Living on the Edge: How to Build Better Financial Guardrails with TPO

Topics: Finance, Management

One of the responsibilities that CPG Finance and Revenue Management Departments are tasked with is putting in place and monitoring “guardrails” to protect organizational investment and revenue generation. Historically, trade promotion is an area where putting these guardrails in place is challenging.

Why is this so challenging?

Currently, finance and revenue management executives are expected not only to report on the health of the business, but also to oversee and generate initiatives that create and sustain growth. This results in increasing pressure to set up systems to protect the investments that they make. Trade Promotion, which on average accounts for an investment greater than 20% of annual revenue,  the lack of performance visibility during analysis and planning severely limits the implementation of meaningful guardrails.  In other words, the inability to accurately  measure performance, makes it near impossible to put alerts in when performance falls outside of expected range. Similarly, there is no way to know if your plan is the best plan to meet budgetary or other constraints, while trying to maximize for revenue, profit or volume. The availability of software solutions, such as Trade Promotion Optimization, that combine analytical insight with measurable predictive performance, allows organizations to easily put in place the guardrails they need to meet corporate objectives.

Performance Guardrailspexels-photo-730662

The ability to put in guardrails during post-event analysis that will alert your team to performance discrepancies preserves your data integrity and allows you to quickly take corrective action. For example, a TPO solution should have the ability to send an alert when baseline performance falls out of a user defined threshold can help identify an anomaly or alarming trend. Furthermore, when dealing with data anomaly identification and correction, a TPO solution should preserve the accuracy of your data by aligning planned versus actual event execution to effectively analyze performance. A TPO solution should integrate POS, shipment and spending while also giving you the ability to monitor competitive and consumer marketing events. This paints the holistic picture of your trade performance. However, these guardrails are not limited to manufacturer performance, because trend analysis can also allow for identification of retail execution issues, opening a fact-based dialogue with retailers.

Planning Guardrails

The safeguards that exist as part of post-event analysis are in place, in part, to be a catalyst for more informed decision making. However, additional guardrails instituted during the planning processes can lead to optimized results aligned with organizational initiatives and business constraints. With constraint-based modeling, you can input these limitations or restrictions and view optimal metrics before running a promotion. For example, event constraints such as always or never promote together and plan constraints such as minimum volume level. With constraints in place, you can optimize your plan within budget while maximizing for revenue, profit or volume. Retailer KPIs also become visible, allowing you to identify the areas where retailers may object and how to improve execution in stores, thus fostering true collaboration and joint business planning.

A TPO solution combines these effective methods of constructing guardrails in one location, making it easier and quicker to make future decisions and see the impact of different promotional mixes. These guardrails place your company in the forefront of the competition thanks to the enhanced ability to pivot and quickly change tactics without losing time or money. Furthermore, your decisions will be more accurate and informed, making the results all the more effective and efficient.

Building guardrails for Trade Promotion is no longer time consuming and expensive, rather it is an efficient and cost-effective process that reaps incremental profit and volume from the significant trade promotion investment.

Next steps: Download Free E-Book: “Putting the O in Optimization.”


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