization) may not be sustainable on a long term. A common unified ordering platform for adopted by all major industry players could be a future in sight for our industry.

·       Alternate secondary sales channel like Tele-ordering to be strengthened and operationalized to co-exist with the traditional permanent journey plans (PJP) of the distributor salesmen.

 

2.     Hyperlocal Delivery Model facilitated by Kirana Stores

 

While the onset of lockdown did not impact the overall demand for consumer goods what remained daunting was making them available to the consumers in a highly constrained logistics environment. The deeply penetrated Kirana stores acted as fulfillment partners for large format retail outlets and online retailers like “Bigbasket , Grofers etc. thus facilitating a hyperlocal distribution network. Organizations like Unilever with deep presence and investments in the General Trade Channel sailed through the pandemic challenges far smoothly as compared to organizations less penetrated, clearly demonstrating the might of the local kirana store. Additionally, investments on programs like Unilever’s Shakti Amma for rural outreach further helped organizations sustain business during the pandemic.

 

Industry Considerations

·       Sustained use of hyperlocal delivery model developed in collaboration with general trade channel.

·       With over 85% of CPG share with the traditional trade channel, investments in increasing the general trade footprint shall continue to remain a strategic effort for the Indian CPG players.

 

3.     Kirana stores adapted to an e-commerce service model for their customers.

 

The orders which always arrived on a “Parchi” (handwritten list of items) simply got replaced with a WhatsApp/ SMS message followed by a phone call, payments received through UPI platforms (PayTM , PhonePe etc.) and door step deliveries executed by storekeeper’s cyclists in their respective catchment areas was almost a seamless transition to an efficient e-commerce model within no time. The transition was effortless as as most components of this model were in practice already- home deliveries to the customers, credit being extended, items returned unquestioned were practices business as usual even in pre-pandemic times. 

 

Industry Considerations

·       Enable the retailers through trainings for use of digital interactions and payments platforms 

·      Focused trade promotions enabling small retail outlets in general trade channel.

Considering Connected Cars

Increasing customer need for connectivity is well recognized by the Indian auto industry. A Connected Car therefore has become a key experience factor that has to be delivered to the customer along with the product. Indian auto OEMs intending to pursue this inevitable industry trend, however are confronted with some basic contemplation.

1.      Is there a Business Case to this investment?

It is hard to quantify the magnitude of direct/indirect benefits from a connected cars initiative and formulate a solid business case for this investment. There is however enough opportunity for auto OEMs to monetize the data received from connected cars. Enhanced service revenue through malfunction detection & service reminders to the customers, cost savings by capturing vehicle performance as input to warranty and R&D teams and potential sales push by offering an enhanced customer experience with a whole range of connected cars functionality are just a few examples that could drive value for the auto OEMs.

As custodians of the car probe data the OEMs also have opportunity to monetize it by sharing anonymized data with partners like map service provider who could possibly enhance their live traffic navigation service, mobile network operators to help them spot issues with their network and other third parties like traffic police who can leverage this data to improve traffic management.

2.      Is there a matured partner ecosystem which can build and run a connected cars service?

Connected cars solution typically encompasses a relatively large ecosystem of partners. The IOT (internet of things) platform provider, telematics device manufacturer, map services provider, mobile network operator and the overall system integrator (to develop customer facing applications and integration with enterprise systems) are key players of a connected cars solution ecosystem. Dependence on multiple partners with no single one offering end to end solution capability increases complexity for the auto OEMs.

Auto OEM’s are progressively engaging with single partner who bring with them relevant implementation and run experience of a connected cars service. Large system integrators offering a reliable inhouse IOT platform, and who can partner with other solution providers to offer an end to end solution are increasingly becoming a choice as a single solution implementation and partner.

3.      Is there enough consumer readiness to adapt and use the connected cars solution?

A connected car offering brings a whole gamut of features including advanced navigation aid using weather and traffic data, remote vehicle controls, emergency services in case of breakdown and crash and a whole set of alerts for theft, tow away, overspeed, security etc. Institutions and fleet owners use driving behavior data for monitoring and check the drivers driving patterns.

Maximizing the solution adaption and its usage will be the key to the success of a connected cars program.  The endeavor of the OEM’s should be to scale up the usage by continuously offering  new connected cars features offering safety, security and convenience to the customer.

Cost recovery from customer for the connected cars service, which currently is the key direct revenue source will increasingly diminish. Data collection and its monetization through enhanced usage of the solution will take priority over charging the customer for the services.

4.      Is there an adequate Infrastructure to support advanced connected cars features and enable the ecosystem to reap its benefits?  

The envisaged benefits of the future connected car can be reaped with adequate vehicle to infrastructure interaction (V2I). Government initiatives to integrate highway toll gates, electronic road pricing, charging stations and emergency services will be a true manifestation of the benefits from connected vehicles.

The auto industry is also seeking greater government support for instance availability of radio frequency channels for v2V and V2I communications for next generation connected cars and autonomous cars using Advanced Driver Assistance System (ADAS) to function.

Conclusion: Key considerations for your connected cars initiative

a.      Data monetization opportunities will take precedence over direct cost recovery from customers for connected cars service. Key is to achieve scale of solution usage and maximize data accumulation to reap benefits from it.

b.      Organizations offering proven technology platforms with an experience to implement and run such initiatives and can partner with other solution providers to offer an overall solution will be partner of choice to implement and run connected cars service for auto OEMs.

c.      OEMS will have to consciously work towards increasing the solution adaption and usage by the customers through introducing new features offering safety, security and comfort.

d.      Auto industry has to be future ready by keeping an outlook on the next level of ADAS capability for connected cars and the internal and external capabilities needed for it.

Collaborating better with channel partners- A perspective on Distributor Management Systems (DMS) in Indian CPG industry

Collaborating better with channel partners

A perspective on Distributor Management Systems (DMS) in Indian CPG industry
 

Rajesh Bhambani (Managing Consultant – IBM Global Business Services) - March 2016

 

1.      Abstract

The Indian consumer packaged goods (CPG) industry is faced with an ever increasing pressure to achieve greater agility in serving the market. In order to maintain this competitive edge, organizations have augmented their focus to improve collaboration with channel partners as part of their go-to market strategy. An effective Distributor Management System (DMS) is a critical pre-requisite to meet this objective .Traditionally DMS were meant for distributors to undertake basic transactions like billing and collection. However, the industry has moved towards advanced solutions that enable business with; increased market visibility to drive supply chain efficiencies and greater sales force automation to improve sales execution.

 

Fig 1. Expectations from a modern DMS

 

While upgrading the existing DMS to achieve advanced functionality is a clear direction that is taken by most CPG organizations, whether to move to an online DMS (a centralized architecture) which drives greater business benefits or to retain the exiting offline DMS (a distributed architecture) is a thought with which many organizations are still grappling with. Despite its benefits, the tentativeness to move to an online solution is driven primarily by the apprehension of not having a reliable internet connectivity throughout the country, which can ensure distributor operations to run online without any risk of business disruption.  

This paper endeavors to present a perspective on the various architecture options for a distributor management system (DMS) and associated pros and cons for each of these options.

                                                                                                                                                                                                                     Fig 2. Offline DMS Architecture

2.      DMS architecture options

DMS architecture can be decentralized or distributed which works in offline mode or centralized which works in online mode.

 

1. a. Decentralized architecture (offline DMS): Traditionally, DMS deployment in CPG        industry has been in a decentralized architecture. A decentralized architecture or an offline architecture has three major application components.
   • Central console; hosted centrally and is integrated with other enterprise applications. It is used to create master data specific to the distributor and manage master data received from other systems. It also acts as a conduit for sending transactions like primary sales, goods in transit and credit notes to distributor application & receiving/ assimilating distributor billing, claims and other transaction data
      
   • Distributor application, hosted on each distributors’ local machine (a separate application instance), is used to perform transactions of billing, inventory management, beat planning, salesman management, etc. in an offline mode. The data interchange between distributor application & central console takes place when distributor application goes online (connect to internet) and syncs data. In the process of syncing, distributor application is updated with data like the schemes, primary invoices and master data like product, price, etc. The central console in turn receives the secondary sales data, claims, and other desired transaction data from the distributors. A key limitation of this architecture is the dependence of the principal organization on the distributor to get online to receive secondary sales data and to keep the distributor application updated with schemes, prices, products etc.

• Mobility Application- Hand held device (HHD): The distributor sales force carries the HHD to retail outlet to capture orders, perform collection, record returns and perform other sales and merchandising activities. The data sync between HHD and distributor application is performed typically through a wireless local area network (WLAN) at distributor premises. A key limitation of this architecture is that the salesman has to be physically present at distributor premises in order to sync the HHD data with the distributor application thereby reducing the productive time spent by the salesman in the field.

b. Centralized architecture (online DMS): Unlike the decentralized architecture, in a centralized architecture there is no need for
                              Fig 3: Online DMS Architecture

a local application to be maintained at each distributor point. The central application is a single place for all master data and all transactions are carried out by the distributor online-by logging on to the central console. In this architecture there is one single application hosted centrally, accessed by the distributor and users of the principal organization. The distributor performs order execution and other transactions by connecting to the central application through a URL using any machine from anywhere. Therefore this architecture mandates the distributor to be online to access and transact on DMS and therefore need a reliable internet connectivity at all times. The HHD application syncs directly with the centralized DMS to receive master data, schemes, beat plan, targets etc. and in turn updates the central application with orders, collection and other transactions. The sync between the HHD and the central application is done remotely through mobile internet connectivity. A key limitation to this architecture is need to have a reliable and continuous internet connectivity to carry out distributor operations.

Online Vs. Offline Architecture    

Offline DMS	Online DMS
§  Business operations can continue without being connected to central console, hence: ü  No risk of business disruption due to internet outages. ü  No dependence on internet connectivity for the distributor to carry out core business transactions. ü  No performance issues due to poor/weak internet connectivity	§  Real time and accurate  visibility of distributor stocks and secondary sales §  Improved sales force efficiency:   ü  Salesforce need not visit distributor premises for HHD data sync. ü  Enhanced HHD assistance through real time visibility to inventory, target achievements. §  No issues occurring due to lag in applying schemes, price revisions etc. to the market §  Improved business monitoring through an online beat tracking and payment collection reconciliation. §  Distributor need not maintain local data base and application §  Easy to maintain and quick roll out of business changes.
§  Lesser visibility of in market stock and inventory §  Reduced sales force efficiency. §  Latency in master and transaction between central console and distributor. §  Cumbersome maintenance  and greater time required to rollout business changes	§  Dependence on a continuous and reliable internet connectivity to carry our distributor operations §  Business disruption in case of internet outages. §  Possible application performance issues in case of weak internet bandwidth.

 c. Partially centralized architecture (partially online DMS)    

                       Figure 4: Partially Centralized Architecture

A partially centralised architecture have a three tier architecture like an offline DMS. The distributor application in an offline application which syncs with the central console when connected through internet. However unlike the offline mode in this case, the HHD syncs with the central console directly over the air (remotely) like in an online system. There is no data sync between the HHD and the distributor application directly. This means that the distributor has to necessarily sync. once a day to get the sales orders (in order to perform billing) from the central console to the distributor application to perform the billing for the day, and hence in the process it sends and receives all other data to keep both systems updated. After the one time data sync the distributor continues to perform billing and other transactions locally in the offline distributor application- without being on-line.

A partially centralised architecture is a smarter way of achieving many a benefits of an online system without needing a continuous and reliable internet connectivity. Although this architecture compel the distributor to sync data at least once a day, however it reduces the risk of business disruption as business transactions can be undertaken offline.

 

3.      Conclusion

Although the benefits of a completely online system are clearly recognised, the apprehension of not having a reliable internet connectivity across the nation, have left the organisations grappling with the decision of whether to go for a completely online DMS or to retain the existing offline solution.

A few CPG organisations however, have already acted as first movers and have successfully deployed a completely online DMS and have been able to reap its benefits to gain a competitive advantage in the marketplace. Yet, there is another set of organisations who are upgrading to advanced functionality but are choosing to retain offline architecture as they do not want to take any chance that may potentially lead to a business disruption.

There are also thoughts around an architecture, which can be termed as a hybrid DMS solution. This means to have a DMS solution in which, for the same organisation, a set distributor work in an online mode (locations where a reliable internet connectivity can be ensured) and the rest of the distributors can continue work in an offline. This kind of an arrangement besides being technically too complex to achieve and maintain, the fact that there is a choice provided to a set of distributors to remain offline defeats the very purpose of having an online solution.

While the debate of an on-line vs. an offline DMS continues, the future trend is clearly pointing towards moving to a completely on-line (centralized) architecture. This is also supported by the fact that the internet penetration in remote locations of India is rapidly increasing. Further, smart application designs make them light enough to be performing well even on low bandwidth internet connections (like a 2G /3G data card) thus reducing the need to necessarily have a high speed broadband connectivity. Keeping these factors into consideration it is evident that the deterrents for moving on to an online system are fast diminishing.  As a way forward organizations should look at means/alternatives to manage operations for locations where reliable internet connectivity could be a challenge, rather than choosing to keep the entire distributor function offline.