What This Article Covers
- How to Account for Promotion Management
- Doing Promotions Management in Brightwork Explorer
The primary issue for backward promotions management is promotions identification. Even the best forecasting applications are setup around the standard workflow, which is not focused on promotions identifications.
What are Promotions?
The following are the generally agreed-upon categories of promotions:
- Customer Promotions: The most common type of promotion, these promotions are directed at customers and are what people typically think about when they think of a promotion.
- Sales Promotions: These are promotions directed by the producer to a supply chain partner.
- Trade Promotions: Promotions directed towards a retailer or wholesaler are referred to as trade promotions.
About Promotions Management
Generally, promotional forecasting is not a major focus of forecasting books, forecasting classes or statistical forecasting. However, promotions can be an incredibly powerful influence on demand and a major factor in reducing forecast accuracy when unaccounted for in the demand history. For those who do not work in the guts of marketing or forecasting, it can be surprising what a major factor promotion can play in the strategy of a company.
- Promotions are common in many industries; however, they are most probably prevalent in the retail and consumer package industry.
- Promotions degrade forecast accuracy by increasing the variability of the sales history, creating unexpected spikes in demand, and increasing the work on the part of the demand planner, as well as on the part of many other individuals throughout the supply chain.
- While this may not seem like a major problem, companies generally greatly understaff the forecasting area. Therefore, every extra overhead with respect to forecasting tends to lessen the likelihood that the item in question will be accounted for.3 Furthermore, because of the existence of competitor promotions, it is extremely unlikely that all of the effects of promotions will ever be accounted for in the forecast system. However, the objective is to capture as much of the promotional effect as possible.
Promotions have the normal effect of decreasing forecast accuracy. The first step to reducing their impact is to properly account for them. However, while there is functionality for promotions management in all supply chain forecasting applications, the effort required to do means that more often than not promotions are not accounted for, and when the statistical forecast runs, it reproduces the promotional “bump,” which must then be manually adjusted.
Doing Promotions Management in Brightwork Explorer
However, with the Brightwork Explorer easy promotions identification screen, your promotions can be quickly identified, and after identification, you simply declare how much of the quantity was due to promotions. We then import the data back into your ERP or forecasting system.