Spend and Receive

Consumer goods companies spend millions on agreements with retailers to run promotions and boost product sales. The right Trade Funds Management (TFM) technology holds the promise of giving CG companies a clear idea of exactly how much of a boost those dollars bring. The future holds the promise of helping CG companies synchronize trade funds within the supply chain. However, analysts warn that solving the trade-fund problem takes more than simply buying the latest TFM solution on the market.

Focal Point

Milnot Holding Company, St. Louis, implemented a TFM solution developed by Gelco approximately one year ago. Prior to that, Milnot, which produces the Beech Nut brand of baby food, Chilli Man Chili and Milnot Canned Milk, used an Excel spreadsheet to track its trade funds, recalls Tim McCreery, director of sales planning and category management for Milnot.

"It was a fragmented process with no real focal point," says McCreery

The Gelco solution enables Milnot to bring its trade funds management touch points under one umbrella. Trade management data, such as sales, product movement, spending and planning information, that previously had been available only from several different sources, became accessible through a single Web-based tool.

Today, Milnot uses its TFM solution to evaluate promotions against syndicated data and plan future promotions with retailers. However, the successful implementation of the TFM solution was predicated on Milnot's understanding of where its trade funds management process stood prior to implementation and deciding exactly what types of tools it needed.

"Most people want to do something in the area of TFM," McCreery says. "But they really have no idea where they are at in the process."

Clear Idea

CG companies today spend between 15 percent and 20 percent of their revenues on trade funds, says Kara Romanov, senior research analyst with AMR Research. However, in many cases, the companies aren't getting a return on their investment, and in most cases they aren't even quite sure where the money is going. The immediate value of TFM technology for most CG companies is the transparency it brings to trade funds spending, Romanov says. Once companies have a clear idea of how the funds are being spent and their ROI, they can graduate to more sophisticated TFM tools, to include account planning, promotional calendar development and forecasting.

Nice Tie

In the future, companies will use TFM technology to tie their supply chains to the promotions, says Roddy Martin, vice president with AMR's consumer packaged goods/life science research team. Doing so will prevent companies from promoting out-of-stock products and help them direct trade funds dollars to the promotion of overstocked items. Martin predicts that it will be at least two years before most CG companies are in a proper position to take full advantage of these potential benefits of TFM.

Most companies exploring new TFM solutions, like Milnot, come to the game using Excel spreadsheets. Simply slapping a TFM solution on top of their current business processes may appear easy and tempting, but the analysts warn that this approach will prove wasteful in the long term.Smart companies identify the problems in their TFM process and use technology to solve them, not just hope that technology will make their problems go away, Martin says.

"You can put in a best of breed solution, or you can say, let's fix promotional planning as a part of our overall supply chain management'," says Martin. "You can solve it as an IT problem or as a business process problem."

Common Challenge

One common challenge CG companies face when implementing a TFM solution is integrating it with their existing database-related systems. International Multifoods Corp. faced that issue when it integrated a TFM solution developed by CAS, with an enterprise resource planning solution from SAP. Multifoods formed its U.S. consumer products business following the acquisition of the Pillsbury desserts and specialty products portfolio in November 2001, after which the company moved to replace The Pillsbury Company's homegrown legacy systems. Multifoods committed to SAP's ERP solution in the mid-1990s, and needed to find a suitable TFM solution that would integrate well with it. Pillsbury used CAS' retail sales force application in the past, says Mark Thome, vice president of information technology with International Multifoods.

"Trade promotion management is a very different solution," Thome says. "But we felt they had a product that would work." Another important factor was that Multifoods felt that CAS could get the TFM system implemented by the March 2003 deadline the company had set for replacing the legacy systems while implementing SAP at the same time. Because Multifoods had experience with both CAS and SAP systems, it was able to lend its expertise to the integration efforts. The company's primary objective in implementing the TFM technology was to install an application that could control spending and do trade planning, says Thome. In the future, Multifoods will look to do more sophisticated uses of the trade management solution, such as modeling and promotion effectiveness.