BI in FMCG Industry - Raj Basu

1. BI in FMCG Industry- Raj Basu

2. Major changes in FMCG industry • Indian Consumer changes • Larger disposable income • Middle class segment bulging • Greater global exposure • Greater appetite & demand for global products • Differentiated product & service requirements • FMCG space dynamics • Explosion of products • Explosion of markets (Kirana & Organized Retail) • Rush of new players • Global players bringing process and intelligence maturity • Increasing competition • Supply chain bottlenecks • Impact on FMCG strategy & operations • Increasing Flexibility • Outsourced Contract Manufacturing • Demand driven supply chain • Improving Customer service • Retail outlet segmentation • Customized Retail service • Supply Chain segmentation • Greater Organizational Alignment • EPM, Divisional Scorecards • Integrated Sales & operations planning • Greater Customer focus • Demand analysis • Product charateristics

3. EPM/BI needs of the FMCG Industry • Rapid EPM adoption for Org Alignment & strategy management • Balanced Scorecards (Strategy Maps, Business Scorecards) • Budgeting, Planning & Consolidation systems • Operational performance management • Financial Analytics for greater ROCE • Working Capital Optimization (C2C Cycle) • Debtor Analytics • Payables Analytics • Inventory Optimization • Treasury Cash Analysis • Customer Analytics • Trade Promotion Analytics • WD Profitability • Outlet performance • Channel Analysis • Integrated Consumer Demand & market performance visibility • Supply Chain Analytics • Supply Chain Performance Management • Product Cost & profitability analysis • Operational Planning efficiency • Inventory visibility & optimization • Supply Network efficiency • Spend Analytics • Operations Analytics • Plant Performance Management • MES Analytics

4. Key BI Trends in the FMCG industry • Major Indian FMCG players are making rapid strides in enabling Business & Competitive intelligence as a key differentiator • Most of the large FMCG companies are centralizing BI as a shared service on a common platform across it’s businesses and brands with a razor like focus on getting Best-In-Class service • Most of them are already deep into state of art Business Intelligence • ability to check on an outlet consumption pattern on a handheld before meeting the owner • ability to analyze secondary sales based promotions rather than primary uptake • ability to provide outlet based actionables rather than market level inputs like OOS, poor AVF scores etc • Global players are even further ahead • Trade Promotion Analytics, Segmentation based promos, supply chain bottleneck alerts, route optimization and advanced forecasting and predictive demand models

5. HR Effectiveness Incr Share Holder value Develop Superior Consumer Insight Effective Model To Measure Performance Identify Capability Development Needs Sustained Profitable growth Improve Productivity Accelerate Organic Growth Level 0 : Corporate Key Business Benefits Vision Strategic Objective Customer Satisfaction Level 1 : Business Functions Functional Objectives Organizational Alignment Strategy Communication Closed Loop - Feedback Strategy Communication Adopt New Technology For Manufacturing Flexibility Unit Objectives Financial Performance Measures Objective Initiatives Individual Objectives Business Performance Level 2 : Units Process Efficiency EPM Objectives FMCG majors are interested in implementing a Performance Management (PM) program across the enterprise, in order to align goals and strategies with operational objectives, plans and responsibilities within the organization.

6. Classic Balanced Scorecard Framework Key Questions Key Imperatives Perspective Vision & Strategy Results Effect To Satisfy our shareholder, what financial objectives must we accomplish Financial “Profitability” “Return on Capital Employed” To achieve our financial goals, what customer needs, must we satisfy Customer “Consumer Satisfaction” “Market Share” To satisfy our customers, what internal business processes, must we excel in Internal Process “Efficiency” Cause Action To achieve & maintain our competitive position, how must the organization the Organization learn & improve Learning & Growth “Knowledge” “Innovation” Balanced Scorecard incorporates a double loop feedback around both internal business processes and external outcomes

7. Decision-making challenges at ITC Businesses • Business Performance Mgmt – Executive, Functional, Unit Level Scorecards • Employee Performance Mgmt – Personal Scorecards Organizational Alignment Fact Based Decision-Making / Actionable Intelligence Tactical Operational • Targeted Promotions & variable pricing • Outlet Segment specific service packages • Profitability based supply routes • Demand driven inventory management • Exception based operations at the Factories • Stock optimization across supply chain nodes • Fast tracking complaints from High Value Cust • Personnel workload mgmt across stores Performance Visibility Analytical Capability • Promotion & marketing impact tracking • Supply Chain bottlenecks • SKU velocity • Logistics impact on operating margins • Store Allocation efficiency • Reservation Pipeline vs Forecast • 360 deg Customer Views • 360 deg Supplier views • Cost variance tracking • Order-To-Fulfillment, Cash –To-Cash, • Procure-To-Pay cycle times • Outlet Service Route Optimization • Outlet Segmentation • Analytical Forecasting • Six Sigma Analytics • Price Elasticity Analysis • BCG Portfolio Analysis • Human Productivity Analysis • Loyalty Analytics • Impact of Food FG Warehouse location on Food Categories operating margins • Impact of Leaf stock at ILTD on price elasticity at ITD • Impact of potato sourcing bottlenecks on Bingo Freshness Integrated Analysis across value chains

8. EPM driven BI at a US Food Distribution Major Strategic Goals Strategic Metrics/Scorecards Demand Initiatives Sourcing Initiatives Supply Chain Initiatives Customer Initiatives Some Analysis Areas Some Analysis Areas Some Analysis Areas Some Analysis Areas • General Analysis • Sales Force Effectiveness • Trade Promotion • Effectiveness • Marketing Effectiveness • Market Analysis • Spend Analysis • Supplier Performance • Analysis • Item & Brand Analysis • Bid Analysis • Competitive Analysis • Delivery Effectiveness • SKU rationalization • Effectiveness • Backhaul Effectiveness • Carrier Performance • Analysis • General Analysis • Segmentation Analysis • Contract Compliance • Business Review Analysis • Customer Profitability • Analysis Business Functions - Functional Metrics, Reports, Alerts, Scorecards, What-If Analysis, Guided Analysis IT Functions - Dashboards, BI Tools, Databases, ETL, Data Models, Metadata

9. A single BI System should support the EPM Model Performance Management Model • A common data set populates • the entire model enabling :- • Scalability • EPM, Data, BI Model • System Performance • Integration • data linkages • business rules BI Layer (Business logic, number crunching, metric/report generation ) Outlet Sales, Invoices, Purchase Orders Inventory, Transport Orders, Stock Tr Orders, Salary Advice, re-distribution Costs Business Plan, Forecast, A/R, A/P, Visual Merch Audit, Production Plans, Market Research, Production Jobs Data Warehouse (Data Storage) Data Extraction, Cleansing, Staging, Transformation & Loading ETL Layer Source Systems Sales Force & CRM Visual Audits WD System Excels PLM HRMS SAP

10. Some benefits of integrated modeling for FMCG • Impact of raw material shortage on retail offtake • Analysis of a request for a short runner on • Factory productivity vis-à-vis customer service • Correlate/factor-in market demand (IMRB) into AE performance • Decision on extending Promotions based on raw material availability • Analyze impact of sales strategies/norms on Market standing • Analyze synergy opportunities like sharing warehouses, transportation sharing • and backhauling, reverse logistics etcacross categories

11. Typical BI Transformation Roadmap Major Organization Transformations….. Brand Management Transformation Process Improvement Transformation Supply Chain Transformation …Need a Performance Mgmt & BI Transformation to empower & measure effect of transformation !! BI Transformation Roadmap EPM & BI Workshops Define Performance Mgmt Model Define BI Strategy Create BI Governance Model BI Implementation BI Change Mgmt BI Value Mgmt Framework Metrics Models Scorecards Alerts Linkages/Alignments Analysis Flows Dashboard Designs Biz Case/ Info Needs Get Mgmt Buy-In Awareness Creation Appreciation of Best Practices Intent Generation Technology Drivers App Architecture Data Architecture Platform Selection Vendor Selection Initiatives Roadmap Effort Estimation Identify Sponsor Create Steering Comm Create Execution Comm Comm to all stakeholders Set expectations/Time Create Project Plan Business Requirements System Requirements Design Development Testing Deployment Training Communication Biz Process Changes Expectation Mgmt Usage Monitoring BI Support Processes Risk mgmt KPO Customer Service Business Impact BI Perf Mgmt BI RoI BI Enhancements

12. BI Program Change Mgmt Challenges & Strategy An effective Change Management strategy for BI Program starts at the Kickoff and ends at satisfactory system adoption and positive customer feedback. However, Change Management is an ongoing process and is part and parcel of an effective BI Governance Model. bringing people on board, convincing them of the value, goading them to use it the right way, measuring business improvements. BI, being a non-critical business application needs cultural process changes to leverage the investment, which makes it even more challenging and critical aspect of achieving success Key Questions for Change Mgmt Planning What will change ? Why will it change ? How will it change ? Who will change it ? Change Change is enabled through 4 key change perspectives People Participation Processes Systems Culture • Business Driven Program • Showcase Business Benefits • Keep business in loop during • change in scope • Embed in biz processes like • sales review etc • Pre-empt business needs • Communicate effectively • Repeated Multi-media • training • Measure adoption, usage and • publish figures • Publish success stories • Identify and Plan for process changes early on • Create effective communication channels and joint project plans with other process owners • Cultural and governance change needs to go along with process changes • Identify & Plan all system • changes early on • (Frontline systems may need to • have more checks and measure • to improve data quality) • Create effective communication channels and joint project plans with • other System owners • Communicate all system changes to the Organization • Business Sponsorship • Business Buy-In, Ownership • Identify Business Change • Agents • Remove Business IT gaps • Remove fear of Retrenchment • Create Senior Mgmt Champions to spread the message

13. Enterprise BI Strategy for ITC Business Intelligence Mission (SYSCO): Provide a single view of timely, accurate, consistent & actionableinformation across the enterprise through a common user interface accessible anytime, anywhere to authorized users, thereby enabling fact based decision making. BI Strategy BI Needs/ Painpoints BI Vision BI Business Case BI Budget Execution Plan Execution Model (Inhouse/Outsource) Vendor Selection Architecture (Data, System) Tool Selection Implementation Roadmap & Project Plan Scope Definition • BI Business Case • Unique Sales & Customer view • Unique Spend & vendor view • Supply chain wastes • Asset utilization gaps • Higher employee productivity • Greater IT ROI • Single Analysis Platform across biz areas • Excel intelligence democratization ! Service & Maintenance Service Model (Outsource, Managed BI Svc) Service Quality Management Service Vendor Selection Service Improvement Governance Model Organization Alignment Customer Focus Risk Management Value Assessment

14. So What’s Driving Trade Promotions? • New product introductions. • In 2003, 33,700 new FMCG items in the US marketplace alone • up from about 32,000 in each of the previous two years. • Declining shelf space. • Median US store size has declined since its 1999 peak of 44,843 square feet, following nine consecutive annual rises. • Wider assortment range in both North American and European stores constrains shelf space yet more. • Private-label products. • Private-label products now account for between 15% and 20% of items sold in US supermarkets, 22% in Europe, and a staggering 42% in the UK. • Result - large and rising trade promotion spend • 10 FMCG firms interviewed by Forrester planned 2003/4 trade promotions at 16% gross revenues • It all adds up to more than $100 Billion per year • Based on 2003 revenues, the 50 largest FMCG manufacturers. • It’s the single largest element of expense for FMCGs, but the least well controlled. Typically CFOs use a complex tangle of spreadsheets and enterprise app extracts to track trade promotion dollars but have no way accurately to estimate in advance the impact of a planned promotion. CRM based approaches typically just rely on sales estimates of trade promotion impact, thus ensuring that trade promotion accruals and supply chain preparations are based only on guess work • No wonder senior execs get mauled by regulators and shareholders alike Source : Forrester Research

15. 1 Analyze Performance - During and end of promotions 7 FINANCE TRADE MANAGEMENT Execute Deals SALES OPERATIONS BRAND / CATEGORY MANAGEMENT Collaborate and Approve New Plans MARKET INSIGHTS Generate new Promotions Plan/Forecast 4 Negotiate & Sell in Deals 6 5 Linking Insight and Performance Management with Decision Support Closed Loop Process BEGINS with Analyzing Performance and Opportunities in the Business 2 3 Analyze Opportunities for Brands and Markets Plan, Simulate and Evaluate Scenarios Analytics Operational

16. Only 7% of Manufacturers say that they are highly effective at evaluating promotion productivity. Despite such large spends, not many manufacturers have succeeded in measuring promotion effectiveness • Of all investments, promotional spending is the highest whilst knowledge about their return and effectiveness is the lowest. • For promotions, the driver is what was done the previous year • Most promotions are NOT evaluated in an objective and systematic fashion • There are no management KPI’s to measure the business. “Half of all promotional expenditure is wasted …... the problem is nobody knows which half!” William H. Lever, Chairman, Unilever Corporation Source: Brandweek November 25, 2002/Cannondale Study

17. Substantial Opportunity for Manufacturers Research suggests that FMCG manufacturers can achieve up to a 40% increase in return on sales through improved trade promotion management. • 80-90% of promotions are not profitable for manufacturers • Consumers are unaware of 51% of items bought on sale • Only 50% of manufacturers measure event profitability “Redeploy Inefficient Spending” “Manage Promotion Driven Costs” 1.5% 2.5% Potential Manufacturer Value Chain Improvement (as a Percent of Sales) .4-.6% .2-.3% .2-.4% .3-.6% Up to 2.5% .1-.2% .2-.3% 0-.1% 10.0% Percent of Sales ROS Manufac-turing Labor Freight Fixed COGS Salesforce Distribu-tion labor Inventory Carrying Cost Diverting and All Other Source: Accenture Industry Experience and Trade Promotion Study

18. Some typical Trade Promotion Effectiveness KPIs

19. What will happen • What is happening • Why did it happen • What happened Trade Promotion Analytics – Hierarchy of Needs Operational Strategic Tactical A N A L Y T I C S Demand Management TP Scenario Planning Customer Behaviour Analysis Inventory Management Ensure shelf availability Measurement of Sales KPIs – Store level, SKU level, Lift%, Drop% Determine and analyse Causals Evaluate Promotions Effectiveness Determine Order Status Determine Promotion Costs Measure promotion impact on sales volumes Evaluate Store/Account Profitability

20. TPM Applications – Key Interfaces Customer Master Data Store Promo Adoption POS Inventory Channel Spends Product Master Data ERP Consumer Off-take Price Master Data Customer Analytics Sales Performance @ Brand-Account level SCM Stock-Out data Historical Sales Trend Consumer Billing Price Operational Application CRM Store level forecasts Base Demand Planogram Compliance Sales Returns Forecast Accuracy Order Backlog Market/Cateogry/Channel Outlook SYNDICATE DATA Inventory Availability Analytical Application Retailer Panel Data Retailer Invoice data Consumer Panel Data Total cost of promotion Retailer Promo penetration data Exception Alerts Optimisation Causal Analysis What-If Analysis Reports Third Party Data Retailer Applications FMCG TPM Application TPM Analytics FMCG Enterprise Applications

21. Thanks !

22. 1990 Evolution of BI BI Affordable, Democratized, Mobilized B1 2.0 Pervasive BI (Business Planning, Collaboration) Increasing Maturity Data –> Insight, Alerts, Root Cause Analysis Static Reports -> On-The-Spot Answers MIS/EIS Reports BI –> EPM/CPM BI -> Greater Integration Business Intelligence -> Intelligent Business (Exception based Mgmt, predictive analytics etc) 1995 2000 2005 2015

23. Evolution of BI BI 2.0 Excel Excel Excel What-If Analysis Collaborative BI Text Intelligence Desktop OLAP Reports OLAP Reports EPM CPM Predictive Analytics Increasing Maturity Static Mgmt Reports Expensive Data Integration Web based OLAP Reports Dashboards Scorecards Alerts Analysis Trails Exception Based Management Mainframes Data Silos Integrated Data Repositories Packaged ERP BI Real Time Analytics 1990 1995 2000 2005 2015

24. Enablers Global Intelligence Framework Common Identification Standards Supply Chain Intelligence Single Platform – all regions Consumer, Shopper & Trade Analytics Global Data Synchronization Trade Dynamics, promotion management Network Planning & Optimization Market Trends & Consumer Segmentation Competitive Intelligence Standardized Processes & Systems Global Information Service Center Integrators Supply Chain & Demand Planning Category & Channel Marketing Global Manufacturing Collaborative Shopper Value Creation Common Business Performance Models Integrated Sourcing Hubs Regional Category Support Global Registry Regional Demand Planning Regional Channel Strategy Country Specific Intelligence Regional Distribution Structure Category Development By country Brand Activation Plans Regional Supply Chain Dispersed R&D Collaborative Planning Data Pool Unilever Akili Unilever Global Network : Connects all regional business units and its customers under one global data pool Unilever Akili : Working together with the business to fulfill consumer whishes better, faster and cheaper

25. Nestle – GLOBE (Global Business Excellence) Managing Data as corporate assets – Implementation of single data standard – All Regions Implementation of harmonized Nestle Business Excellence Best Practices – All Regions Implementation of standardized information system & technology – all regions GLOBE - Objectives Marketing Effectiveness Portfolio Enhancement Key Initiatives Strategic Partner Supply Chain • By Geography, Category & by Product groups • Help to optimize product offerings • Identify new opportunity for growth of existing products in the global portfolio • Demand Planning • Manage risks to targets • Global Sourcing • Effective hedging • Working capital optimization • SKU optimization • Customer profiling & categorization • Consumer & shopper behavior • Trade dynamics & channel intelligence • Micro Marketing intelligence specific to regional needs • Drive operational channel marketing programs • Help in M&A • Identify Cash Flow issues • Currency risks • Aid in investment opportunities Enables Shared Services & reduces cost of operations Business Benefits Effective decision making Speed to share & Implement new best practices

26. Reebok – Global Business Intelligence Sales & Marketing Analytics Purchase Analytics Supply Chain Analytics Vendor Analytics Financial Analytics mySAP portal SAP BW SAP R/3 - AFS (Apparel & Footwear solution) [NAM, Canada, Japan, Europe, Russia] SAP R/3 - AFS (Apparel & Footwear solution) [NAM, Canada, Japan, Europe, Russia] SAP R/3 - AFS (Apparel & Footwear solution) [NAM, Canada, Japan, Europe, Russia] SAP R/3 - AFS (Apparel & Footwear solution) [NAM, Canada, Japan, Europe, Russia] Enterprise Exchange Service Sales Force Customers Logistics Vendors Forwarders Customs Financial Institutions • Key Benefits • Consolidated picture of performance – By brand, By Geo, By Period • Fact based decision making – exception based Supply Chain management • Driving accountability across organization –metrics ownership from top to bottom • Better vendor control – vendor scorecarding • Improved sharing of best practices within organization – visibility across organization

27. Managed-BI Service Model for ITC Client Business Team Client Partner Client’s Client SLAs, Joint Planning, Escalations, Business requirements, Financials, Change Management ITCInfotech Client Management Team • BI Program Management • Business Analysts • BI Support Security Control BI Application Portal (ITD, FBD, Hotels, LRBD) Complexity Firewall Managed Service Vendor Facilities Analytics Services • Knowledge Services • Business Analytics Services (Segmentation, Price Elasticity etc) • Business Optimization Services (Stock optimization, Route Opt) • SME (SCM, CRMetc) • Analytics Experts Quality Control (Scorecards) ITC Infotech Governance Measures • Reporting Services • Generate On–Demand reports, Alerts, Dashboards • Maintain ETL Reporting, Database applications • Architects • BI Engineers • ETL Engineers • DBA • Data Management Services • Master Data Management • Data Quality Management • Data Administrators • Data Analysts Systems & Datacenter Methodologies & Processes • Infrastructure Services • Software Server Management • Hardware & network Management • Hardware Engineers • Network Engineers

28. Business-Analytics Scope of Integrated BI • Financial Analytics • Profitability Analysis • Financial Planning Accuracy • Working Capital Analysis • Brand Analytics • Category & Portfolio Analysis • Marketing Spend Effectiveness • Brand & Market Analysis • TM&D Performance Scorecard • Operational Analytics • Production & Planning Efficiency • Unit Level Scorecard & Automation • New Product Lifecycle Analysis • Vendor Scorecard • SCOR Measures • Customer Analytics • WD Profitability Analysis • Retail Outlet Analysis • Customer Service Effectiveness • Trade Marketing Analytics • Sales Analysis • Salesforce Analysis • Channel Analysis • Category Analysis • Trade Promotion Analysis • Workforce Analytics • Employee Attrition • Workforce Productivity • IR Effectiveness • Resource analysis

29. Business-Analytics Scope of Integrated BI • Distribution Performance • Supply Chain Planning efficiency • Supply Chain effectiveness • Supply Network efficiency • Warehouse Performance • S&OP Analysis • Forecasting Accuracy • Planning Adherence & efficiency • Variance Analysis • HR Performance • Recruitment Efficiency • HR Spend analysis • Working Environment Regulation Effectiveness • Payroll Efficiency • Project Performance Mgmt • Project Planning efficiency • Project Spend & vendor Analysis • Project Execution effectiveness • Project Risk Analysis • Corporate Sustainability Performance • Carbon footprint, variance & credit analysis • Sustainability Spend Analysis

30. Integrated EPM/BI Capability Corp Performance TM&D Perf CBSC, Food, PCB Perf HR Perf Brand Perf Mgmt Finance Operations Perf HR Perf Sales Finance Distribution Emp Perf Planning Perf Mkt Research Perf Portfolio Perf Procurement Perf R&D Perf Category Perf Promo Perf Warehouse Perf Network Eff Dist Perf NPD Perf Plant Perf Workforce Eff Channel Perf Outlet Svc Eff Logistics Perf Branch Perf Emp Eff WD Perf WSD Perf Route Eff Scheduling Eff Carrier Eff AM Perf AE Perf