Characteristics of a good promotion planning system
Filed in archive Point of view on March 5, 2008
Companies have different motivations for launching promotion programs: Some want to get rid of the inventory in the warehouses, some of them are get paid by the suppliers, some want to increase seasonal balance and some want to do cross-selling. In any case, apart from the good side of the promotion which is increase in profitability (hopefully!) there is a bad part and that's the increase in complexity in supply chain.
Supply Chain Analysis, recently conducted an online poll in which users were asked whether they agreed that more promotions increased supply chain complexity and reduced service levels.
The results show that 47% of respondents believed that this was indeed the case, although 37% disagreed, believing more promotions do not complicate the supply chain, while 16% were undecided.
Some of the characteristics of a good promotion program, in my point of view are the following ones:
1- High level of communication between sales and supply chain department to do the promotion at the time where supply chain doesn't have other big issues.
2- Use the historical data to calculate the effect of cannibalization, better estimate of demand and determine the good time for promotion.
3- Have a plan B in the case demand rises unexpectedly to be able to respond to the customers
4- Work on fast replenishment techniques to fulfill the demand
These were just some quick thoughts. Do you also have some ideas?
Tags: promotion supply chain complexity management effect poll survey researchscm super market 2007 supply
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Response from:
Mike
(03/05/08 4:22pm)
One area that was not mentioned was the importance of also planning an unsaleables / returns policy regarding a promotion. In the event that a promotion does not go as well as planned what is to be done with excess product in the stores and DC's? I have seen with some CPG food manufacturers unsaleable rates as high as 40% to 60% thereby exceeding any possible sales gains. The other area that is important is to look at how some of these promotions result in product being diverted to the secondary and tertiary market and the effect that this may have on your brand name.
Response from:
Randy Littleson
(03/07/08 12:18am)
Agree with your thoughts. You mention that you should have a plan B in case demand is higher than you speak. I would take that one step further. You need to ensure that your front-line decision makers are armed to deal with whatever comes up. You might have, as you noted, an upside surprise in demand. You could also see demand vary in geographies differently than you had planned. There's also the potential for supply disruptions that could impact your ability to meet the demand that the promotion generates.
The reality is that you just don't know. Unless you can predict with absolute certainty how your promotion will impact your business, you need to be able to respond to unexpected issues. A lot of money goes into a promotion, and the last thing you want is to find that you can't respond as needed to unexpected outcomes.
Empowering front-line decision makers with the ability to quickly sense issues, to fully analyze their impact and then to collaborate on a profitable response, you'll go a long way toward ensuring a successful promotion.
The reality is that you just don't know. Unless you can predict with absolute certainty how your promotion will impact your business, you need to be able to respond to unexpected issues. A lot of money goes into a promotion, and the last thing you want is to find that you can't respond as needed to unexpected outcomes.
Empowering front-line decision makers with the ability to quickly sense issues, to fully analyze their impact and then to collaborate on a profitable response, you'll go a long way toward ensuring a successful promotion.
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