Trade promotions ripe for collaboration: Sarbanes-Oxley is shining a spotlight on promotion practices. Collaboration between grocers and suppliers could bring much needed transparency to the process.Grocers are dabbling with collaboration tools to optimize supply chain management. However, it is surprising that more retailers are not using these tools to manage trade promotions. Companies sink millions of dollars into trade promotions each year, yet they never receive the promised return on investments. Further, companies fail to document the effectiveness of these promotions.
Why isn't collaboration being used to manage trade funding? Maybe the practice is too difficult to monitor, or perhaps grocers and suppliers already have a full plate. Consider this: Shareholders and the general public are putting public companies in the hot seat like never before, As a result, retailers and manufacturers must be accountable for financial records. This includes every dollar they spend on trade promotions.
To ensure this accountability, federally imposed regulations are going to require that all trading partners take responsibility for trade funding efforts. What's more, top-level executives who fail to comply with better trade funding record keeping could face penalties much harsher than a slap on the wrist.
These new requirements come on the heels of recent troubled times. For example, Ahold's U.S. Foodservice division, which supplies restaurants, hotels and schools, reported overstated o·ver·state
tr.v. o·ver·stat·ed, o·ver·stat·ing, o·ver·states
To state in exaggerated terms. See Synonyms at exaggerate.
o profits related to accounting irregularities. As a result, the company's stock price plunged, and some top-level executives within the division resigned. More recently, Enron's ex-CEO Jeffrey Skilling was charged with fraud and insider trading.
Supermarket officials who think it can't happen to them are being naive. Instead, companies must prepare for this legislation with the help of collaboration tools. This requires that companies move their manual bookkeeping processes into electronic files that can be shared. Not only will retailers gain accountability, they may also find cost savings and productivity improvements that are often overlooked among cluttered, disorganized dis·or·gan·ize
tr.v. dis·or·gan·ized, dis·or·gan·iz·ing, dis·or·gan·iz·es
To destroy the organization, systematic arrangement, or unity of. bookkeeping.
By adding collaboration within trade promotion management, retail and manufacturer partners can share data. This includes item forecasts, promotional discounts, promotional lift and more importantly, campaign timing and updates.
For collaboration to work, all relevant information needs to be immediately visible to all parties. However, disparate systems and manual processes cannot support this seamless information delivery. Manual processes waste money and cannot confidently report funding deductions.
For example, between 18% and 25% of a typical consumer product manufacturer's costs are poured into marketing, and 17% of a grocer's costs are spent on trade promotions. Yet, BearingPoint, a business consulting firm Noun 1. consulting firm - a firm of experts providing professional advice to an organization for a fee
business firm, firm, house - the members of a business organization that owns or operates one or more establishments; "he worked for a , reports that 78% of trade promotions are ineffective and inefficient. This is a scary fact given grocers typically report a 1% product margin. One culprit contributing to this low ROI (Return On Investment) The monetary benefits derived from having spent money on developing or revising a system. In the IT world, there are more ways to compute ROI than Carter has liver pills (and for those of you who never heard of that expression, it means a lot). is a lack of valid audit trails that highlight deductions and funding.
With the help of government intervention and the Sarbanes-Oxley Act See SOX. (SOX (1) (Schema for Object-oriented XML) An XML schema developed by Veo Systems and Muzino Communications, which was submitted to the W3C. SOX is based on DTD, but adds data typing and reuse mechanisms. ), the industry will begin re-evaluating this formula sooner than it planned. In addition to putting top-level management under scrutiny, all company information technology departments are required to create and maintain an archive of corporate records to support this legislation.
The deadline for compliance is scheduled for June. However, statistics released during a recent press conference sponsored by Oracle reported that only 14% of consumer packaged goods suppliers are SOX-compliant, and only 22% of retailers are ready. Sadly, most companies are still in the education phase. With only two months to go, companies need to get their collaboration plans in place.
Trading partners must begin synchronizing synchronizing,
n a technique that a therapist uses to coordinate his or her breath with that of the client; builds trust and establishes relationship. data and integrating common systems. These systems include those across the supply chain, accounts payable and receivable, point of sale, price optimization and decision support tools. This combination will help trading partners take advantage of collaboration as they analyze and document all revenue and costs related to trade promotion activity. The integrated systems also help companies control data, gain visibility of sell through and most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent"
above all, most especially , gain accountability.
It is a shame that new regulations are at the core of these changes in the retail environment. However, for companies to gain accountability, focus on their optimal ROI and stay out of the hot seat, collaboration, coupled with analytics and documentation, is a must.
Deena M. Amato-McCoy can be reached at firstname.lastname@example.org.