|
- Summary
- Top Tips
- Explanation of topic
- Weaknesses Identified
- Best Practices
Summary
The purpose of the promotion process is to align and create synergies between systems and people to execute successful promotions and maximise on-self availability.
The promotion process involves cross functional working and multi channel communication this makes the execution of the process complex. The intention of having such a structure is to drive sales by increasing the attractiveness of the customer offer.
Promotions are used to retain existing customers by keeping their shopping experience fresh and exciting whilst also used to increase market share by drawing new customers from the competition.
Top Tips
- Allocate a Promotions Process Owner
The process owner should be high level with in the business to have the authority to challenge decisions and force adherence to procedure. Ensure all members involved in execution of the critical path follow the process and communicate via agreed channels and all functions of the business are aligned.
- Review process by department and identify best practice
Provide training to equip colleagues with the skills required and empower people to drive the desired behaviours.
- An agreed change process and defined contingency plans
Agreed escalation routes, sign off and communication channels if late amendments or product replacements are required.
- Autopsy and feedback built into the promotion process
Recorded learning’s both good and bad to drive continuous improvement. Hold a central database recording historic data; such as forecast accuracy, market conditions and promotional offering.
Back to Top ^
Explanation of topic
A common promotional process starts with a planning phase; incorporating Retailer’s agreeing their Promotional Strategy and aligning joint Businesses Plans with manufactures. A cross category review is usually conducted and the promotional offer signed off. Planogrammes are created in conjunction with agreeing robust forecasts with manufactures. The process moves into the execution phase where forecast are validated, orders are placed and managed. Stores receive stock and set up ready for go live. Promotions are tracked and a clear exit strategy applied.
Back to Top ^
Weaknesses Identified
Fragmented process and inflexible
This promotions process requires efficient, aligned communications and involve all departments in manufacturers and retailers which increase complexity (communications).
Generally high volumes of product are required due to the expected uplift in sales; this requires long term planning which can be difficult to manage in a fast paced environment such as the retailing marketplace. This marketplace necessitates retailers to be proactive to demand but on the other hand manufacturers require planning to ensure leanness of production which then enables better prices. [see Manufacturing] The promotion process can appear inflexible. A number of retailers apply follow the same process even if the categories have different characteristics and involve different customers’ behaviour.
No standard process for late changes and delays
The promotion process should follow a defined critical path and often only takes account of the ideal conditions. As mentioned above, the promotion process is a timely process and involves all business functions internally and externally with cross functional communications, interactions and negotiations. When a late change is necessary there is no standard process to accommodate this. Late changes are often not communicated adequately, creating confusion across departments and increasing the risk of errors. It is this breakdown in communication that can result in gaps on shelves.
Non-adherence to process
Compliance to the promotion process timeline is essential to ensure that all tasks have sufficient time to be performed correctly without errors, optimising promotion on-self availability OSA. Adherence to timescale is critical and is identified as one of the biggest challenges in executing successful promotions.
Delays in the process have subsequent implications further down the critical path and often results in misunderstanding, miscommunication and ultimately errors impacting on- shelf availability OSA.
Late changes reduce the time available for the execution phase i.e. late commercial decisions deviate from the promotion processes delaying the flow of information to the next people in the chain.
Significant changes (e.g. changes of theme corporately or customer offer changes) at a late stage requiring the buyers to rework the plan are even more likely to delay the promotion process. Hence, one experienced buyer mentioned: "When nothing causes a late start or finish of the planning, the process works very well". The challenge with promotions is always how to remain reactive and nimble as possible, to make the right changes for the customer without impacting the execution of the promotion.
Manufacturing Lead Times
Changes to the agreed forecasts or delays in providing manufacturers with robust volumes can cause availability issue upstream. Depending on the manufacturers’ production capacity, lead times and sourcing of raw materials deviation from the critical path will affect OSA. [see Manufacturing] [see Forecasting] . Some manufacturers explained that usually they are able to react to small changes to the promotions. The manufacturers explained that they encounter difficulties mostly when the retailers give them late notice for a major promotion that would require setting up an extra night shift for example. Several manufacturers noticed that their OSA issue was mainly due to a big promotion and specific product lines. However, several manufacturers claim that occasionally, when there is an opportunity to increase sales with a major retailer, they would step outside the process; the key is efficient communication in the wider team of sudden big changes to ensure supply outside usual business process.
Strategy for exiting a promotion
Poor planning when exiting a promotion or poor forecasting and phasing of volumes, retailers or manufacturers may be left with excess stock. This inventory can be very costly and result in high waste and capacity issues at DC and stores. [see Manufacturing]
Back to Top ^
Best Practices
Formalised process for amendments
A standard process for late changes (contingency) can be designed in parallel to the standard process path but evolving at faster and variable pace depending on the circumstances and embedding contingency back up plans. This process for late promotions would require shorter communication lead times. The retailer needs to determine the latest date a promotion can be signed off from planning phase without delaying the execution of the promotion creating OSA issues.
Concurrence of Promotion
Within certain retailers all promotions are launched at the same time in cycles throughout the year. Stores can struggle to keep up with the set up workload, creating errors in set up, confusion and out of stocks OOS. Also, launching the 3 temperature regimes (chilled, ambient and frozen) at the same time created capacity issues in distribution centres DC’s. One of the promising practices successfully adopted by many UK retailers is launching the promotions in sequence by product regime (ambient, chilled, and frozen). This has smoothed the workload involved in the set up of the promotions in stores and simultaneously level volume going through logistics and transport network.
Minimise one size fits all
The “one size fits all” strategy can be revised to increase flexibility and agility of the process. Stores should be grouped in size or region and have a tailored promotion process to suit their shoppers behaviour.
Ownership and Control
Identify clear areas of accountability and responsibility for each stage of the promotion process. The critical path should have a clear owner to enforce adherence and challenge delays, amendments and ensure the correct outputs are delivered on time.
Consistent approach
Indentify best practice and benchmark against it. Engage all stakeholders in delivering to a consistent format and to an agreed standard through training and assessment. Have clear success measures that all stakeholders are driving to achieve, feedback results to drive continuous improvement. Alignment of business KPI’s will ensure all stakeholders in the promotions process are working to execute the same deliverable and avoids internal conflict of interest.
Minimise late start and late finish of the promotion planning phase
The retailer needs to determine the latest date a promotion can be signed off from planning phase without delaying the execution of the promotion. By establishing where flex can be attributed to the process there are clear decision points where changes can or can’t be made. All changes must be signed off by the assigned process owner.
Root Cause Analysis
Retailers should track and keep a record of any late changes and non adherence to process, in order to analyse the root causes of these late changes. Acting on the causes, focusing on timescales and techniques to reduce the amount of unplanned events will reduce the risk of errors. According to one retailer senior manager, “Compliance to the critical path and a robust review process would solve 90% of the promotional OOS.”
80% of promotions following timescale 20% flexibility
A number of retailers work on an 80-20 rule where 80% of the promotions follow the process timescale so that the other 20% of promotions could be planned on a much shorter lead time. This enables the retailer to remain a reactive and flexible business within the highly competitive retailing environment and market changes (20% flexibility) with enough structure to enable stability (80% planned). These unplanned promotions encompass industry leading offers differentiating one retailer from it’s competitors. These 20% of shorter planned promotions should be agreed with flexible, reactive manufacturers and through strong partnerships developed over the time. Some of the manufacturers have the capability and flexibility to supply promotions within a very short notice from the retailers, up to one week before the promotion launch without forecast figure or paperwork. This coincide with the affirmation of the retailer which has 20% of its promotions planned in a very short lead time.
Shared resource can have quicker response times.
Vendor managed inventory VMI and personnel “implants” can interact with the retailer Supply Chain function and the Commercial function and act as one point of contact with the manufacturer. Hence, this person could be ideally placed to notice late changes at the retailer and inform the manufacturer to provide resource to the retailer. It effectively allows the manufacturer to have more confidence that the promotion plan will happen as expected or that any changes are identified with enough lead time to be able to respond.
Agreed contingency plans ahead of major promotions
Some retailers agree with manufacturers upfront a quantity of buffer stock over the forecast in order to guarantee continuous supply of promotion stock, allowing the retailer to have an element of forecasting error.
Manufacturer contingency
If the manufacturer is left with high promotion stocks as a result of over forecasting, some retailers, again depending on relationships developed with the manufacturer may help the manufacturer and take overstocks and clear through via promotions.
Other Promising Practices:
Direct feedback from stores to the supply chain in the retailer head office regarding any execution issues with current promotions. When a trend across stores is identified, it gets recorded weekly and is visible to the whole business.
Established process in place where if the stores are flagging out of stocks, the delivery lead time from DC to stores can be reduced from 3 days to 1 day.
Back to Top ^
Other Focus Areas:
|
|
|
|
|
|
|
|
|
Forecasting |
Getting Product to Store |
On the
Shop Floor |
Distribution |
Communication
& Collaboration |
I.T |
Production |
 |
|
 |
|
Promotional On-Shelf Availability - Next steps:
|
|
 |
|
 | | |
|
