This is an expert from a very good article written by John Walsh in CPGmatters.
Emphasizing that trade promotion management (TPM) is a crucial component of any consumer goods company’s strategy, a significant amount of time and due diligence must go into the process of selecting a TPM vendor and system, said Kiera Benidettino, Director of Trade Promotions for Fresh Express, the nation’s largest provider of packaged salads.
Speaking at the recent Trade Promotion Management Associates (TPMA) Conference in Chicago, she discussed why an effective TPM system is vital and explained the process of choosing the right system.
Concerning Fresh Express, she stated promotional lifts put “significant strain on our supply chain operations,” since lettuce is highly perishable and inventory cannot be stockpiled. The shelf life of Fresh Express’ products is typically 15-20 days. “This means our supply chain is measured in hours,” she explained. So, for her company, a good TPM system must support a quick and eficient supply chain, which requires a “tremendous amount of coordination.”
Benidettino noted an effective TPM system is vital to consumer packaged goods companies:
- Spending Magnitude — TPM is the Number 1 or 2 SG&A expense on a CPG company’s P&L. In addition, expenses have increased more than 12% annually over the past six years to the point where spending is, on average, 14% – 17% of gross sales.
- Questionable Results — Less than 50% of spending reaches the consumer and manufacturer, and retailer margins continue to decline.
- Government Regulations — Sarbanes-Oxley mandates tremendous responsibility for internal controls. In addition, SEC and FASB regulations significantly impact forward buying practices, financial reporting and slotting fees. FASB regulations require all expenditures be identifiable, so a TPM system must capture specifics on trade investment in real time.
For Fresh Express, effective TPM matters because promotional lifts impact its supply chain. “The decision of how much to harvest each day is dependent upon results at the stores, so our biggest challenge in TPM is connecting promotions with our supply chain,” Benidettino said. Its TPM system must support forecast accuracy to ensure service and product quality. “Therefore,” she explained, “when taking steps to find the right TPM solution and provider ‘you must know our company’ including trade fund management capacity, IT resources and budget capabilities.”