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Milking a paperless system

Milking a paperless system

Fonterra Brands Malaysia employee Yeoh Guan Beng used to encounter teething problems whenever he had to budget for trade promotions and campaigns every year.

A lack of visibility into the spending process meant that Yeoh, who is regional sales manager (South), was unable to keep track of the incurred costs and ultimately over-spent his budget. Typically, his company ended up breaking the promotions and campaigns budget by at least 10 percent.

Promotion and campaigns are major facets of Fonterra's marketing strategy. The dairy products company, which is headquartered in New Zealand, spends an average of RM20 million (US$6.25 million) annually on promotions and campaigns.

Competitors are investing heavily in trade promotions to attract consumers and market their brand awareness. And Fonterra had to match their efforts, resulting in a jump of 35 percent in expenditure of its promotions and campaigns activities over the past five years.

Huge backlog

But, for tracking its spending on the activities, the organization used a system that consisted of paperwork and an Excel spreadsheet. This produced a huge backlog because it required tedious manual checking and reconciliation. Human errors were all too common because of the inability to properly analyze trade promotion spending and budget requirements.

All these issues cost the company about RM0.2 million (US$62,500.00) yearly, estimated Ritchie Lim, Fonterra's information systems manager for Malaysia, Singapore and Thailand. When approval was given for money to be spent on an activity, the paperwork would be sent back to the main office for claims. The papers would be accompanied by yet more papers indicating rebates, invoices for discounts and other forms of promotions.

"First, we've got to match if it is valid or not, and who approves it," Lim said. "Then there's the delay in getting the paperwork back in. Sometimes, the paperwork gets lost, and so forth, so that it had to be sent again."

This meant inaccuracies in the recording process.

"We were finding no end to it. It became tougher, because every year had more paper work, more queries; more budget to spend and we didn't know where best to spend," says Lim.

Leadership support secured

The management of the involved businesses met and decided unanimously that a paperless Internet-based system was the solution. This meant that the requirements and inputs from the different managers would have already been included within the project.

While most IT projects require buy-in from the senior management for support, this particular one took a slightly different route. "The general manager, information systems manager, trade marketing, sales operation and finance teams all group together to design the system and to say this is how we operate and commit on that part," says Lim.

Each group has issues to address, says Lim. The finance department has problems reconciling the numbers. The sales and marketing teams are keen to improve their performance. And the managers want to know how they are spending the money, Lim explains.

"We agreed to implement SmartTrader, which is designed to enable every trade promotion spend to be approved, tracked, provide analysis and integrated to the core accounting system."

The primary objective of the project is to enable all the sales and trade marketing teams to control and manage promotional funds more effectively and utilize promotion funds effectively to generate sales and return on investment for the company.

FCMG tool

Implemented by solutions provider Far-East Business Technology, SmartTrader is a vertical-specific system designed to support and manage trade promotion activities in the Fast Moving Consumer Goods (FMCG) industry.

The business channels that the software addresses include supermarkets, distributors, wholesalers and various sales agents.

About 100 sales and trade marketing staff, five finance staff, two information systems team members and five consultants were involved in the deploying of the system.

"This is a first project in the Fonterra organization where a sales person can request and get approved on trade spend anywhere and anytime where there is Internet access," says Lim.

Through the Internet, the employee uses the SmartTrader system to apply for the promotion funds. A limit is set according to historical sales and budget. The approval is send via e-mail to the respective managers to approve. The authorized managers will approve or reject the application for promotional funds according to justification.

An SMS message will be send to the requestor for notification of success or rejection.

On successful application, the sales person will execute the promotion accordingly as requested.

Upon rejection, the sales person may contact the authorized manager to justify the requested investment required.

No over-spend

Any approved funds are accumulated and committed to ensure that there is no budget over-spend. The approved transactions are updated in the company accounting system for claims and payment when invoices are received.

Any remaining unused requested funds are released to the budget.

The various trade spends are classified to various types of trade spend activities and management information is provided for analysis.

The project development started in early January last year and went live with full integration to accounting system and trade promotion analysis a month later. The second phase included SMS notification was implemented in November the same year.

"The implementation was about two weeks as we grouped all the sales personnel in one central location for training," says Lim. Since then, he estimates that some 5,000 employees have been using the new system.

No finger pointing

But the benefits of the project soon shone through. "Now, the turnaround is that people are happier because there is no delay in payment, and there is no argument or finger pointing," explains Lim. The system now ensures the minute that the invoice was sent, payment would be made immediately.

Besides being paperless, the new system ensures that spending can be easily tracked. When an employee has been given a certain budget, the various activities were given the same unique running number. "All these invoices backtrack to this number. For instance, you can have five invoices but you can still refer to this number," says Lim.

The system is also able to add up the costs, and allow the management to have an idea how much money has been spent. "When the claim comes in, it will be committed in terms of funds allocated and debited to the general ledger. All finance needs to do is match the numbers that are applied from the Internet," says Lim.

With the system, any increase over a certain allocated amount will require an authorized manager to approve it. This way, the management is able to control any over spending.

The project added an SMS notification component where the employee will be informed on the approval or rejection of the applied fund. "You do not need to go to the Internet for an update. The executive can say, 'I've got the SMS, and I can just phone my supplier to execute straight away because my fund is approved', so execution of the activity can be faster," says Lim.

Campaign visuals

The system also allows photos taken at the campaign, such as the placement of promotional stands and signs, to be uploaded into the backend. "So in that sense, they (the management) have confirmation execution and also a visual on how the campaign or activity has been executed," says Lim.

One new feature is the ability to conduct analysis over the sales and promotion activities, thanks to the business intelligence component in the system. The system provide an analysis of return of investment on promotional spend. The sales and marketing teams can understand exactly which type of promotion generates the most payback in various different trade channels.

"The system provides the ability to view 'what works' and 'where it works' at the click of the mouse," says Lim. Together with the pictures, which photographs the activities, a team whose campaign has been successful can now share with other teams across the country on the best practices of the promotional activity. Similarly, teams will understand why certain activities are unsuccessful and avoid making the same mistake.

The new system has made Yeoh a happy man. "I spend a lot of time querying claims on trade spend and now, every claim has been approved upfront and now the requestor knows when the trade promotion approval has been rejected or approved via SMS," he said.

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