Going deeper
Let’s take a deeper dive into identifying optimization sophistication levels. Understanding if your organization is at an entry, intermediate or advanced level will contribute to selecting the best optimization strategy to meet your needs.
Which One Are You?
1
At this level, a Consumer Products Manufacturer may lack an understanding of their non-promoted price at shelf. In order to determine incremental volume, a base volume forecast has to be ascertained. The manufacturer will need to focus on a better understanding of base and lift due to:
- Trade spending budget constraint
- Possible base volume erosion
- Margin erosion
Your challenges may include some or all of the following:
- Always promoted
- Multiple overlapping merchandising conditions
- Lack of POS data
Entry Level: Base And Incremental Volume
2
Here, manufacturers have evolved and have a clear understanding of base and incremental lift for said merchandising condition.
They have:
- Utilized each and have improved trade efficiency using pre- and post-event analysis.
- Improved forecast accuracy for volume and accruals based on accurate lift indexes.
- Typically loaded a weekly base volume into the TPM application using “What if” scenarios during the planning process to determine the frequency, depth and combination to deliver an S&OP target based on a net revenue target.
This type of modeling requires a planning tool with optimization capability.
Intermediate level: “What if” scenario modeling
3
At this level, manufacturers are category leaders who understand what their constraints are and are not restricted by the retailers’ calendar. In fact, the tables are turned at this level and retailers need these manufacturers. Their constraints include a defined budget, sales margin and growth goals. Once these are put into the planning tool, your plan is built and ready to run.
Advanced level: “Business Rule Constraint-Based”
scenario modeling
