A post-project take on SAP Trade Promotion Optimisation (TPO)

21 December 2012

Chandra Sekhar

Chandra Sekhar

Consultant

I was recently involved in an SAP Trade Promotion Management (TPM) implementation at Premier Foods and SAP Trade Promotion Optimization (TPO) Proof of Concept (PoC) at Molson Coors. The SAP TPO PoC project was one of the first in the UK. I wanted to share a few views on the projects in this blog, highlighting a few features of SAP TPO and how it complements SAP TPM.

Optimise your trade promotions

Information is wealth only if it is understood and used correctly. Past data can hold answers to questions about the future and can give key direction to strategy to achieve desired objectives. SAP TPO can turn that past trade promotions information into wealth in terms of creating effective trade promotions.

SAP TPO helps find the best combination of price and other promotion vehicles for trade promotions based on past promotions performance, see Luke Griffiths' blog 'The SAP Trade Promotion Optimisation (TPO) FAQ'. It predicts manufacturer and retailer profits, category impact, and promoted volume with its decomposition (i.e. base, promotional, seasonality volume breakup). It can plan future promotions in detail and automate trade promotions creation with integration to SAP TPM.

Support multiple data types

Often past trade promotion analysis is limited to data available internally i.e. in internal systems. In reality however, trade promotions compete against competitor products so it's crucial to know how an organisations trade promotions fares against the competition.

It is very important to analyse such data which is not available internally but only from external sources like data vendors or retailers.  An analytical tool should have the ability to analyse data from multi-sources and project results from multiple perspectives. SAP TPO can analyse data from various sources i.e. POS data from retailers, internal shipment data and data from data vendors for forecasting.

Analytics

Chandra-TPO-AnalyticsSAP TPO has built-in advanced predictive analytics capability which can predict sales volume and other promotion results for a given price and promotion vehicles like display, feature, multi-buys, temporary price reduction, and promotion spend.

It uses SAP Demand Modelling Foundation (DMF) for forecast calculations, which is a science engine with built-in and configurable forecast models; previously it was also used in SAP Promotion Management for Retail to do similar forecasts.

Multiple forecast types

It supports two types of forecasting.

  1. Prediction - It analyses past promotions performance for a given price and promotional vehicles (like displays, features, price reduction, and multi-buys) and predicts one outcome in line with trend.
  2. Simulation - Most of times, the challenge is not just getting results but getting them with in constraints, what can be a best option in such case. Simulation, in addition to price and promotional vehicles can also consider objectives like profit optimization & sales volume optimization and more importantly constraints like trade spending limits and forecast multiple optimal scenarios. The best suitable one can be chosen after analysing all scenarios.

Forecast accuracy

Chandra-TPO-ForecastAccuracyData quality is the most important and critical element of any forecast as it will influence the forecast results. It is essential to have complete and accurate data without gaps. When external data like syndicated or research data is used it is crucial to check if they are true or close representative of retailers being used in all required locations.

One important  lesson learnt from experience is do not underestimate how much effort it will take to source, clean, format and load the data. 

Within SAP TPO, each forecast has a forecast confidence indicator, which represents system model confidence in the forecast and is based on past data.

The master brain behind SAP TPO forecasting, DMF, can be configured and adjusted to fine tune forecasting models. The best way to improve forecasting is to test and analyse results thoroughly and use findings to optimize forecast models and techniques.

Weighing the data

Based on the age of data, appropriate weight is given by DMF in forecast computation; recent data carries more weight than old data in analysis. It means this year's data is more significant than the year before and so on.

Intuitive presentation of results

Chandra-TPO-IntuitivePresentationOf ResultsA picture is worth a thousand words. It's desirable but can be cumbersome to go through an exhaustive list of details to make a decision. Comprehending the same can be a lot simpler if presented in form of charts or statistical graphs.

SAP TPO presents forecasted results in intuitive graphical dashboards which makes it easy to view and compare different forecast outcomes in a single view. As of version TPO 1.0, it will depict forecasted results in 5 dashboards with a different perspective in each. On one dashboard the user has the option to change 'trade spend' and see impact instantly.  More dashboards can be added through enhancements.

These dashboards not only present data but also the insights.  This can reduce the strain of going through various details on each forecast scenario to make a choice.

Integration with SAP TPM

SAP TPO not only optimises trade promotions scenarios but can also convert them into SAP Trade promotions with click of a button. TPO will create the desired type of promotion from a selected scenario and will pre-populate all essential information from the scenario.  Information like account (retailer), products and more important but time consuming planning details (key figures) will be populated into the promotions and planning layouts.

Enhances SAP TPM

When SAP TPM is integrated with SAP TPO it adds 'what-if' functionality that helps in enhancing forecasted scenario within trade promotions. Here account managers can further change promotion and price details and verify how it can impact the promotion's performance.

Conclusion

SAP TPO aids implementing promotion strategy more effectively by empowering account managers to choose optimal promotion options and achieve desired objectives.

SAP TPO can be implemented on its own as a standalone tool but implementing in conjunction with SAP TPM can realize the true potency of each other. SAP TPO can plan promotion strategy and TPM can execute it smoothly with its integration to other processes i.e. funds management & claims management.

Account managers can focus on creating optimal promotions and worry less about creating and maintaining them.

View comments

Comments

Blog post currently doesn't have any comments.

Bluefin and SAP S/4HANA - welcome to the one horse race

We use cookies to provide you with the best browsing experience. By continuing to use this site you agree to our use of cookies.