The Journey “TPM To TPO” !

Speaker: Trevor Barrett Manager – Premier Foods UK In This Session …

• Following the implementation of Trade Promotion Management (TPM) within Premier Foods, this session provides an insight into:

– Our SAP Trade Promotion Management Implementation – SAP Funds and Trade Claims Management (Phase 2) – Our Approach to Trade Promotion Optimization

2 What We’ll Cover …

• Premier Foods – Our History • Initial SAP TPM Implementation • Phase 2 with Funds/Claims Management • SAP Trade Promotion Optimization (TPO) • Wrap-up

3 Premier Foods

• Our History

• http://www.youtube.com/watch?v=Dgtw M5pQXtY Premier Foods – Our History

• With origins in the canned food industry, Premier Foods has continually expanded and acquired new brands to become the UK’s largest food producer

• In 2002 the acquisition of Nestlé's UK ambient food business brought favourites like Branston, Crosse & Blackwell, Sarson's and Sun Pat into the fold

• In 2004 Premier was successfully floated on the London Stock Exchange, with an initial market capitalisation of £526 million.

• In the same year, we became leader in the meat-free market following the acquisition of the meat alternatives Quorn and Cauldron

• In August 2006, we completed the £460 million acquisition of Campbell’s UK & Irish business adding OXO, Batchelors, Homepride and to our range

• In March 2007 Premier Foods completed the £1.2 billion acquisition of RHM along with many of the UK’s best known food brands including Hovis, Sharwoods, Cadbury cakes, Bisto and

Our Top Ten Brands Have Retail Sales Of £1.25bn We have a portfolio of brands with significant scale to drive innovation and growth

Soup’s Bread

Sauce’s Sauce’s

Gravy/Stock Deserts Cake

Top 5 Customers – Tesco/Sainsbury/Morrisons/Asda/Co-Op Premier Foods – Our History • SAP & Premier? – Premier Foods has been using core SAP in parts of it’s business since 2008 – The Hovis Division had no SAP platform – Hovis – a perfect test bed for SAP TPM integrated with the SAP Orders to Cash implementation

• Hovis & Trade Promotions – Hovis (Bread) accounts for c £500m of Premier’s total turnover – Fresh products delivered daily (Product range is bread and other bakery e.g muffins) – Mainland GB and Northern Ireland operation – 20+ manufacturing/ distribution sites across the UK – The Supply Chain operates 24x7 – most deliveries occurring overnight before 11am – 8500 deliveries per day = 8500 invoices – Order cycles are short, typically within 24/48hrs of order receipt.

Approximately 60% of Hovis volume is sold “on promotion”, therefore

including SAP TPM integrated with SAP Order To Cash solution was key...

7 Premier – Our Business Unit Structure

Premier Foods

Cake Grocery Hovis Deserts Desert/Source/Meal Bread

Ambient Business

TPM Live 8 What We’ll Cover …

• Premier Foods – Our History • Initial TPM Implementation • Funds/Claims Management (Phase 2) • Trade Promotion Optimization (TPO) • Wrap-up

9 Why Deploy SAP TPM At Hovis • Key Benefits

 Replacement of manual processes for managing £80m commercial spend

 Provides internal control processes to manage promotions, schemes and claims

 Integrated planning, ensuring planning is based on common shared data

 Enhanced business reporting and visibility to aid decision making by marketing/Sales & Supply chain Functions

10 What methodology was used

• Phased approach – enabled benefits to be delivered earlier than waiting for a big bang solution • Agile approach – to ensure rapid development and frequent review with business to reduce likelihood of large re-works at later stages in the project – End to end project took 18 months to deliver and exit early life support • Collaborative – to provide early visibility of the solution to the business and develop a joint agreeable end solution – Cross functional teams across sales , supply chain , commercial finance and credit control – Super Users “championed” the solution and undertook end user training 11

Our TPM Phasing

Claims Management

Phase 2

Phase 1

Promotion Approvals

ROI Discounts Planning

13 A Real Life Scenario

Imagine the following scenario:

 You are a Sales Manager and you need to increase your sales of Hovis Granary bread with one of your key accounts

 You have decided to implement an event, a short term promotion, in effect, providing an off invoice discount to the retailer for every loaf of bread purchased during the month of December

 Thoughts in your mind:  How much is the retailer currently paying us for that loaf of bread?  How many units are they currently ordering on a weekly basis i.e. what is the baseline forecast?  How much can I afford to discount the product to the retailer?  What is the retailer charging the customer i.e. the on-shelf price?  What will my return on investment be for this promotion, assuming an certain increase / uplift in number of units sold during the promotional period?

So, where do I start today? 14

ROI Planning: Overview of Totals & KPI’s

Summary of base, Summary of incremental Summary of spend incremental and total volume financial metrics across associated to promotion across featured products featured products across featured products

When the user is happy he/she will send for approval………………

20 Promotion Approval: Workflow email prompts

• When activity requires your approval, you will receive an auto-generated workflow email requesting your review / approve the proposal – Clicking the link will take your straight to the document in the TPM portal via TPM log-in page – Reminder documents will be issued until the document is actioned

21 Discount Prices created and transferred... Discounts are created off the back of the promotion once approval complete

22 Post Implementation status…

• Reliance on multiple spreadsheets is a thing of the past • Integrated demand planning now supports decision making at point of promotion creation • Approval process ensures audit & control of all promotions • Integrated pricing ensures discounts created in TPM auto sync to SAP ERP • Capturing ‘actuals’ data enable’s post promotion analysis and will enhance future business decision making

• SAP Quality Award achieved (Silver) 24

What We’ll Cover …

• Premier Foods – Our History • Initial TPM Implementation • Funds/Claims Management (Phase 2) • Trade Promotion Optimization (TPO) • Wrap-up

25 Claims Management

• Commercial Claims Scope • Benefits  Creation of Commercial  Better Control and enhanced reporting Claims in FSCM – Dispute  Improved Visibility and Process Control (visibility and accountability throughout Management the Claims lifecycle)  Integration into Trade Claims  Reduced Processing time via reduction Management of Workflow Approval path whilst maintaining integrity and control with  Approval Workflow new Overspend Process  Claims validation  Inclusion of Credit Control in Claims  Claims settlement / Process Integration into Finance  Fully integrated to Accruals Process including 'real time view of Accrual' within TPM.  Includes some future-proofing with Flexible Workflow to allow transition of Admin tasks from Sales team to PBS

Funds Management

• Current Scope

 Limited Fund Management set up for the purpose of processing and settling Claims

 Default Funds assigned to Promotions based on currency and promotion type

• Improvements and Benefits  Full Funds Management to provide enhanced budgetary control of promotional spend  Accurately manage trade expenses to planned fund amounts  Centrally manage and monitor all trade funds, budget tracking and utilisation  Close the loop on funding and settlement processes by integrating trade funds to trade claims.  Reduce the length of the promotion approval chain by using pre-authorized funds 27 What We’ll Cover …

• Premier Foods – Our History • Initial TPM Implementation • Funds/Claims Management • Trade Promotion Optimization (TPO) • Wrap-up

28 Trade Promotion Optimisation

• Premier Proof of Value Approach

– Validate Customer analysis – Validate Product Analysis – Understand Collaborative Opportunity TPM Evolution at Premier Foods • Emerging business needs: – Shopper/consumer focus in planning – Understanding of volume drivers – Plan accuracy: Plan vs actual – PEA for all trade promotion activities – Retailer P&L Planning and Forecasting

• Logical next step for us - Validate SAP TPO given our experience with SAP TPM

Proof of Value as the next Step of the Journey • Proof of Value objectives – Focus on model/forecast accuracy – Understand optimization capabilities – Pricing and promotion insights • Usability assessment based on – Experience with SAP TPM – Various demonstrations – Gartner/POI checklist from last year‘s event

Proof of Value Set-up

• Using IRI data for demand modeling – Tesco and Asda – Sharwoods & Loyd Grossman brands – Data range from July 2010 to June 2012 • SAP TPO to optimize according to – Maximize retailer / Premier Foods profit during promotion period – 3 weeks between Aug, 13th - Nov 15th, 2012

IRI data facts as input Distinct tactics in data: . On Shelf Only . Multi Buy . Off Shelf . TPR

ASDA – Sales History Tesco – Sales History Number of Sales Records per Product-Location Number of Sales Records per Product-Location 45 45

40 40

35 35

30 30

25 25

20 20 Number of Prod-Locs Number Number of Prod-Locs Number 15 15

10 10

5 5

0 0 0 20 40 60 80 100 120 140 0 20 40 60 80 100 120 140 Number of Sales Records Number of Sales Records Proof of Value Results: Model Accuracy

• Accuracy >85% outperforms current status • Further improvement potential by data enrichment (e.g. display location) • MAPE assessment as one of the standard modeling metrics – MAPE = Mean Absolute Percent Error – Excellent results

 Proof of Value Results: MAPE in Relation to Average Unit Sales/Week

Scatter plot of MAPE vs. Avg US/week 45000 • Forecast results confirm accuracy 40000 of the forecasting 35000 model 30000 • Average forecast 25000 accuracy 20000

Avg US/week Low forecast error identified improved to >85% 15000 during high volume weeks,  higher error during low 10000 volume weeks

5000

0 0 10 20 30 40 50 60 70 80 90 100 MAPE (%) Model Accuracy: Time Series (ASDA) Proof of Value Results: Price sensitivity analysis • Insights of price sensitivity analysis by customer and product • Average response of price change (weighted by statistical confidence)

300 Average Reference 250 Price:

200 . Overall: £1,69 . Retailer 1: £1,50 150 . Retailer 2: £1,85 Retailer 1 Retailer 2 100

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0 -50 -45 -40 -35 -30 -25 -20 -15 -10 -5 0 5 10 15 20 -50 Optimization Scenario: Maximize Profit . Scope: Tesco and Wet Sauces Indian category . Objective: Maximize retailer and Premier Foods profit during promotion period . Period: 3 weeks between August 13th to November 15th, 2012 . Promotion Parameters Tactic ACV% Spend On-Shelf 70,00 Off-Shelf 27,00 £ 50.000 TPR (between £0,90 and £1,75) 70,00 Keep retailer margin

Compare 10 best scenarios for Tesco (RTL) vs 10 best for Premier Foods (PF) Maintaining Focus-TPO Plan Through Implementation - Dale Hagemeyer , Gartner ‚Our‘ Checklist for User Experience from LY POI event

        What We’ll Cover …

• Premier Foods – Our History • Initial TPM Implementation • Funds/Claims Management • Trade Promotion Optimization (TPO) • Wrap-up

41 Lessons Learned

• Clarify what and why you “want” or “need” TPM and TPO • Validate that your plan is “doable” — Not over aspirational • Determine your technical environment structure and data availability • Consider your phases of functionality release • Prioritization by business team’s availability, business urgency and business impact • Proof of Value verified SAP TPO’s accuracy and ability to deliver business insights • We are ready to focus on the next step of the journey

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Your Turn!

How to contact me: Trevor Barrett [email protected] 43 Where to Find More Information

• http://www.sap.com/uk/solutions/business- suite/crm/brochures/index.epx

• http://www.sap.com/uk/solutions/rapid- deployment/crm/index.epx

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