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Rob Hand of Oracle on Comprehensive Trade Management

6/5/2008
With the growth of TPM over the past several years, CG companies are now beginning to integrate all the major areas of trade management. This means bringing TPM into alignment with forecasting and demand planning, supply chain integration, brand and category management, retail execution and analytics. I recently talked with Oracle's director of industry strategy and veteran industry analyst Rob Hand about how the CG industry is changing to meet this new challenge.


What is "comprehensive trade management," and how does a CG manufacturer achieve this status?

Hand: Comprehensive trade management is the combined functionality of all major processes executed between the manufacturer and the retailer to plan, forecast, distribute, promote, sell and measure the product flow from the dock to the consumer. It means automating the entire process, including brand and category management, financial planning, annual sales forecasting, demand and operational planning, trade promotion planning, execution, settlement and business intelligence analysis. These functions are based on a single data and rules foundation, and leverage the growing volume of retail point-of-sale (POS) data in concert with the supplier's historical performance data to understand consumer demand, respond to market signals and fulfill rapidly. In fact, comprehensive trade management serves the joint initiative of both trade and supplier to position the consumer as the centerpiece of this activity.


All manufacturers have to provide basic functionality to be competitive. What sets comprehensive trade management apart?

Hand: CG companies have an array of point solutions, internally developed applications, or worse, spreadsheets to manage certain key functions in the trade process. Some are good; others are marginal or even counterproductive. They have grown up to offset the lack of a definitive end-to-end enterprise solution. Integration between these applications is costly and inefficient, and the individual data relationships often vary to the point that information retrieved from each has to be "filtered" through spreadsheets to be analyzed.

Comprehensive trade management is one seamless environment where the nomenclature, hierarchies and other data relationships are consistent from end to end. When we designed the Oracle solution, we had a powerful set of best-of-breed applications and industry thought leadership, but we still had to build the integration and align the data relationships to achieve this goal. It is time consuming and costly work, requiring domain expertise across a number of trade management areas.


Has CPFR had an impact on comprehensive trade management?

Hand: The VICS CPFR initiative is best known for promoting true collaboration between retailers and suppliers. But, it has also helped accelerate two other industry developments. First, timely retail POS is becoming more available, giving supplier and retailer the opportunity to respond to the consumer immediately with better product, messaging and service. Second, the introduction of predictive trade planning and promotion optimization software is revolutionizing the manufacturer's ability to simulate and model more effective promotions. These two factors unite the rep and buyer into a smarter consumer demand fulfillment team.


Manufacturers cite lack of POS and timely consumption data as obstacles to accurate performance measurement and collaboration on a more meaningful level. How does comprehensive trade management offer an advantage if the manufacturer lacks the POS data?

Hand:
Let's break this into two problems. First, the lack of good POS and/or sufficient consumption data is clearly a barrier to effectiveness. Even the largest CG companies suffer from a lack of visibility into retail product movement, shopper buying habits, loyalty data and pricing. Without this information, it is almost impossible to know how your promotions perform. Second, even with sufficient POS or consumption data, there is a weakness in the process of planning effective promotions based upon it.

The comprehensive trade management solution captures and stores the information received within one single data repository, from which a statistical engine can calculate and model promotions. Any trade management solution considered "comprehensive" must include an optimization engine based on sound predictive modeling and a demand signal repository (DSR) that can capture, clean, store and forward trustworthy data. Even if POS data is limited, an optimization engine that considers causal events and conditions (such as weather, seasonality, etc.) can leverage historical data received from a unified core of planning, performance, store execution, and even anecdotal input from field reps and merchandisers. If the retail execution tool is aligned, it too can leverage mobility to provide immediate intelligence. This is one of the core benefits of comprehensive trade management.


How should the demand signal repository (DSR) figure into the overall trade management function?

Hand:
The DSR helps manufacturers capture, manage and leverage external demand data sources more efficiently and effectively. It is complementary to other solutions, like Oracle CG Sales Analytics, Demantra and Siebel; but provides pre-built standards-based integration with specific comprehensive trade management applications. It is more than a passive data repository because it leverages the flexibility and extensibility of analytical applications. It also offers rules-based exception management capabilities (including event-based triggers to initiate transactions in external applications). The DSR is a perfect foundation for a category management workflow engine that puts the brand and category planning and analyses at the heart of the performance data flow, enabling more rapid evaluation and response at store level to the consumer demand signals.


How can the manufacturer use comprehensive trade management to ensure that annual planning can be more precise and trustworthy?

Hand:
Effective planning is critical to CG companies, but no matter what technology appears in the arena of forecasting and S&OP, it seems that spreadsheets do the hard work. One of the cornerstones of comprehensive trade management is a fully integrated planning environment that enables planners to bring in data from the promotion transaction engine and from retailer and supply chain systems to build feasible consensus plans that can be reviewed and adjusted in as close to real-time as desired. That environment also enables the predictive modeling and optimization of the forecast, demand and sales plan, and drives a user interface that sales people like. That means it almost has to look and act like a spreadsheet, but contain embedded rules and tools that guarantee that sales reps, brokers or field marketers can do everything they do in a spreadsheet today and trust it.

When I say the word "comprehensive," I refer to a single unified trade management solution that requires no external support from other applications. In other words, comprehensive trade management allows CG companies to lose the spreadsheets.


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