Performance Management in Retail and the Consumer Goods Industry: Best Practices and Case Studies PDF
Preview Performance Management in Retail and the Consumer Goods Industry: Best Practices and Case Studies
Michael Buttkus · Ralf Eberenz Editors Performance Management in Retail and the Consumer Goods Industry Best Practices and Case Studies Performance Management in Retail and the Consumer Goods Industry (cid:129) Michael Buttkus Ralf Eberenz Editors Performance Management in Retail and the Consumer Goods Industry Best Practices and Case Studies Editors MichaelButtkus RalfEberenz Horváth&PartnerGmbH Horváth&PartnerGmbH Berlin,Germany Hamburg,Germany ISBN978-3-030-12729-9 ISBN978-3-030-12730-5 (eBook) https://doi.org/10.1007/978-3-030-12730-5 ©SpringerNatureSwitzerlandAG2019 Thisworkissubjecttocopyright.AllrightsarereservedbythePublisher,whetherthewholeorpartofthe materialisconcerned,specificallytherightsoftranslation,reprinting,reuseofillustrations,recitation, broadcasting,reproductiononmicrofilmsorinanyotherphysicalway,andtransmissionorinformation storageandretrieval,electronicadaptation,computersoftware,orbysimilarordissimilarmethodology nowknownorhereafterdeveloped. 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Theregisteredcompanyaddressis:Gewerbestrasse11,6330Cham,Switzerland Foreword Performance management of companies in the retail and consumer goods industry mustmeetincreasinglydemandingchallenges.Thesearedrivenbydrasticchanges in consumer behavior, more and more volatile market developments, and the ongoing transformation toward a fully digitized world in terms of private, social, andeconomiclife. Inordertocopewiththeseimmensechanges,newconceptsacrossallcorporate functions are essential—in the strategic orientation, in sales, in marketing, in pro- duction,inthesupplychain,andalsoincontrolling. Thecustomerwithhisneedsandshoppingmotivationhasmovedintothefocus ofthecompanies.Throughever-largeramountsofdatahiscustomerjourneyismore transparent than ever, and from this, management-relevant, insightful, and reliable information can be generated. Analyses and recommendations for action are thus generated much faster than before. The demand for a much more flexible and specificdesignofplanningprocesses anddecision-makinginstrumentsistherefore significantly greater. As a result, they can be increasingly automated by modern systems.Inadditiontothesecross-industryrequirements,whicharementionedhere asanexample,thechangesresultingfromindustry-specificbusinessmodelsmustbe mastered. The multitude of interconnections, new sales channels and their integra- tion,hightransparencyofprices,theimportanceofbrandsforthesalessuccess,the development of digital ecosystems and platforms, as well as the mastering of pressure on margins are just a few examples that illustrate how corporate perfor- mance management in the retail and consumer goods industry faces its own chal- lengesbutalsogreatopportunities. This book gives multifaceted insights and answers on these fundamental chal- lenges,frombothaholistic andafunctionalperspective.Experiencedmanagersof well-known companies as well as industry experts from the management consul- tancyHorváth&Partnersprovideinsightsintotheirvaluableexperience.Successful practical approaches from various projects will be presented and worthwhile solu- tions will be designed. As a result, this anthology offers valuable approaches concerninginnovativesolutions. v vi Foreword Thechallengesforcompaniesoftheretailandconsumergoodsindustryarevery similar worldwide. Performance management systems used to manage these chal- lenges are based on the Anglo-American or German management accounting phi- losophy. Since the perspectives on approaches differ in German and American understanding, especially with regard to controlling, this is particularly exciting. These differences will be presented in detail throughout the introductory chapter. Readers outside of Germany are offered special impulses and suggestions that are intendedtocausecriticalreflectionanddiscussionasaresult. Ihopethatthisworkwillsupportmanyreadersingettingstartedwithandfurther developingperformancemanagementintheretailandconsumergoodsindustryand that they will enjoy reading them. At the same time, I would like to wish all companies the courage and success for the application of the concepts described herein. HorváthAG,Stuttgart,Germany MichaelKieninger January2019 Preface Far-reaching changes are challenging the retail and consumer goods industry. Continuous globalization, demographic change, new possibilities through digitiza- tion, and the trend toward increased sustainability but also increasingly volatile politicalandeconomicframeworkconditionscreateenormouspressureforcompa- nies to adapt. Concomitantly, changes in consumerbehaviorcan also be observed. CostumersareincreasinglyaccessingtheInternetusingmobiledevicesandareusing social media to inform themselves and to rate and buy products. Their shopping decisions are more spontaneous; they expect immediate delivery and all this at lowestprices,regardlessofstationaryoronlineconcepts. For theconsumer goods industry, this represents great challenges but also great opportunities. Whoever manages to be the first to present the market with real innovations can stand out from the masses of competitive products. Whoever carefully maintains and continuously develops brands and directly and effectively addresses theend consumer can not only generate competitive advantages through improved advertising and communication but can also create lasting relationships with him. New technologies support addressing the customer, both target group specifically and individually. With every step taken before, during, or after the shopping of a product, customers leave behind personal data. Their data trail is growing daily, and with smart and responsible usage, companies can use this to cometoabetterunderstandingofthecustomerandtoincreasecustomercentricity. Butalsointhecaseofretail,theconsumergoodsindustry’sgreatpartner,market conditions are changing. An ongoing predatory competition and an uninterrupted trendtoward internationalizationcreateincreasingly largeretailingcompanieswith constantly growing purchasing power. Consequently, the battle for the margin is increasinglytough.Inaddition,theborderlinebetweenindustryandretailislessand lessclear.Retailingcompaniesareprogressivelyswitchingtoin-houseproductionor are successfully establishing their own strong brands. For the industry, this means that additional competitors, thataretheirown customers atthesame time, emerge. Asa countermeasure, theindustry isattemptingtoreduce itsdependenceonretail. Their own sales channels are established, be it online or stationary using “brand vii viii Preface stores,” “factory outlets,” or “flagship houses.” Consequently, retail is faced with newcompetitorsthroughitssuppliers. However, despite all far-reaching and multilayered changes, the commercial target setting, namely that all companies must earn money, remains completely unchanged.Thisbeingsaid,thepressureoncostsandpricesremainshighandwill undoubtedly increase further. As a result, performance management is faced with more and more demanding requirements regarding efficiency and effectivity. With thegrowingcomplexityandincreasinglyrapidspeedofchangeofbusiness,better, more consistent, and faster information is required on all decision-making levels. Fromthepreparationoffundamentalstrategicdecisionsandtheirmaintenancetothe support of daily operative problems, good processes, instruments, and information aremoreimportantthanever. But what defines good performance management? Or rather: Which personal qualification, which organizational structure and which planning, forecasting, and reportingprocesses,whichsteeringinformation,andwhichITsystemsarenecessary to ideally secure a company’s growth and profitability? Naturally, the answers to thesequestionslargelydependontherespectiveparticularbusinesssituationandits specific challenges. Nonetheless, the publication on hand attempts to answer these questionswithpersuasiveconceptualapproachesandimplementationexamplesthat have been tried in practice for the retail and consumer goods industry and have relevanceformanyapplications.Indoingso,theaimistakingondifferentperspec- tives while contemplating this multifaceted subject matter, thereby offering an overview that is as broad as possible and offers profound approaches to holistic performance management. Consequently, we have divided the subject matter into sixparts: 1. Controlling vs. Management Accounting—How German and Anglo-American- UnderstandingDiffers 2. Something New on the Agenda—Challenges and Trends Controllers have to copewith 3. HowtoApproachPerformanceManagement—BestPracticeConcepts 4. DigitalPerformanceManagement—NewOpportunitiestoBoostEfficiency 5. Planning,ForecastingandManagementReporting—SuggestionsforDoingitthe SmarterWay 6. FunctionalControlling—Business-SpecificValuePropositions The first part, “Controlling vs. Management accounting—How German and Anglo-American Understanding Differs,” discusses the fundamental differences between the German and Anglo-American understanding of performance manage- ment.LarryWhitediscussestheterminological differencesandexplainspotential advantagesoftheGermanapproach.PeterKajüterandMoritzSchröderanalyze the differences between German and US-American cost accounting systems on an empiricalbasis,andinbothcontexts,costaccountingischaracterizedasthecoreof corporateperformancemanagement. The second part, “Something New on the Agenda—Challenges and Trends Controllers Have to Cope With,” introduces the greatest trends and challenges for Preface ix the retail and consumer goods industry with Ralf Eberenz’s and Maximilian Schröer’s contribution that also maps out their importance for controlling. Subse- quently,CarstenBork,SaschaBrosig,WalidMehanna,andStefanTobiasoffer amoredetaileddiscussiononthespecialimplicationsandopportunitiesofferedby thedigitizationofcorporateperformancemanagement. Specificapproachesforperformancemanagementarethensuggestedinthethird part “How to Approach Performance Management—Best Practice Concepts.” Therein, Philipp Graf von Arnim addresses the particularities of multichannel managementinretailingcompaniesanddiscusseshowastrongercustomerorienta- tion can be reflected in controlling. Steering a combination of wholesale and retail businesseswithaconsistentsetofkeyperformanceindicatorsissimilarlychalleng- ing. Bernd Seufert illustrates how the METRO Group has solved this issue. The partisthenconcludedwithanexampleprojectbytheREWEGroup.TinoEichler, ChristophKremers,andFlorianWernerdemonstratethevaluecontributionofa data-based management information system on the basis of a modern data warehouse. Undertheheadingof“DigitalPerformanceManagement—NewOpportunitiesto Boost Efficiency,” we illustrate digitization’s diverse opportunities in our fourth part.DanielKittelbergerandLea-SophieAllramsederpromoteacomprehensive strategy for the digitization of steering processes in order to meet the danger in inconsistentislandsolutions.ThebasistothisendremainstheERPsystem. SAP S4/HANA now also offers the option of controlling in real time. Frank Poschadeldescribesthepreconditionsunderwhichthisopportunitycanprovidereal added value for management. In particular, Kai Grönke’s and Sina Gieseking’s contribution is dedicated to realizing efficiency potentials in the finance function. They examine the possible application of robots for the further automation of predominantlytransactionalfinanceprocesses.However,thepotentialofdigitization exceeds the mere field of cost reduction. Decision-making processes can also be automated with the use of mathematic-statistical algorithms. Mareike Clasen and MichaelMilnikillustratehowpowerfulmachine-basedforecastsalreadyaretoday and how replenishment processes, for example, can be optimized. In conclusion, JörgEngelbergsintroducesaconsistentlydigitalbusinessmodelwithZalandoand mapsouttheparticularcontrollingrequirementsnecessaryforitsmanagement. WehavegivenallrelevantsteeringprocessestheirownplaceinPart5“Planning, Forecasting and Management Reporting—Suggestions for Doing it the Smarter Way.”Wehavededicatedthreecontributionstothemostimportantaspect,namely, theorganizationofplanningprocesses.Inhiscontribution,MichaelButtkushigh- lights simplicity, robustness, and flexibility as the fundamental quality criteria of planninginaretailingenvironment.DominiqueReuse,MarioSchoeb,andUlrich Teuschersupplementthediscussionwiththeaspectofaplanning process’length. Shorteningtheplanningdurationprincipallyprovesbeneficialforthequalityandthe steeringrelevanceofplanning.ThisisprovedbythepracticalexamplefromREWE in the contribution by Anna Thiel. In it the fundamental realignment of company planning and the necessary implementation steps are covered. In his contribution, ThorstenLipsconcernshimselfwithbusinessprognosisorrather:forecasting.He x Preface illustrates how so-called predictive analytics approaches can meaningfully add to managementassessmentsorevenpartiallyreplacethem.Finally,JohannesIsensee andAngelineSchulmeisterindicatethegreatimportanceofthestandardizationand harmonization of performance indicators for an effective management reporting usingthediscounterPENNYasanexample. Inthelastpart,“FunctionalControlling—Business-SpecificValuePropositions,” wediscussthemostimportantcontrollingfunctionsinretailingandconsumergoods companies.Itissortedaccordingtoorganizationalaspectsandbeginswithstrategy controlling.Herein,NikolaiBrosch,OliverGreiner,andSvenjaStövekenaddress aholisticmanagementapproachforthedevelopmentandcontrollingofasuccessful productandbrandportfolio.TheyarefollowedbyJohannesHofmeisterandBjörn Portner who examine the influence of new technologies on risk controlling. All relevant trends and challenges for corporate controlling are introduced by Ralf Eberenz and Stefan Behringer’s contribution. Reto Andreoli and Beate Oberholzer supplement this perspective with a practical example: the realignment ofSwarowski’sperformancemanagementsystem.WithFranziskaSchmiedebach- Ullner’scontributionconcerningtherequirements ofcontrolling from marketing’s point of view we open the discourse on marketing and sales controlling. An effective division of tasks between functions is thoroughly derived and then it is illustrated how a collective pursuit of targets can succeed. Oliver Hupp and FranziskaRumpelpreciselyexplaincurrentmarketdevelopmentsandtheireffects on the allocation of marketing budgets to sales channels. Finally, Carsten Moldenhauer and Henning Zwirnmann illustrate in which way digitization has also entered marketing and use the example of the analysis of shopping behavior using mathematical models. Heiko Schulte-Oversohl addresses the specific chal- lenges of sales controlling. He illustrates how tasks, instruments, processes, and personality traits of successful sales controllers are distinct. The part is concluded with two contributions concerning supply chain controlling. Christian Daxböck, Jochen Kröber, and Markus Bergmann give an overview on digitization poten- tials through supply chain steering, whereas Dominik Fuchs, Matthias Haas, Julian Dombrowski, and Nicolas Göpfert focus on the new possibilities created bySAPS4/HANA. OurperspectivethroughoutthesecontributionsisstronglymarkedbytheGerman languagearea.Therelevanteconomic-historical,cultural,andacademicpreconditions representedinthispaperhaveledtosomemanifestationsofperformancemanagement thatarenotrepresentativeforotherregionsoftheworld.Nonetheless,manycompa- nies,asnumerousproductbrandsandcompanynamescantestify,aresuccessfulwith theselocalsteeringconcepts.Consequently,theapproachesdiscussedinthispaperare intentionallybroughtupfordiscussionintheAnglo-Americanareaandareintendedto motivatethereadertodealcriticallytherewith.Inordertodoso,someterminological barriers must first be overcome. In Germany, management’s support by corporate performancemanagementissummarizedbythe“German”generictermcontrolling. Controllingisconsideredasallactivities,processes,andinstrumentsnecessarytothis end, but also the organizational function itself. Precisely translating this term to English is almost impossible, as in the Anglo-American area, different contents and
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