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BI in FMCG Industry - Raj Basu

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1 BI in FMCG Industry - Raj Basu

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 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 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 it’s 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 Strategy Communication
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. Key Business Benefits Organizational Alignment Strategy Communication Effective Model To Measure Performance Identify Capability Development Needs Develop Superior Consumer Insight Adopt New Technology For Manufacturing Flexibility HR Effectiveness Process Efficiency Customer Satisfaction Objective Initiatives Financial Performance Measures Business Performance Incr Share Holder value Sustained Profitable growth Accelerate Organic Growth Improve Productivity Vision Strategic Objective Functional Objectives Unit Individual Level 0 : Corporate Level 1 : Business Functions Level 2 : Units Strategy Communication Closed Loop - Feedback

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

7 Decision-making challenges at ITC Businesses
Business Performance Mgmt – Executive, Functional, Unit Level Scorecards Employee Performance Mgmt – Personal Scorecards Organizational Alignment Fact Based Decision-Making / Actionable Intelligence Tactical Operational Targeted Promotions & variable pricing Outlet Segment specific service packages Profitability based supply routes Demand driven inventory management Exception based operations at the Factories Stock optimization across supply chain nodes Fast tracking complaints from High Value Cust Personnel workload mgmt across stores Performance Visibility Analytical Capability 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 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 Integrated Analysis across value chains

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

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

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 Typical BI Transformation Roadmap
Major Organization Transformations….. Brand Management Transformation Process Improvement Transformation Supply Chain Transformation …Need a Performance Mgmt & BI Transformation to empower & measure effect of transformation !! BI Transformation Roadmap EPM & BI Workshops Define Performance Mgmt Model Define BI Strategy Create BI Governance Model BI Implementation BI Change Mgmt BI Value Mgmt Framework Metrics Models Scorecards Alerts Linkages/Alignments Analysis Flows Dashboard Designs Biz Case/ Info Needs Get Mgmt Buy-In Awareness Creation Appreciation of Best Practices Intent Generation 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

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 Key Questions for Change Mgmt Planning What will change ? Why will it change ? How will it change ? Who will change it ? Change Change is enabled through 4 key change perspectives People Participation Processes Systems Culture 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 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

13 Enterprise BI Strategy for ITC
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. BI Strategy BI Vision BI Needs/ Painpoints BI Business Case BI Budget Execution Plan Implementation Roadmap & Project Plan Execution Model (Inhouse/Outsource) Vendor Selection Architecture (Data, System) Tool Selection Scope Definition 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 ! Service & Maintenance Service Model (Outsource, Managed BI Svc) Service Quality Management Service Vendor Selection Service Improvement Governance Model Organization Alignment Customer Focus Risk Management Value Assessment

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

16 Source: Brandweek November 25, 2002/Cannondale Study
Despite such large spends, not many manufacturers have succeeded in measuring promotion effectiveness Only 7% of Manufacturers say that they are highly effective at evaluating promotion productivity. 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 KPI’s to measure the business. “Half of all promotional expenditure is wasted …... the problem is nobody knows which half!” William H. Lever, Chairman, Unilever Corporation Source: Brandweek November 25, 2002/Cannondale Study

17 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. 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 “Redeploy Inefficient Spending” “Manage Promotion Driven Costs” 1.5% 2.5% Potential Manufacturer Value Chain Improvement (as a Percent of Sales) .4-.6% .2-.3% .2-.4% .3-.6% Up to 2.5% .1-.2% .2-.3% 0-.1% 10.0% Percent of Sales ROS Manufac-turing Labor Freight Fixed COGS Salesforce Distribu-tion labor Inventory Carrying Cost Diverting and All Other Source: Accenture Industry Experience and Trade Promotion Study

18 Some typical Trade Promotion Effectiveness KPIs
Process Steps KPI Description Type of KPI Source of Information Role 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/Strategic Manufacturer Sales & Costing systems VP - Marketing Measure the lift in sales volume due to the promotion Sales Lift% % increase in base demand post promotion Tactical Retailer POS systems 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 Retailer POS Systems 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 Manufacturer Sales systems

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

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

21 Thanks !

22 Evolution of BI Increasing Maturity
BI Affordable, Democratized, Mobilized B1 2.0 Pervasive BI (Business Planning, Collaboration) Increasing Maturity Data –> Insight, Alerts, Root Cause Analysis Static Reports -> On-The-Spot Answers MIS/EIS Reports BI –> EPM/CPM 1990 BI -> Greater Integration Business Intelligence -> Intelligent Business (Exception based Mgmt, predictive analytics etc) 1995 2000 2005 2015

23 Evolution of BI Increasing Maturity BI 2.0 Excel Excel Excel What-If
Analysis Collaborative BI Text Intelligence Desktop OLAP Reports OLAP Reports EPM CPM Predictive Analytics Increasing Maturity Static Mgmt Reports Expensive Data Integration Web based OLAP Reports Dashboards Scorecards Alerts Analysis Trails Exception Based Management Mainframes Data Silos Integrated Data Repositories Packaged ERP BI Real Time Analytics 1990 1995 2000 2005 2015

24 Unilever Akili Unilever Global Network : Connects all regional business units and its customers under one global 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 Dispersed R&D Category & Channel Marketing Collaborative Shopper Value Creation Regional Category Support Demand Planning Distribution Structure Channel Strategy Category Development By country Country Specific Brand Activation Plans Enablers Common Identification Standards Single Platform – all regions Global Data Synchronization Standardized Processes & Systems Integrators Common Business Performance Models Collaborative Planning Global Registry Global Information Service Center Data Pool

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 Marketing Effectiveness Portfolio Enhancement Strategic Partner Supply Chain Demand Planning Manage risks to targets Global Sourcing Effective hedging Working capital optimization SKU optimization Customer profiling & categorization Consumer & shopper behavior Trade dynamics & channel intelligence Micro Marketing intelligence specific to regional needs Drive operational channel marketing programs By Geography, Category & by Product groups Help to optimize product offerings Identify new opportunity for growth of existing products in the global portfolio Help in M&A Identify Cash Flow issues Currency risks Aid in investment opportunities Business Benefits Effective decision making Enables Shared Services & reduces cost of operations Speed to share & Implement new best practices

26 Reebok – Global Business Intelligence
Sales & Marketing Analytics Purchase Analytics Supply Chain Analytics Vendor Analytics Financial Analytics mySAP portal 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] Enterprise Exchange Service Sales Force Customers Logistics Vendors Forwarders Customs Financial Institutions Key Benefits Consolidated picture of performance – By brand, By Geo, By Period Fact based decision making – exception based Supply Chain management Driving accountability across organization –metrics ownership from top to bottom Better vendor control – vendor scorecarding Improved sharing of best practices within organization – visibility across organization

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

28 Business-Analytics Scope of Integrated BI
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 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 Business-Analytics Scope of Integrated BI
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 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 Integrated EPM/BI Capability
Corp Performance TM&D Perf CBSC, Food, PCB Perf HR Perf Brand Perf Mgmt Finance Operations Perf HR Perf Sales Finance Distribution Emp Perf Planning Perf Mkt Research Perf Portfolio Perf Procurement Perf R&D Perf Category Perf Promo Perf Warehouse Perf Network Eff Dist Perf NPD Perf Plant Perf Workforce Eff Channel Perf Outlet Svc Eff Logistics Perf Branch Perf Emp Eff WD Perf WSD Perf Route Eff Scheduling Eff Carrier Eff AM Perf AE Perf

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