Consumer Products Industry
I worked in the Financial Planning & Analysis department of a large CP beverages company. This was the most exciting learning experience of my career. This company did comprehensive planning –they did
- 5 year Strat Plan (Strategy) that focused on capacity planning, capex planning, new markets growth, new product launch, Owned vs franchised operations, Glass strategy etc. This was usually top down and would eventually feed into the yearly target plan (top down plan)
- They also did a very detailed bottom up plann which focused on revenue plans (including sku level planning based on historical trends, new market penetration, new channel penetration etc, share of the market), headcount plans, capex planning – especially on some of the sales assets like Cooler machines to be provided to retailers etc, Glass turns, other cost and expense planning, capacity planning – own produced vs subcontracted
- In addition they did a quarterly forecast where the numbers were adjusted for the year to date and the balance of the year
All of these went for multiple iterations, reviews and rolled up through country, to region and into a global plan.
Now this I would guess will be the typical process that every CP customers follows, they call it by different names with variants of the process. But essentially its driven with the ultimate goal to achieve best forecast accuracy possible, and also being able to work towards to an agreed plan, prioritize the right investments and have a formal consensus to work with.
Now apart from the above there were other teams such as Sales and Demand Planning team building their own plans, but it was completely different and not aligned to what finance guys were building.
Many companies are now trying to address this aspect of Let’s get out of our planning silos! and would like to get consensus based Integrated Business Plan, that connects the dots between the departments.
Lets look at some key challenges that CP companies face on planning process:
- Capacity planning is always a challenge. Many CP customers rely on their contractors e.g. Under Armour had 95% of their products coming from contract manufacturing
- Lack of common practice and process for planning across different business divisions/units
- Visibility into business unit /line profitability – who is underperforming – this is critical to make a adjustment in forecast. Cambell Soups in US faced this as a major challenge as they did not have visibility into this to do accurate forecasting
- How does monthly brand and sales account forecast tie into to your overall financial plan, this was always disconnected (lack of Integrated business planning) for a big food CP customer in UK
- Net margins analysis was another huge issue as there were several indirect costs not appropriately allocated
- Trade promotion efficiency – What’s the incremental sales and revenue coming out of trade promotions, how can we do better trade promotion planning aligned to sales and revenue plans
- Inventory turns and cost of goods sold are the big cost items in CP. Its always challenging to plan for this as it has several drivers affecting it
- Data required for planning based on historical information lying in different disparate systems – Multiple ERP, Point of Sales, Data warehouses
Looking at these challenges, a combination of better and more integrated process with supporting technology would help overcome them. 400+ Consumer Products companies globally have invested in SAP’s Business Planning and Consolidations over the past 3-4 years and are in different stages of implementing/using the solution.
Key benefits that Consumer Products companies see with BPC and SAP’s planning solutions are :
- Great cross business line /product visibility to do quick forecasting and adjustments
- Integrated architecture to ERP and also ability to pull data from Point of sales /datawarehouses
- Process centric approach through the Business Process flows
- Familiar user interface for business – Microsoft Excel
- Good integration to Business Intelligence to facilitate Planning and Analysis seamlessly
- Better manage capacity planning
- Ability to do top down and bottom planning, including rolling forecasts
- Facilitating to move towards Integrated Business Planning architecture
- Optimized in-memory planning leveraging SAP HANA would facilitate significant performance improvements and ability to handle big data more effectively
There are some significant projects going on where the results and benefits will be pouring in soon. Consumer Products companies are crafting a great partnership with SAP to derive great innovations and solutions for addressing their key challenges.