This presentation compares the cost of managing trade promotions with excel vs a trade promotion management system.

1. Spreadsheet Addiction
The True Cost to the CPG Industry

2. Spreadsheet Addiction – The True Cost to the CPG Industry
Trade spending represents the second greatest expense on the balance sheet of most Consumer
Packaged Goods (CPG) companies. Most spend anywhere from 10 to 30% of total sales on trade dollars
to drive demand on the shelves, point of sale and distribution. Yet, most estimates show that the majority of
CPG manufacturers in North America continue to manage trade with ad hoc processes and desktop tools
such as spreadsheets. Many companies have even spent millions of dollars on enterprise applications only
to find sales users still doing “shadow accounting” on spreadsheets. So why the addiction?
Despite significant investments and reliance on centralized packaged software elsewhere in the
organization, sales users remain the toughest audience to wean off desktop tools. In fact, until just a few
years ago, Microsoft© Excel® remained the most common CRM tool in use across industry. There are many
reasons that the spreadsheet has maintained such a strong foothold in CPG. Here are a few of the most
common.
• Familiarity – Most CPG sales managers have been working in spreadsheets since they entered
the business. While the versions have advanced over time, CPG sales users tend to be very skilled
and adept at making spreadsheets do wonderfully complex operations. They simply gravitate to
whatever is the most comfortable means, or the path of least resistance.
• Flexibility – Unlike other front-office departments, sales in CPG remains much more of an art
form than a set of rigid well-structured processes and practices. Sales people often enter the field
because they enjoy building relationships, working on negotiations and managing a business.
Enterprise applications are too often viewed as constraints (at best) and distractions (at worst) by
sales users. Spreadsheets, on the other hand, can be fairly easily adapted to follow the least
structured of processes and work habits making the tools very appealing.
• Portability- Sales people in CPG typically spend a great deal of time on the road managing
retail accounts, ensuring promotions are being executed and sizing up the competitive products on
the shelves. As such, spreadsheets are often embraced as the perfect “to-go” tool that requires no
Internet connection or synchronization back to headquarters. Plus, spreadsheets also transport
easily from employer to employer. It is not unheard of for a sales person to be hired specifically
because of the sophisticated set of spreadsheets they bring with them for managing their accounts.
• Confidentiality- The greatest asset for the typical sales person is his or her knowledge of and
relationships with the key buyers in retail. Sales people often believe the best way of protecting that
intellectual property is to keep it local or confidential, rather than sharing it all in the corporate
database. Spreadsheets or even email address books are often viewed as better places for such
information over transparent and centralized enterprise systems.
In addition to the functional reasons for sales people to cling to spreadsheets, cost is often the real reason
no alternative has been offered to them. After all, Microsoft© Excel® is licensed and pre-loaded on most
Windows machines in the workplace, and other tools like Google Docs and OpenOffice have come on the
scene with truly free alternatives. So if spreadsheets are virtually “free”, then why would anyone ever look
elsewhere for managing trade promotions in CPG?

3. The reality is that while spreadsheet tools themselves are often “free”, the physical money paid doesn’t
complete the entire equation. Numerous limitations to the spreadsheet strategy actually create additional
direct costs, opportunity costs or costs associated with risk and governance that most companies overlook
or choose to ignore. Let’s take a look why this can be a dangerous oversight.
Spreadsheets are Data-Driven, Not Process-Driven
Anyone familiar with the software industry knows that one of the greatest mistakes you can make in
designing an enterprise application is using a data-driven, rather than process-driven approach. Humans
simply aren’t wired to think about workflow and task as a set of numbers. Yet, this is exactly what
spreadsheets force people to do.
Every cell in a spreadsheet represents an intersection of two measures - for instance the promotional tactic
for a given time period for a given product. However, the spreadsheet does not inherently include workflow.
Using the same example, there is likely also an approval process, a negotiation cycle, a contract and then
post-even metrics all associated with that cell that simply cannot be captured or managed.
Spreadsheets are also designed from inception to answer a specific question. Again using our example from
above, answers “What promotional tactic am I using for product A during period X?”. However, what if that
question changes? Or if new measures are needed? Somebody has to go in and manually manipulate the
spreadsheet each time to reflect the business, which costs time and effort. And don’t forget to multiply that
effort by the number of individual spreadsheets effected. Suddenly there is a distinct cost in lost time and
labor.
Spreadsheets Lack Version Control
There exists an interesting paradox with managing retailers since your customers can simultaneously act as
an ally or enemy. One day a retailer is promoting your product and helping you achieve your volume goals,
when the next they are taking deductions or bill-backs without warning. Perhaps a retailer claims that two
years ago, they neglected to take a deduction they were entitled to and they have some documentation
to back that claim. You cannot challenge the claim because your promotion plan spreadsheet from two
years ago was updated a dozen times, and nobody can find the original. Adding fuel to the fire,
spreadsheets lack the ability to attach vital documentation that could have helped defuse the situation.
With spreadsheets, the only way to ensure version control is manual effort. A company must realy on users
to remember to save with sequential file names, and never overwrite old copies. In practice, this creates a
real storage and retrieval nightmare in addition to general human error. This combination virtually ensures a
complete lack of versioning and therefore a forfeiture of any formal auditability. So ask yourself, what is the
cost of being completely defenseless against
post-audits and unexpected deductions?

4. Spreadsheets are Localized
You may recall that portability was one of the leading advantages to the use of spreadsheets for
managing trade promotions, but the flip side of portability is localized storage. Sure, spreadsheets are
always there whether on a plane, a subway or in the far reaches of the world. But, by the same token they
never synchronize back to any centralized system. One way to counter this is to set up a central server
where folks can save and backup their spreadsheets, but once again this introduces a reliance on manual
effort and introduction of human error. It also detracts from the true “portability” of a spreadsheet if the
master is stored on a server.
Secondly, by allowing sales people to manage their trade and account plans on spreadsheets, critical data
is rendered vulnerable to theft or loss. A laptop can easily be stolen, left in a restaurant or dropped and
damaged. With no central repository, your company’s sensitive data is traveling the country with no
backup of security - another massive risk to the organization. How much time and effort would be required
by an IT organization just to recover data from a damaged disk, let alone recover a lost or stolen laptop?
And how much time would it take to reconstruct all that information from scratch?
Spreadsheets are Latent
One of the greatest challenges for CPG firms is to take and assemble various downstream data feeds to get
a better understanding of how promotional activities are performing in the field This could include
syndicated data, actual sales, point-of-sale data, among others. It can be hard enough to piece this
information together, but nearly impossible to continually update in a single place.
Because of this, most sales reps keep huge folders of files for each of these data sources and retrieve
information as needed. Although cumbersome, this approach is still easier than manually assembling the
information together on a regular basis. Either way, this takes time, effort and also introduces the
opportunity for human error yet again. If the wrong file is referenced, or a file is saved improperly anything
from a misplace decimal to a terrible business decision could result. Again, a combination of a labor cost in
addition to a cost of risk directly results from the use of spreadsheets.
The Real Costs of Spreadsheets
Each of the challenges above references some kind of cost. While they may not manifest in physical
payments you would see in an invoice or on a credit card statement, these are hidden costs. They may not
be immediately obvious in the near term, but they are all very real costs that could cause you to lose time,
business, security or even your job.
• Labor costs – Perhaps the most frequently ignored element of spreadsheet cost is manual
effort. Consider how much time is spent building, maintaining and securing spreadsheets for each
sales employee for a month and add it all up. The resulting sum is certainly in the order of weeks, not
hours or even days.

5. • Opportunity costs – Closely tied to labor cost is opportunity cost. What are the activities your
sales employees could have been engaged in had they not been fixing or managing a spreadsheet
or a report? In CPG, sales people need to regularly report back to their retailers and their managers
– often in dozens of different formats. It is not uncommon for this to take three to five days per month
simply managing different reports from a single source of data. Isn’t that time that could have been
better spent analyzing the business, doing store audits or collaborating with buyers?
• Security and risk costs – While risk can be very difficult to quantify, the MEI and The Penguin are
registered trademarks of MEI. All other trademarks are the property of their respective owners.”CFO
test” can be a good substitute here. For instance, what would the CFO think of the idea that he or
she has no way of knowing about a huge spike in trade liability for the coming month? Or the idea
that an entire sales plan could be left in a hotel on a lost laptop? Or how about a post-audit, where
the backup documentation is all stored on the laptop of someone who left the company a year
ago? While you may not be able to pin a cost to risk, the CFO’s typical reaction to these risks says it
all.
• Cost of human error – Too often, a single missed keystroke in a formula or an accidentally
deleted cell can mean that entire workbooks or spreadsheets are wrong. How confident are you
that all the data in your sales people’s spreadsheets is all accurate and reliable? Keep in mind, this is
information they are using to make key decisions about promotion strategies, communicate
spending liability and measure promotion effectiveness. You wouldn’t manage your Cost of Goods
Sold (COGS) in a spreadsheet, so why would you manage your second biggest expense that way?
• Cost of scalability – Scalability remains one of the most common triggers for a CPG company
to move away from spreadsheets and onto true centralized enterprise software. Most companies
start out small, and they can manage their business without too much on basic desktop tools. Then
centralized ERP comes on board, and soon they are growing by double digits. The effort behind
managing and consolidating spreadsheets becomes exponentially more difficult until finally
processes start to break down. In many cases, a lack of an enterprise trade management system
can single-handedly prevent a CPG firm from growing into larger national accounts. That can
represent a significant opportunity cost in addition to growing labor costs.
Realistically, spreadsheets aren’t going away and will always remain a vital cog in the CPG enterprise.
Good business software embraces that fact rather than fighting it. However, CPG organizations need to
understand the consequences of relying too heavily on spreadsheets for managing massive trade budgets.
Otherwise, that unforeseen trade liability could have profound impact on the business. Spreadsheets may
seem free on the surface, but in truth, they could be a lot more expensive than you ever thought.
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