Originally published - August 3, 2007
The Consumer Packaged Goods Industry
Consumers today are more demanding; they have more disposable income and many options to choose from. Consumer packaged goods (CPG) companies need to keep abreast of changing consumer needs and business scenarios to remain competitive in the market. Such companies need to manage their new product innovations and promotions more efficiently and effectively in order to minimize costs and increase sales. At the same time, visibility of inventory and sales across the various channel partners (distributors and retailers) is essential for effective and efficient decision making.
IT has become an effective enabler in this fast-changing world. Emerging technologies are offering better solutions for seamless communication. CPG companies have traditionally invested in enterprise resource planning (ERP) packages for better internal planning. Also, many companies operate with multiple legacy systems, each addressing the needs of a particular functional area. However, these legacy and ERP systems are not integrated to provide a comprehensive view of the business. Web-based sales portals, by integrating internal systems with channel partner systems, provide a complete view of the business and help address many challenges of the CPG industry. Following are the challenges faced by CPG companies across the globe, where a sales portal can be an effective answer:
new product introduction and monitoring, where failure of new products due to incorrect research, incorrect pricing, or improper promotional support are primary concerns
lack of inventory visibility and sales data across the distribution channel, leading to poor financials
meeting the distribution service level expectations of organized retail
effective management of promotions, where poor planning, lack of timely data to restructure the promotion, and delay in settling payouts to channel partners are key concerns
understanding market trends and competition analysis, where lack of the latest information on market trends and the competition hinders the ability to make appropriate decisions
Most of these problems are critical, and availability of accurate data at the right time is an absolute necessity to address these issues. The current practices of information collection and dissemination across the distribution channel are achieved by traditional means, such as telephone, fax, e-mail, and snail mail. But there are inherent limitations and delays in these modes of communication which, in turn, handicap fast and accurate decision making.
The Sales Portal and Its Key Functional Elements
A portal is a Web-based application that enables companies to interact with channel partners, allowing for collaboration and exchange of real-time information. A portal is a tool that provides for both data extraction and data upload. Sales portals in particular need to have certain functional elements:
cost-effective and user-friendly portal technology, where channel partners and internal teams are able to retrieve data quickly and easily
the capability to store large amounts of data
an analytical tool to perform complex calculations
scalability to incorporate additional channel partners into the existing system
Furthermore, a Web-based sales portal has to be able to integrate with internal ERP systems, as well as seamlessly integrate with the transactional databases of the channel partners. Security and authentication functionality of a portal should be able to interact with existing security tools, as well as provide a single sign-on. These functions should manage the user's profile so that the user is able to verify and open any applications within the portal (depending on the user's profile). A portal should enable access to data only to limited and authorized people (distributors and retailers should not be able to view data related to marketing spends, for example). Lastly, a sales portal must be safeguarded against viruses and spam; effective antivirus tools need to be incorporated into the system.
Administration functionality is required to manage a portal's content and users, where an administrator has the right to allow or disallow users to log in to the portal. This helps to facilitate the portal's capabilities remotely.
The portal should have intervention tools to generate alerts, and exception reports to take timely action. For example, a delay in order execution over a specified time limit should generate an alert to users so that they can take the necessary action.
Figure 1. Schematic structure of a sales portal.
As a knowledge base, the portal should provide for the indexing and storing of an organization's collected data, as well as the information available to it from the channel partners.
Content management is a key activity, and a portal needs to provide the means to publish materials and generate periodic reports. These reports should be accessible to the various channel partners as required.
Benefits of a Sales Portal for CPG Manufacturers
A sales portal provides real-time information to a CPG manufacturer regarding sales and inventory across the channel. Through a sales portal, the company can track sales, inventory, and market credit of the channel partners on a near real-time basis, thereby enabling the company to perform accurate target-setting and better stock management. This helps in reducing stock-outs or excess inventory across channels.
In addition, a sales portal helps improve the promotion planning process by using past information effectively. A portal helps to communicate information about a promotion to the channel partners more quickly, enabling timely and uniform implementation of the promotion, as well as time-tracking. A sales portal with analytics as an additional feature will enable pre- and post-promotion analysis, which increases the effectiveness of execution and promotes faster and accurate settlement of promotion claims for the channel partners. This should go a long way in improving relationships between the manufacturer and its channel partners.
Furthermore, sales portals are useful in reducing lead times for new product introduction. Online product concept approval and finalization with feedback from sales teams and channel partners through a portal can help with the selection of the best product concept. It could also help reduce errors in product pricing and in forecasting for existing products, as the effect of new products on existing products can be factored into the planning process.
A sales portal can be used as a repository of knowledge for the latest information on the competition and their products and promotions. The sales team can update information in the portal whenever the competition introduces new products or promotions. A portal used as a repository can also track trends in the industry in terms of fashion, technology, product innovations, and so on. This information can be updated periodically by different sources to create a complete knowledge bank for future use.
A sales portal can be used as a tool to improve the productivity of the sales personnel. The availability of online data improves the sales team's efficiency of service to the outlets (that is, the sales team is able to effectively cover a greater number of outlets, as they spend less time performing paperwork, data analysis, and updates). Channel partners' sales and inventory data will help the company's sales officers to monitor their channels effectively. Sales officers can also focus more on managing the distributor sales team to improve its productivity. The company can ensure that goods are not being loaded on to select distributors, but rather that they are effectively distributed across all distributors, leading to more efficient distribution of stock.
Finally, a portal can be used by the company to communicate with all its channel partners through newsletters (as an example) published in the portal.
Benefits of a Sales Portal for Channel Partners
Sales portals provide a single interface to channel partners, which helps in placing orders and tracking their status online. A portal helps channel partners to effectively monitor their investments (inventory and credit).
Channel partners can benefit from faster settlement of claims during promotions. Traditionally, each time a promotion is completed, distributors or retailers must send their claims to the manufacturer on paper, which need to be approved before payment is released—a time-consuming process. A portal can enable a channel partner to enter its claims online in a predefined format that can be immediately approved online by an authorized person.
Through a sales portal, channel partners can gain visibility into new products being launched by the company. This visibility can help channel partners to better plan and forecast stock. Through the portal, channel partners can participate in the process of product development by providing feedback on the product concepts and pricing based on their market conditions. This could create a sense of ownership for channel partners, which in turn could increase the success rates of the new product launches.
Key Considerations for a Successful Sales Portal
A CPG manufacturer usually decides to develop a sales portal in order to communicate with all its channel partners easily, and to provide them with information and tools to sell more of the manufacturer's products. However, very often these sales portals fail to achieve their objectives, as channel members do not see the benefits of this initiative. To ensure success, several elements need to be considered before implementing a sales portal.
First and foremost, an organization must understand and factor in the needs of the channel partners. The objectives for setting up the portal need to be articulated clearly, indicating the roles, responsibilities, and functional limitations of each entity in the sales portal structure. An evaluation needs to be done to understand how the company is currently working with the channel partners, and what improvements a portal can achieve.
It is critical that a company knows how its relationship with distributors will evolve to create mutual success beyond what currently exists. Off-line processes that benefit from being streamlined by an online application need to be identified well in advance. The information that needs to be collected must be listed and clearly defined. To eliminate duplication of effort by leveraging online and integrated back-end systems, areas of double data entry that channel partners and a company's sales staff are currently performing need to be identified and segregated.
Figure 2. Key considerations for successful implementation of sales.
The company chief executive officer (CEO) must communicate the logic and purpose behind the portal as well as the expected business benefits to each and every channel partner and to each member of the internal sales team. Channel partners need to understand that the initiative is in their interests in terms of increasing return on investment (ROI). The cost-benefit analysis of the portal must be provided to the channel partners before the portal's implementation. Investments from the channel partners, if any, are to be clearly communicated and ratified. Once the sales portal is up and running, periodic bulletins should be sent to all channel partners on various key performance indicators (KPIs) to inform them of the system's progress and benefits.
Technological flexibility and simplicity are two other key aspects a CPG manufacturer must consider when planning to implement a sales portal. The portal has to be simple and user-friendly. A user should not have to deal with a multitude of screens to carry out a single transaction. Data transfer should be efficient, as the speed and size of data transfer are key aspects of a successful portal; this should be factored in the design stage of the portal itself. The portal should be able to seamlessly integrate with the existing systems of channel partners and the sales and marketing departments, without a significant increase in investments.
Companies benefit greatly if they take a structured approach to implementing sales portals.
Potential Drawbacks of a Sales Portal
While offering several benefits to CPG companies, there are certain risks associated with portals as well. Integrating multiple and disparate systems across the supply chain is a key challenge. Many times, performance is compromised during integration. Change management is essential, as the way of doing business in any company will change significantly with the implementation of a portal. If users are not convinced about the benefits a sales portal offers, the success of this new technology in an organization will be suboptimal. Also, unless the system is extremely secure, there is a chance of an organization's information being exposed to outsiders. Due diligence is required to ensure channel partners stick to guidelines; adherence to set regulations can be linked to channel partners' incentives in order to ensure compliance.
The possibilities sales portals can offer a CPG manufacturer are enormous; they can be leveraged according to the changing needs of the market. A sales portal can be used for integrating with material suppliers and other service providers, such as advertising agencies, market research agencies, consumer panels, etc. Market research agencies' information, such as syndicated retail audit data and consumer panel data, can be merged with internal information systems to provide a holistic view of a business. The sales portal can also provide a platform for interacting with consumers. This interaction may help in developing loyal consumer communities that can be involved in product development, communication development, and feedback activities. CPG companies can look at sales portals as an efficient way to coordinate and communicate with their channel partners. An effective sales portal is one that is flexible and user-friendly. A CPG company needs to take its sales and marketing teams, distributors, and retailers into confidence to ensure the successful implementation and use of a sales portal. Change management and information security are also paramount to the success of a sales portal; otherwise, the entire exercise may be a complete failure.
About the Authors
B.K. Mahesh is a senior consultant in the retail and CPG practice of Infosys Technologies Ltd. in India. Prior to this, he worked for four years with a large FMCG company based in the Middle East, and four years with Amul (India) in both brand and customer management. He can be reached at Mahesh_setty@infosys.com.
Noorani Subramanian Hariharan is a consultant in the retail and CPG practice of Infosys Technologies Ltd. in India. He has over four years of experience in brand and customer management with Titan Industries Ltd. (India). Hariharan has a degree in management from the Indian Institute of Management. He can be reached at Hariharan_noorani@infosys.com.