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©Company confidential 1 BI in FMCG Industry - Raj Basu.

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1 ©Company confidential 1 BI in FMCG Industry - Raj Basu

2 ©Company confidential 2 Major changes in FMCG industry Indian Consumer changes Larger disposable income Middle class segment bulging Greater global exposure Greater appetite & demand for global products Differentiated product & service requirements FMCG space dynamics Explosion of products Explosion of markets (Kirana & Organized Retail) Rush of new players Global players bringing process and intelligence maturity Increasing competition Supply chain bottlenecks Impact on FMCG strategy & operations Increasing Flexibility Outsourced Contract Manufacturing Demand driven supply chain Improving Customer service Retail outlet segmentation Customized Retail service Supply Chain segmentation Greater Organizational Alignment EPM, Divisional Scorecards Integrated Sales & operations planning Greater Customer focus Demand analysis Product charateristics

3 ©Company confidential 3 EPM/BI needs of the FMCG Industry Rapid EPM adoption for Org Alignment & strategy management Balanced Scorecards (Strategy Maps, Business Scorecards) Budgeting, Planning & Consolidation systems Operational performance management Financial Analytics for greater ROCE Working Capital Optimization (C2C Cycle) Debtor Analytics Payables Analytics Inventory Optimization Treasury Cash Analysis Customer Analytics Trade Promotion Analytics WD Profitability Outlet performance Channel Analysis Integrated Consumer Demand & market performance visibility Supply Chain Analytics Supply Chain Performance Management Product Cost & profitability analysis Operational Planning efficiency Inventory visibility & optimization Supply Network efficiency Spend Analytics Operations Analytics Plant Performance Management MES Analytics

4 ©Company confidential 4 Key BI Trends in the FMCG industry Major Indian FMCG players are making rapid strides in enabling Business & Competitive intelligence as a key differentiator Most of the large FMCG companies are centralizing BI as a shared service on a common platform across its businesses and brands with a razor like focus on getting Best-In-Class service Most of them are already deep into state of art Business Intelligence ability to check on an outlet consumption pattern on a handheld before meeting the owner ability to analyze secondary sales based promotions rather than primary uptake ability to provide outlet based actionables rather than market level inputs like OOS, poor AVF scores etc Global players are even further ahead Trade Promotion Analytics, Segmentation based promos, supply chain bottleneck alerts, route optimization and advanced forecasting and predictive demand models

5 ©Company confidential 5 EPM Objectives FMCG majors are interested in implementing a Performance Management (PM) program across the enterprise, in order to align goals and strategies with operational objectives, plans and responsibilities within the organization. KeyBusinessBenefits Organizational Alignment Strategy Communication Effective Model To Measure Performance Identify Capability Development Needs Develop Superior Consumer Insight Adopt New Technology For Manufacturing Flexibility Vision Strategic Objective Functional Objectives Unit Objectives Individual Objectives Level 0 : Corporate Level 1 : Business Functions Level 2 : Units Strategy Communication Closed Loop - Feedback HR Effectiveness Process Efficiency Customer Satisfaction ObjectiveInitiatives Financial Performance Measures Business Performance Incr Share Holder value Sustained Profitable growth Accelerate Organic Growth Improve Productivity

6 ©Company confidential 6 Perspective Key Imperatives Key Questions Financial Customer Internal Process Learning & Growth Effect Cause Results Action Profitability Return on Capital Employed Consumer Satisfaction Market Share Efficiency Knowledge Innovation Vision & Strategy To Satisfy our shareholder, what financial objectives must we accomplish To achieve our financial goals, what customer needs, must we satisfy To satisfy our customers, what internal business processes, must we excel in To achieve & maintain our competitive position, how must the organization the Organization learn & improve Balanced Scorecard incorporates a double loop feedback around both internal business processes and external outcomes Classic Balanced Scorecard Framework

7 ©Company confidential 7 Decision-making challenges at ITC Businesses Business Performance Mgmt – Executive, Functional, Unit Level Scorecards Employee Performance Mgmt – Personal Scorecards Impact of Food FG Warehouse location on Food Categories operating margins Impact of Leaf stock at ILTD on price elasticity at ITD Impact of potato sourcing bottlenecks on Bingo Freshness Fact Based Decision-Making / Actionable Intelligence Organizational Alignment Integrated Analysis across value chains Operational Exception based operations at the Factories Stock optimization across supply chain nodes Fast tracking complaints from High Value Cust Personnel workload mgmt across stores Tactical Targeted Promotions & variable pricing Outlet Segment specific service packages Profitability based supply routes Demand driven inventory management Analytical Capability Performance Visibility Promotion & marketing impact tracking Supply Chain bottlenecks SKU velocity Logistics impact on operating margins Store Allocation efficiency Reservation Pipeline vs Forecast 360 deg Customer Views 360 deg Supplier views Cost variance tracking Order-To-Fulfillment, Cash –To-Cash, Procure-To-Pay cycle times Outlet Service Route Optimization Outlet Segmentation Analytical Forecasting Six Sigma Analytics Price Elasticity Analysis BCG Portfolio Analysis Human Productivity Analysis Loyalty Analytics

8 ©Company confidential 8 EPM driven BI at a US Food Distribution Major Strategic Goals Strategic Metrics/Scorecards Demand Initiatives General Analysis Sales Force Effectiveness Trade Promotion Effectiveness Marketing Effectiveness Market Analysis Spend Analysis Supplier Performance Analysis Item & Brand Analysis Bid Analysis Competitive Analysis Business Functions - Functional Metrics, Reports, Alerts, Scorecards, What-If Analysis, Guided Analysis IT Functions - Dashboards, BI Tools, Databases, ETL, Data Models, Metadata Sourcing Initiatives Supply Chain Initiatives Customer Initiatives Some Analysis Areas General Analysis Segmentation Analysis Contract Compliance Business Review Analysis Customer Profitability Analysis Delivery Effectiveness SKU rationalization Effectiveness Backhaul Effectiveness Carrier Performance Analysis Some Analysis Areas

9 ©Company confidential 9 A single BI System should support the EPM Model Visual Audits Sales Force & CRM WD System Data Warehouse (Data Storage) BI Layer (Business logic, number crunching, metric/report generation ) Source Systems SAP ETL Layer Data Extraction, Cleansing, Staging, Transformation & Loading Performance Management Model ExcelsPLMHRMS Outlet Sales, Invoices, Purchase Orders Inventory, Transport Orders, Stock Tr Orders, Salary Advice, re-distribution Costs Business Plan, Forecast, A/R, A/P, Visual Merch Audit, Production Plans, Market Research, Production Jobs A common data set populates the entire model enabling :- Scalability EPM, Data, BI Model System Performance Integration data linkages business rules

10 ©Company confidential 10 Some benefits of integrated modeling for FMCG Impact of raw material shortage on retail offtake Analysis of a request for a short runner on Factory productivity vis-à-vis customer service Correlate/factor-in market demand (IMRB) into AE performance Decision on extending Promotions based on raw material availability Analyze impact of sales strategies/norms on Market standing Analyze synergy opportunities like sharing warehouses, transportation sharing and backhauling, reverse logistics etc across categories

11 ©Company confidential 11 Typical BI Transformation Roadmap Define Performance Mgmt Model Define BI Strategy Create BI Governance Model BI Implementation BI Change Mgmt BI Value Mgmt Supply Chain Transformation Brand Management Transformation Process Improvement Transformation Major Organization Transformations….. …Need a Performance Mgmt & BI Transformation to empower & measure effect of transformation !! EPM & BI Workshops Awareness Creation Appreciation of Best Practices Intent Generation Framework Metrics Models Scorecards Alerts Linkages/Alignments Analysis Flows Dashboard Designs Biz Case/ Info Needs Get Mgmt Buy-In Technology Drivers App Architecture Data Architecture Platform Selection Vendor Selection Initiatives Roadmap Effort Estimation Identify Sponsor Create Steering Comm Create Execution Comm Comm to all stakeholders Set expectations/Time Create Project Plan Business Requirements System Requirements Design Development Testing Deployment Training Communication Biz Process Changes Expectation Mgmt Usage Monitoring BI Support Processes Risk mgmt KPO Customer Service Business Impact BI Perf Mgmt BI RoI BI Enhancements BI Transformation Roadmap

12 ©Company confidential 12 BI Program Change Mgmt Challenges & Strategy An effective Change Management strategy for BI Program starts at the Kickoff and ends at satisfactory system adoption and positive customer feedback. However, Change Management is an ongoing process and is part and parcel of an effective BI Governance Model. bringing people on board, convincing them of the value, goading them to use it the right way, measuring business improvements. BI, being a non-critical business application needs cultural process changes to leverage the investment, which makes it even more challenging and critical aspect of achieving success People ParticipationProcessesSystemsCulture Change Business Sponsorship Business Buy-In, Ownership Identify Business Change Agents Remove Business IT gaps Remove fear of Retrenchment Create Senior Mgmt Champions to spread the message Identify and Plan for process changes early on Create effective communication channels and joint project plans with other process owners Cultural and governance change needs to go along with process changes Identify & Plan all system changes early on (Frontline systems may need to have more checks and measure to improve data quality) Create effective communication channels and joint project plans with other System owners Communicate all system changes to the Organization Business Driven Program Showcase Business Benefits Keep business in loop during change in scope Embed in biz processes like sales review etc Pre-empt business needs Communicate effectively Repeated Multi-media training Measure adoption, usage and publish figures Publish success stories Key Questions for Change Mgmt Planning What will change ? Why will it change ? How will it change ? Who will change it ? Change is enabled through 4 key change perspectives

13 ©Company confidential 13 Enterprise BI Strategy for ITC BI Strategy Execution Plan Service & Maintenance Governance Model BI Vision BI Needs/ Painpoints BI Business Case Scope Definition Implementation Roadmap & Project Plan Architecture (Data, System) Tool Selection Execution Model (Inhouse/Outsource) Vendor Selection BI Budget Service Model (Outsource, Managed BI Svc) Service Vendor Selection Service Quality Management Service Improvement Customer Focus Risk Management Value Assessment Organization Alignment BI Business Case Unique Sales & Customer view Unique Spend & vendor view Supply chain wastes Asset utilization gaps Higher employee productivity Greater IT ROI Single Analysis Platform across biz areas Excel intelligence democratization ! Business Intelligence Mission (SYSCO): Provide a single view of timely, accurate, consistent & actionable information across the enterprise through a common user interface accessible anytime, anywhere to authorized users, thereby enabling fact based decision making.

14 ©Company confidential 14 So Whats Driving Trade Promotions? New product introductions. – In 2003, 33,700 new FMCG items in the US marketplace alone –up from about 32,000 in each of the previous two years. Declining shelf space. –Median US store size has declined since its 1999 peak of 44,843 square feet, following nine consecutive annual rises. –Wider assortment range in both North American and European stores constrains shelf space yet more. Private-label products. –Private-label products now account for between 15% and 20% of items sold in US supermarkets, 22% in Europe, and a staggering 42% in the UK. Result - large and rising trade promotion spend –10 FMCG firms interviewed by Forrester planned 2003/4 trade promotions at 16% gross revenues It all adds up to more than $100 Billion per year –Based on 2003 revenues, the 50 largest FMCG manufacturers. –Its the single largest element of expense for FMCGs, but the least well controlled. Typically CFOs use a complex tangle of spreadsheets and enterprise app extracts to track trade promotion dollars but have no way accurately to estimate in advance the impact of a planned promotion. CRM based approaches typically just rely on sales estimates of trade promotion impact, thus ensuring that trade promotion accruals and supply chain preparations are based only on guess work –No wonder senior execs get mauled by regulators and shareholders alike Source : Forrester Research

15 ©Company confidential 15 Closed Loop Process BEGINS with Analyzing Performance and Opportunities in the Business Linking Insight and Performance Management with Decision Support FINANCE SALES MARKET INSIGHTS OPERATIONS TRADE MANAGEMENT BRAND / CATEGORY MANAGEMENT Analyze Performance - During and end of promotions 1 Plan, Simulate and Evaluate Scenarios 3 Collaborate and Approve New Plans 4 Generate new Promotions Plan/Forecast 5 Negotiate & Sell in Deals 6 Execute Deals 7 Analyze Opportunities for Brands and Markets 2 Analytics Operational

16 ©Company confidential 16 Only 7% of Manufacturers say that they are highly effective at evaluating promotion productivity. Source: Brandweek November 25, 2002/Cannondale Study Despite such large spends, not many manufacturers have succeeded in measuring promotion effectiveness Half of all promotional expenditure is wasted …... the problem is nobody knows which half! William H. Lever, Chairman, Unilever Corporation Of all investments, promotional spending is the highest whilst knowledge about their return and effectiveness is the lowest. For promotions, the driver is what was done the previous year Most promotions are NOT evaluated in an objective and systematic fashion There are no management KPIs to measure the business.

17 ©Company confidential % 1.5% 10.0% ROS Manage Promotion Driven Costs Redeploy Inefficient Spending 80-90% of promotions are not profitable for manufacturers Consumers are unaware of 51% of items bought on sale Only 50% of manufacturers measure event profitability Potential Manufacturer Value Chain Improvement (as a Percent of Sales) Percent of Sales Manufac-turing Labor FreightFixed COGSSalesforceDistribu-tion labor Inventory Carrying Cost Diverting and All Other.4-.6%.2-.3%.2-.4%.3-.6%.1-.2%.2-.3% 0-.1% Up to 2.5% Source: Accenture Industry Experience and Trade Promotion Study Substantial Opportunity for Manufacturers Research suggests that FMCG manufacturers can achieve up to a 40% increase in return on sales through improved trade promotion management.

18 ©Company confidential 18 Some typical Trade Promotion Effectiveness KPIs Process StepsKPIDescriptionType of KPISource of InformationRole Impacted Measure the efficiency of the entire supply network to ensure that product is available on the shelf at all times during the promotion Shelf Availability % of time that product is available on shelf in the correct shelf during the total time of the promotion Operational Retailer Inventory System by SKU by shelf location Brand Manager Account Manager Supply Chain Planner Retail Buyer/Merchandiser Measure the profitability of each promotion for the entire lifecycle Promotion ROI Incremental Revenue less campaign costs, creative costs, Tactical/Strategi c Manufacturer Sales & Costing systems Brand Manager Account Manager VP - Marketing Measure the lift in sales volume due to the promotion Sales Lift% % increase in base demand post promotion Tactical Retailer POS systems Brand Manager Account Manager Demand Planner Measure the extent of cannibalization due to promotion on other SKUs/Stores Sales Drop % % drop in base demand of non- promoted SKUs in promoted Stores and promoted SKUs in non- promoted Stores Tactical Retailer POS Systems Brand Manager Account Manager Demand Planner Measure the extent of Forward Buy by Stores/Accounts Store/Account Volume Mismatch between POS sales volume and Store/Account Buy volume during promo period Operational Retailer POS systems Manufacturer Sales systems Demand Planner Account Manager

19 ©Company confidential 19 Trade Promotion Analytics – Hierarchy of Needs What will happen What is happening Why did it happen What happened Operational Tactical Strategic Evaluate Promotions Effectiveness Ensure shelf availability Measurement of Sales KPIs – Store level, SKU level, Lift%, Drop% Determine Order Status Determine Promotion Costs Demand Management TP Scenario Planning Determine and analyse Causals Customer Behaviour Analysis Inventory Management Evaluate Store/Account Profitability Measure promotion impact on sales volumes ANALYTICSANALYTICS

20 ©Company confidential 20 TPM Applications – Key Interfaces ERP CRM Operational Application POS Customer Analytics Inventory SYNDICATE DATA Retailer Promo penetration data Total cost of promotion Retailer Invoice data Inventory Availability Order Backlog Analytical Application Forecast Accuracy Base Demand Historical Sales Trend Sales Brand-Account level Customer Master Data Product Master Data Price Master Data SCM Store Promo Adoption Consumer Off-take Channel Spends Stock-Out data Consumer Billing Price Store level forecasts Planogram Compliance Sales Returns Market/Cateogry/Channel Outlook Consumer Panel Data Retailer Panel Data Reports Causal Analysis Exception Alerts What-If Analysis Optimisation FMCG Enterprise Applications Retailer Applications FMCG TPM Application Third Party Data TPM Analytics

21 ©Company confidential 21 Thanks !

22 ©Company confidential 22 Evolution of BI Increasing Maturity 1990 BI Affordable, Democratized, Mobilized Pervasive BI (Business Planning, Collaboration) Data –> Insight, Alerts, Root Cause Analysis Static Reports -> On-The-Spot Answers BI –> EPM/CPM BI -> Greater Integration Business Intelligence -> Intelligent Business (Exception based Mgmt, predictive analytics etc) MIS/EIS Reports B1 2.0

23 ©Company confidential 23 Evolution of BI Increasing Maturity Static Mgmt Reports Data Silos Integrated Data Repositories Packaged ERP BI Real Time Analytics Expensive Data Integration Desktop OLAP Reports Excel Web based OLAP Reports OLAP Reports Exception Based Management Predictive Analytics Collaborative BI Mainframes Dashboards Scorecards Alerts Analysis Trails EPM CPM Text Intelligence What-If Analysis BI 2.0

24 ©Company confidential 24 Unilever Global Network : Connects all regional business units and its customers under one global data pool Unilever Akili Global Registry Global Information Service Center Data Pool Unilever Akili : Working together with the business to fulfill consumer whishes better, faster and cheaper Global Intelligence Framework Supply Chain Intelligence Consumer, Shopper & Trade Analytics Market Trends & Consumer Segmentation Trade Dynamics, promotion management Network Planning & Optimization Competitive Intelligence Supply Chain & Demand Planning Global Manufacturing Integrated Sourcing Hubs Regional Supply Chain Disperse d R&D Category & Channel Marketing Collaborative Shopper Value Creation Regional Category Support Regional Demand Planning Regional Distribution Structure Regional Channel Strategy Category Development By country Country Specific Intelligence Brand Activation Plans Enablers Common Identification Standards Single Platform – all regions Global Data Synchronization Standardized Processes & Systems Integrators Common Business Performance Models Collaborative Planning

25 ©Company confidential 25 Nestle – GLOBE (Global Business Excellence) Implementation of harmonized Nestle Business Excellence Best Practices – All Regions Managing Data as corporate assets – Implementation of single data standard – All Regions Implementation of standardized information system & technology – all regions GLOBE - Objectives Key Initiatives Business Benefits Effective decision making Enables Shared Services & reduces cost of operations Speed to share & Implement new best practices Supply Chain Demand Planning Manage risks to targets Global Sourcing Effective hedging Working capital optimization SKU optimization Customer profiling & categorization Marketing Effectiveness Consumer & shopper behavior Trade dynamics & channel intelligence Micro Marketing intelligence specific to regional needs Drive operational channel marketing programs Portfolio Enhancement By Geography, Category & by Product groups Help to optimize product offerings Identify new opportunity for growth of existing products in the global portfolio Strategic Partner Help in M&A Identify Cash Flow issues Currency risks Aid in investment opportunities

26 ©Company confidential 26 Reebok – Global Business Intelligence Sales & Marketing Analytics Purchase Analytics Supply Chain Analytics Vendor Analytics Financial Analytics SAP BW SAP R/3 - AFS (Apparel & Footwear solution) [NAM, Canada, Japan, Europe, Russia] SAP R/3 - AFS (Apparel & Footwear solution) [NAM, Canada, Japan, Europe, Russia] SAP R/3 - AFS (Apparel & Footwear solution) [NAM, Canada, Japan, Europe, Russia] SAP R/3 - AFS (Apparel & Footwear solution) [NAM, Canada, Japan, Europe, Russia] mySAP portal Customers Logistics Vendors ForwardersCustoms Financial Institutions Enterprise Exchange Service Key Benefits a.Consolidated picture of performance – By brand, By Geo, By Period b.Fact based decision making – exception based Supply Chain management c.Driving accountability across organization –metrics ownership from top to bottom d.Better vendor control – vendor scorecarding e.Improved sharing of best practices within organization – visibility across organization Sales Force

27 ©Company confidential 27 Managed-BI Service Model for ITC Client Business Team BI Program Management Business Analysts BI Support Reporting Services Generate On–Demand reports, Alerts, Dashboards Maintain ETL Reporting, Database applications Analytics Services ITCInfotech Client Management Team ITC Infotech Governance Measures Methodologies & Processes Quality Control (Scorecards) SLAs, Joint Planning, Escalations, Business requirements, Financials, Change Management Complexity Firewall Clients Client Client Partner BI Application Portal (ITD, FBD, Hotels, LRBD) Systems & Datacenter Knowledge Services Business Analytics Services (Segmentation, Price Elasticity etc) Business Optimization Services (Stock optimization, Route Opt) Data Management Services Master Data Management Data Quality Management Infrastructure Services Software Server Management Hardware & network Management SME (SCM, CRMetc) Analytics Experts Architects BI Engineers ETL Engineers DBA Data Administrators Data Analysts Hardware Engineers Network Engineers Managed Service Vendor Facilities Security Control

28 ©Company confidential 28 Financial Analytics Profitability Analysis Financial Planning Accuracy Working Capital Analysis Brand Analytics Category & Portfolio Analysis Marketing Spend Effectiveness Brand & Market Analysis TM&D Performance Scorecard Operational Analytics Production & Planning Efficiency Unit Level Scorecard & Automation New Product Lifecycle Analysis Vendor Scorecard SCOR Measures Business-Analytics Scope of Integrated BI Customer Analytics WD Profitability Analysis Retail Outlet Analysis Customer Service Effectiveness Trade Marketing Analytics Sales Analysis Salesforce Analysis Channel Analysis Category Analysis Trade Promotion Analysis Workforce Analytics Employee Attrition Workforce Productivity IR Effectiveness Resource analysis

29 ©Company confidential 29 Distribution Performance Supply Chain Planning efficiency Supply Chain effectiveness Supply Network efficiency Warehouse Performance S&OP Analysis Forecasting Accuracy Planning Adherence & efficiency Variance Analysis HR Performance Recruitment Efficiency HR Spend analysis Working Environment Regulation Effectiveness Payroll Efficiency Business-Analytics Scope of Integrated BI Project Performance Mgmt Project Planning efficiency Project Spend & vendor Analysis Project Execution effectiveness Project Risk Analysis Corporate Sustainability Performance Carbon footprint, variance & credit analysis Sustainability Spend Analysis

30 ©Company confidential 30 Integrated EPM/BI Capability Corp Performance TM&D Perf SalesDistribution Category Perf Branch Perf Promo Perf Finance Channel Perf Planning Perf Warehouse Perf Logistics Perf Network Eff WD Perf WSD Perf AM Perf Outlet Svc Eff Route Eff Carrier Eff Scheduling Eff CBSC, Food, PCB Perf Brand Perf Mgmt Finance Operations Perf HR Perf Portfolio Perf Mkt Research Perf NPD Perf Procurement Perf Plant Perf R&D Perf Workforce Eff HR Perf Emp Perf Emp Eff AE Perf Dist Perf

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