Kellogg Details Trade Promotion Optimization Project
Consumer goods companies are expanding their trade promotion management initiatives to include advanced analytics and optimization capabilities. However, each company seems to have its own definition of trade promotion optimization (TPO) as well as its own way of getting there. During an exclusive CGT web seminar earlier this week, Kellogg Company revealed its journey toward using advanced analytics and demand data to model promotion variables.
As the world's leading producer of cereal and a leading producer of convenience foods with brands, including Kellogg's, Keebler, Eggo, Cheez-It, Nutri-Grain, and many, many more, Kellogg's trade investments are strategic drivers of its market and competitive presence. With so many brands to manage, across multiple global regions and through a wide variety of sales channels, Kellogg Company is constantly looking for opportunities to maximize spend effectiveness by anticipating demand and predicting revenue, volume and profitability.
Here is a recap of the webinars highlights:
As the world's leading producer of cereal and a leading producer of convenience foods with brands, including Kellogg's, Keebler, Eggo, Cheez-It, Nutri-Grain, and many, many more, Kellogg's trade investments are strategic drivers of its market and competitive presence. With so many brands to manage, across multiple global regions and through a wide variety of sales channels, Kellogg Company is constantly looking for opportunities to maximize spend effectiveness by anticipating demand and predicting revenue, volume and profitability.
Here is a recap of the webinars highlights:
-- Simon Ellis, practice director, Supply Chain Strategies with IDC Manufacturing Insights, set the stage by reviewing new research on trade promotion optimization goals, progress, assessments and impediments in the consumer goods industry. “Although some companies are still focused on pure cost reduction, the vast majority of companies recognize the importance of getting dollars to work more effectively at the end of the day,” he reported. “And 70 percent of companies are making moderate progress toward those goals. Another 10 percent say they are making significant progress. This suggests that TPM and TPO are hot this year.” For more about this research, download CGT and IDC Manufacturing Insights’ 2011 Sales & Marketing Report.
-- Amjad Malik, vice president of Business Analytics with Kellogg Company, then added real-world context to the research findings. “Trade promotions are the second biggest line item on our P&L right behind COGS. If we're spending that much money on trade, it becomes extremely important for us to spend on tools, process and analytics to improve the effectiveness of our trade funds,” said Malik. He went on to discuss Kellogg's efforts to use advanced analytics and demand data to model promotion variables such as price, distribution, time and other causalities for predicting demand and improving forecasting. “There are three keys to success, the most important of which is integration with your TPM system to avoid dual data entry, minimize inputs, and reduce errors and complexity,” shared Malik.
-- After Kellogg’s presentation, the audience flooded the speakers with questions about SAP’s Trade Promotion Optimization offering, which was mentioned by Malik as part of Kellogg’s technology strategy. Ian McDonald, vice president of Industry Solutions Management for Consumer Products with SAP, was on hand to offer a technology preview, walking them through SAP Trade Promotion Optimization capabilities, like promotion pre-assessment, volume and profitabilty modeling, promotion optimization. “[TPO] is about promotion effectiveness… it’s about changing things, learning and meeting target revenue, volume and profit objectives,” said McDonald.
Click here to listen to this exclusive webinar in its entirety.