In this insight, I take a look at the three reasons why SAP Customer Business Planning (CBP) takes the pain out of planning and executing trade investments.
Many consumer products companies spend upwards of 25% of their revenue on trade promotions. This is often the second largest item on the P&L behind cost of goods sold. The total amount of money spent on trade investment continues to increase year-on-year, yet the shocking reality is that only a third of those activities actually make money.
Such companies also need to contend with the fact that modern, digitally savvy consumers are gaining more control of their shopping experience than ever before; they are able to search for the best deals using their mobile devices from anywhere, at any time. These digital consumers demand more convenience and less friction along their consumer journeys. Against this context, any company wishing not just to survive but to thrive in today’s fiercely competitive retail environment must have the effective management of trade investments at the top of its priority list.
The majority of consumer product companies follow a similar four-step, closed-loop process to manage trade investments.
Execute and Pay are the transactional elements of the process. Together, they form the backbone of any trade investment solution as they enable sales teams to create long-term agreements, generate pricing conditions, accrue funds and settle claims. A common problem is that many legacy corporate systems are designed purely to handle these transactional processes and it is precisely this design consideration that makes them cumbersome for sales teams to use.
When it comes to Planning and Analysing, we often find that these steps are treated as separate elements of the trade investment process and are not systemised in a way that enables collaboration. IT, Sales, and Commercial Finance teams using a combination of different spreadsheets, personal experience and intuition can end up fulfilling their part of the loop in silo, forming parts of a jigsaw rather than a complete picture. We have encountered some companies who have attempted to stretch the boundaries of their Execution tool to accommodate their planning requirements and this often leads to poor system performance and user resistance. Given the critical importance of planning in order to achieve internal and customer Joint Business Plan targets, it is surprising that so many companies have not yet invested in a planning tool which can integrate with the Execute, Pay and Analyse functions in order to provide a robust and joined-up solution.
Help is at hand
The good news is that SAP has recognised the need for such a solution and has developed a planning application called SAP Customer Business Planning (CBP). It is now in Version 2.0 with new releases scheduled every six months as part of SAP’s trade investment roadmap. Whilst the tool is fairly new, it has been recognised by Gartner as “closing most of the usability gaps with compelling HTML 5.0 views and creating a more out-of-the-box approach to customer planning”. When you use SAP for ERP, then CBP can be tightly integrated with demand planning, as well as with SAP Accelerated Trade Promotion Management (for Execution) which sits on an SAP HANA database and therefore addresses the performance issues which have hampered previous SAP TPM implementations.
We have already seen an early wave of excitement amongst clients surrounding the launch of CBP. Below, I’ve outlined three of the main reasons why I believe CBP will represent something of a trade investment revolution from SAP and why your users will find that CBP takes the pain out of planning and executing trade investments.
- CBP gives users the ability to create plans which reflect the way that buyers buy, rather than being restricted by internal master data structures. In other words, users can create customised planning hierarchies which are bespoke to a retailer and then assign those plans to a particular buyer. This makes it much easier to hold joint business planning conversations without investing huge amounts of time copying, pasting and modelling data in Excel.
- CBP contains scenario planning functionality which means that you can compare different promotions, model their effect on the year-to-go plan and then easily add the preferred promotion(s) to your customer plan and see the impact in real time.
- CBP has an intuitive user interface and gives users the benefit of an HTML 5 experience more in keeping with the user experience delivered by the latest offerings from SAP which are built upon the Fiori design guidelines (for those thinking “what on earth is Fiori?”, it is the name for a set of design principles which govern the new user experience across the entire SAP portfolio).
- CBP contains five tabs which provide a guided navigation for the user ranging from an Overview tab which delivers a tiled KPI dashboard (for Analysing), to a Planning tab which provides both a Manufacturer and Retailer P&L view; this is perfect for modelling the impact of investments on the Joint Business Plan. The overall benefit of improved usability is increased user adoption of the solution, leading to less work-arounds and improved visibility of spend.
- Typically the bug-bear of TPM solutions, performance is addressed in SAP CBP through a combination of two factors:
- Firstly, the underlying HANA database uses the power of in-memory computing to render calculated key figures in planning layouts in a dramatically reduced time when compared to the older pre-HANA SAP TPM application.
- Secondly, CBP enables the user to create future promotions at a high level which may be more appropriate when planning promotions which are nine months out. For example, you may wish to enter a total spend value for a planned event, or average pricing for a group of products, but you may not have the supporting detail to split volumes or pricing out by individual materials. Planning at a high level for future events with fast promotion entry takes a lot of the pain away from account teams; they can then spend more time in front of customers and less time building highly granular bottom-up plans for events in the far planning horizon, which will inevitably change (and require re-work) as the event approaches.
So, I’ve explained why I believe that SAP Customer Business Planning will be a big hit with consumer product companies.