Avoid Stockouts by Integrating SAP APO DP and SAP CRM Trade Promotion Management

  • by Manoj Ambardekar, Solution Architect
  • March 21, 2011
Learn how to transfer trade promotions created in the Trade Promotion Management (TPM) function of SAP Customer Relationship Management to SAP Advanced Planning & Optimization Demand Planning (DP). If you plan for a trade promotion with a retailer but cannot meet the demand, it will lead to customer dissatisfaction and potential loss of future sales. A supplier can avoid stockouts by integrating TPM with DP.
Key Concept
Promotion uplift refers to the increase in demand created by a trade promotion that is over and above the baseline forecast. Promotion uplift is added to the baseline demand to calculate total demand. Due to competition in a market, promotion uplift can be a major component of the total demand.

As part of trade and consumer promotions, the trade-spending fees and discounts given to retailers can be 10 percent to 15 percent of the cost of goods sold. That amount may account for hundreds of millions of dollars. Therefore, a company needs to know the return on investment on the trade spend and target trade promotions to the right product categories and brands. A company needs to capture the promotion’s lift in demand and compare it to the baseline demand without the promotion.

SAP Customer Relationship Management (CRM) Trade Promotion Management (TPM) enables trade marketing managers to allocate the trade spend to different initiatives. TPM helps managers create a trade planning structure and gain visibility into trade promotions. Managers can identify the most profitable customers, fastest-moving product groups, and most effective types of promotions (e.g., end-of-aisle displays or front-page ads). Trade marketing managers generally work at higher levels in the product hierarchy (e.g., product groups or brands for a retail chain). However, demand planners work on a lower level (e.g., product) so that they can interact with supply planners to ensure adequate supply for trade promotions. For promotions to be effective, they need to be operationalized at a lower level so that planners can monitor supply levels.

TPM can send a promotion to SAP Advanced Planning & Optimization (SAP APO) Demand Planning (DP) in real time, a move that offers many benefits. It keeps the promotion in sync for both SAP APO and SAP CRM because in its absence, the demand planner may be working on a different number than the trade promotion planner. If a trade promotion is extended in the short term for a few days, this needs to be communicated to the demand and supply planners as soon as possible to avoid a shortage. Also there could be new promotions created in the short term that may be absent in the demand and supply plans. Without real-time integration, the production and inventory plans will only provide supply to meet the baseline forecast. DP typically uses a sales history spanning one to three years to generate a baseline forecast using statistical or judgmental techniques. SAP APO can then send this baseline forecast to TPM to help a trade marketing manager create a more accurate trade promotion. The promotion can be based on an absolute number or a percentage of the baseline forecast.

Manoj Ambardekar

Manoj Ambardekar has more than 20 years of IT and manufacturing experience with firms such as IBM, Infosys, PricewaterhouseCoopers, and Siemens Information in the CPG, brewing, and process industries. He has more than 14 years of experience with SAP APO and SAP ECC with specialization in logistics. He has played multiple roles as functional and technical lead as well as project manager. He has implemented SAP applications at more than 12 large- and medium-sized projects since 1998. Manoj is a chemical engineer certified in production and inventory management (CPIM) from APICS – USA, and holds a master’s of engineering (industrial) degree from B.I.T.S. in Pilani, India. Manoj works on both large and SME clients to implement SAP as both a configuration SME in APO/ECC PP-MM/Solution Manager and project manager/team lead. He specializes in supply chain management solutions using software such as SAP APO, SAP SCM, SAP ECC, SAP Solution Manager, and business intelligence for North American clients.

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