Many consumer good (CG) firms are currently playing on a very rocky rugby field. With multiple business lines, diverse product families, a dizzying number of brands and highly decentralized operations, the planning and financial reporting process can easily become fragmented. It's not surprising then that each business unit, whether it be marketing, manufacturing, finance or purchasing, simply tries to keep a handle on its respective area. But, short-term vision and developing a comprehensive game strategy are very different goals.

Unifying Applications for Greater Insight

To avoid departmental myopia, a sophisticated, yet simple-to-use application is needed to link bottom-up and top-down planning processes. The right business performance management (BPM) software solution can help consumer goods and retail companies to gain a much broader and more accurate view of their overall business performance as well as target specific areas where greater profitability can be achieved.

In addition to classic budget and financial planning issues in other industries, such as long cycle times, limited workflow and version control, there are also industry-specific challenges in consumer goods companies which can be addressed by investing in a leading-edge business performance management system.

Modeling on the Fly

With a business performance management software application that provides one version of the truth, with data which is continuously updated, users can gain insight into projected and actual performance in multiple dimensions - by product, cost center, customer, country etc. By linking actuals, forecasts and other non-financial metrics, management can easily identify which products, brands or business units are the most profitable. They can then model on the fly to assess projected performance when assumptions for drivers such as promotional spending, product pricing or orders in the pipeline are altered with various scenarios.

Mastering Price Optimization and Trade Spending

In consumer goods companies, price optimization is an integral aspect of profitability. In fact, even the smallest changes in a company's pricing policy can have an enormous impact on margins and bottom line performance. BPM software can help understand which segments of the market are most sensitive to changes in prices, whether pricing tactics are in line with a company's goals and how specific product categories are performing at the retail or distribution outlet level.

Allocating funds for trade promotional spending is another key area where consumer goods companies must make essential decisions with important consequences. Using a BPM software solution allows companies to explore different "what-if" scenarios with ease to predict profitability based on different mixes of trade spending. This information in turn can be shared with sales and marketing to follow changes in consumer trends and competitors' strategies to make the best choices.

Improving Supply Chain Efficiency

At most consumer goods companies, inventory levels are still too high. Unless a company uses rolling forecasts, it is likely that their forecasts will be inaccurate, resulting in inventory levels which are unnecessarily high, or worse still, too low. BPM software integrates plans with rolling forecasts in a single application to bridge the gap between sales and operations, thereby enabling more accurate sales forecasts, which lead to more precise purchasing and inventory decisions.

All Adds Up

Beyond these consumer goods industry-specific needs, a BPM solution addresses more generalized planning and budgeting issues found in other industries as well. It should include a central data repository, version control, approval routing, workflow capabilities, real-time linkage to strategic plans, non-financial key performance indicators (KPIs), actuals and forecasts. By attaching supporting narratives to budgets and plans, users can draw direct comparisons between strategic plans and budgets or between budgets and KPIs, which gives a much clearer picture of specific areas that need improvement or adjustment.