Trade spending has long been essential to growth for consumer-packaged-goods (CPG) companies. Today, it’s the second-largest cost on their profit-and-loss statement. But the rise in trade spending and promotion has fueled an already overly manual process with increases in claims, adjustments, and deductions. Typical promotional claims are received from retailers such as Target, Walmart, Woolworths or independent retail units. Each retailer submits their claims generated by their systems thus creating a large and complicated layer of additional processing for the manufacturer to then allocate promotion payouts. Processing trade deductions and claims are clearly time-consuming and costly – and ripe for digitalization and automation. 

Why is Trade Promotion Processing so Hard

The sheer volume of claims is one factor that complicates trade claims promotion processing; a typical large CPG company might process 15,000 trade claims every month. But trade claims processing is also challenging because there is high dependence on manual effort to handle them. Most manufacturers receive claim files from multiple retailers. They are sorted manually to create claim files that can be accepted as records by their enterprise resource planning systems. Then, the initial validation process to check for duplicate or incomplete claims is initiated. Next, the claim records are manually matched by sales and commercial finance teams for promotion allocation. The allocation also needs to be signed off by multiple departments which necessitates interdepartmental communications before final approval/rejection leading to a closed claim.

Typically, the process also involves multiple applications including promotion management, enterprise resource planning (ERP) and retailer claim and payment systems. For example, a typical claim settlement must undergo a variety of process challenges starting from claim receipt to closure. These steps include sourcing and recording valid deductions, matching and validating the deductions to promotions, payment regularization and correspondence and storage and backup. 

Trade Promotion is Ripe for Automation

Processes, even complex ones like managing trade promotion claims and deductions, can be automated – and should be. As figure 2 illustrates, the process involves gathering claims, verifying them, matching them to promotions, validating financials and making payments back to retailers. Automation of this process demands a structured approach to each component (gathering claims, initial verification and validation, matching, validating with promotional and budget financials and final payments). 

A common structure is just one component of an automated solution for trade promotion claims processing. The roadmap to an automated solution must also have or enable the following: 

• Readable and traceable claims: Each claim must be tracked from initiation to closure using distinguished identifiers. The system must accommodate (and be configurable) to any file type, file format or data type.
• Flexible rule engine:Users must be able to configure dynamic rules in the system to suit their promotion matching. A rule is the promotion search logic, which permits the users to set identification logic for any account, any claim type and any file format. The user-based rule engine allows incorporating continuous user knowledge into the matching algorithm to improve claim matching statistics.
• Organized segregation and accurate aggregation: The automated system needs to mimic the human segregation and aggregation logic for high match statistics. This is a critical piece of the solution and is vital to the cost-benefit analysis between automation and continuing to operate manually.
  
• Customer level configurations: Every customer account has a typical claim format and reporting pattern. The solution must provide a range of configuration options including customer account level claim templates and a variety of claim processing types.
• Cloud interface:  Scalability and variable processing speed requirements for this process demand a cloud infrastructure. The inputs and outputs to the system need to be via cloud-based storage and inconfigurable templates to ensure faster interfacing with multiple external systems (financial and trade promotion management).  

Automation Delivers Results

CPG companies can generate substantial benefits in multiple areas by enabling a more automated approach to trade claims processing. The entire process can be accelerated. Manual tasks like collating and segregating claims and deductions, maintaining backups and verifying claims always take more time. Automation can reduce the time spent on these tasks by at least 40%. 

Automation improves tracking of operational efficiency by quickly determining claim validity. Customers want their claims processed quickly; it’s a major determinant of the quality of the relationship between them and the CPG company when promotion claims are not processed efficiently. Further efficiency gains can be achieved by reducing promotion duplication rates between claims, applications and departments by 50%-60%.

From our experience working with CPG companies, across all customers, losses of approximately 10- 15% of total abnormal loss result from incorrect claim processing and the recoveries are extremely meager. While an automated system would promise more, even a mere increase in the recovery by 10% for deductions, can result in sizable savings by plugging revenue leaks.

A more automated system is also a more flexible one, enabling non-technical users to easily interact with and understand the process. And, an automated system provides robust reporting and analytics. Automation can provide claims aging reports, customer level of claim discrepancies reports and functional reports for reconciliation between financial and claim systems are examples of reporting that is highly valued across departments to track and address claim processing performance.

A Proven Example of Successful Automation

A global chocolatier based in Australia would receive large volumes of claims in the last five days of every month. The high volume required the chocolatier to dedicate overtime and extended man hours to sift through the claims and allocate the same for timely payments. The claim processing accuracy was suffering due to the load and the company believed that they were losing almost 2% of the net profits in claim-related leakage. After Wipro deployed its Promax Auto Claims solution for the chocolatier, the end-of-month claim processing is 90% + automated with only exception handling still requiring a manual process. The automation was approached in a phased manner, following the 80:20 rule to tackle the retailers with the largest impact initially and gradually roll out to all distribution channels. The system is poised to create productivity savings of up to 40% and decrease the customer’s cash flow time by 10%. 

A standalone promotion claims automation system can generate substantial benefits for CPG companies. And while the obvious benefit is the bottom-line impact for manufacturers, more efficient processes can improve relationships with retailer clients and free up more time that was previously used for manual processing. Improved and efficient resource utilization is a goal for any business. Automation provides measurable gains in any process and helps companies achieve a higher focus on core business operations.

About the Authors

Abhishek Banerjee

Sales Consulting Lead, Wipro Promax

Abhishek is a Sales Consulting Lead for the Wipro Promax business unit focused on trade promotion and optimization for Consumer Packaged Goods. He has 11 years of experience in the IT industry across sales, solutions, commercial negotiations and business consulting. Abhishek has worked with numerous CPG customers in the UK, the US and the ANZ helping to identify and solve challenges across their TPx landscapes. 

Sreeja Sreekumar

Product Engineering Lead, Wipro Promax

Sreeja is the Product Engineering Lead for the Wipro Promax business unit with 16 years of experience building products for the Consumer Packaged Goods and Airlines sectors. She has extensive experience developing product strategy, leading teams in design and development for products and implementation of multifaceted technology projects across geographies and sectors.