posted by Greg Hilton
Foodservice and Problem Solving Frameworks
In this series on problem solving frameworks we are taking a look at solving problems using methods learned from the book, The McKinsey Way by Ethan M. Rasiel, and applying them to trade promotion management issues. If you are checking in from the
original post, “The McKinsey Way” is a peek into the problem-solving framework used by one of the world’s most successful business strategy-consulting firms, McKinsey & Company.
If you happened to catch the last entry in this series, and you are checking back, one of two things have happened: You have let your subscription to C-SPAN run out and have some extra time on your hands or, hopefully more likely, you are in desperate need to solve a Foodservice Trade Spend problem. My vanity calls me to hope it is the latter of the two.
Reminder about The Theme
Approach every business question with a structured framework for solving the question (Ex: How can I measure and manage my contract relationships to make sure they are priced optimally). We take structured problem solving real serious at
Answers Systems and seek solutions not just with technology, but also with process improvement and best practice implementation that includes the human element.
Again, borrowing from McKinsey, here are the high-level steps to follow when solving a business problem:
1. Gather as much of the facts as is humanly possible.
2. Start with a hypothesis of what the problem may be
3. Divide your supporting findings into unique categories (Google for “MECE” for more information on how we will do this or stay tuned for the next blog).
4. Test, Test, Test your theory
5. Implement!
Where to begin
So we set the stage in our last blog by identifying that there is a problem each manufacturer faces with trade promotion management that must be resolved. The problem we noted above is all about gathering enough information about what is happening on your contracts to make an informed pricing decision. Start at a contract level and then work your way up so you can make a “contract portfolio” decision. So you go from “what is going on with my Wings n Things contract “ and work your way up to. . . “What is going on with my entire National Accounts contract portfolio.”
Sounds easy enough. All you need is to have a place to store all your contracts and then a way to gather every bit of data surrounding the contract(s) performance. Then you need a way to report and do some predictive analysis.
Here is the hypothesis we stated as the core to understanding whether your contract. . . and then your contract portfolio. . . is performing.
1. Information about the claiming history and volume usage of a contractee or a segment of contractees. . . . .
2. Coupled with a process to trap, track and audit usage and claiming activity against the contractee(s). . . .
3. If your team has powerful tools to analyze the information and has been sufficiently trained. . .
4. Can improve your ability to negotiate appropriate contract discount terms with both your operator and distributor for mutual gain.
Step 1: Gather all of your data
In the Foodservice industry, gathering 100% of the claiming data for your contracts is pretty tricky. If you have an operator contract with a large chain account, and you are giving lots of different types of incentives to the operator, you are going to spawn all kinds of claims. On just one contract for one delivery period, you may have (depending on the complexity of the contract) lots of incentives:
- Billbacks from the distributor
- Headquarter claim from the operator
- Growth incentives for both
- Marketing allowances
- Etc.
Being able to capture every claim is essential to be able to draw a conclusion or, at least set a hypothesis about a contract’s performance. You have to have the ability to work with electronic trading partners (who pass claims to you in a myriad of electronic formats) and you need to be able staff a team to enter paper claims. Stopping short of getting 100% of your claims entered and centralized means that any hope of a real hypothesis about a contract’s performance. . . is hopeless.
So, when it comes to gathering all of your facts for your hypothesis, you simply must collect everything.
Translation – If you want to know if your contract (and then your entire contract portfolio) is performing to a standard, you must gather everything. Again, I just got my “Captain Obvious” badge for that one. The concept is pretty simple, executing can be the challenge. The good news is that there are firms like
Answers Systems who can deliver these facts to you.
In our next installment of this series, we will discuss what happens when you have the trade promotion management data. How do you begin to determine whether your contract (or your portfolio) is performing?