By Preston Flowers, Partner, Columbus Consulting
FP&A TODAY
Organizations have long used Financial Planning and Analysis as a means to collect data from across teams to build operating plans and provide analysis on sales, margin, expenses, and overall financial health. Today, however, retailers are looking to FP&A as a means to drive profits through scenario planning and risk/opportunity management. Newer connected technology is enabling businesses to reduce/eliminate their reliance on Excel and shared worksheets which are slow, less accurate and require a great deal of manual administration. And, with AI-enabled systems, retailers are able to scale their practices and processes at unprecedented levels. As a result, leadership is turning their focus from time-consuming mundane tasks to more impactful actions. Teams can now access more real-time views of how the organization is performing and forecast scenarios that trigger additional opportunity or alert heightened areas of risk.
THE FUTURE-REPLACING THE ROUTINE
Being able to do more, faster and with the same or fewer resources is allowing brands to focus their time and energy on decision-making and strategic thinking. Reacting to the business as soon as possible in the planning and management process is helping retailers to optimize profits. Retailers are starting to leverage artificial intelligence to absorb the routine, everyday workflow and to look for trends in their plans in order to focus their priorities on the areas of greatest impact.
ENTER ARTIFICIAL INTELLIGENCE
The industry is starting to leverage AI to determine business drivers. This facilitates driver-based planning, which considers multiple variables, both internal and external, and correlates the micro and macro factors to define likely outcomes. The process is fully integrated across stakeholders and has automated notifications to enhance workflow.
Artificial Intelligence is allowing connected teams to input a range of data points with triggered high and low scenarios. The scenarios create decision points based on various organization probabilities. Knowing which products, locations, sales channels, customer audience segments and other variables present immediate sales opportunities or, conversely, lost sales and potential downside, gives leaders a window to maximize or minimize impact. Leaders can now gain better visibility to their EPS targets and can implement guardrails along the value chain to safeguard results.
Being able to utilize AI to more quickly and more accurately identify performance drivers and elevate them cross functionally allows for retailers to respond with a stop-start-scale mindset. These newly enabled real-time reactions allow for businesses to realize optimal profits. As such, getting on the AI bandwagon is becoming more and more appealing as tangible rewards are now being more clearly defined.
Find more on Artificial Intelligence HERE
GETTING AI READY
Walk, don’t run. With newness comes excitement and often a sense of urgency. Getting the most out of AI does require preparation and discipline. While there is a tendency to get onboard with the latest technologies and systems upgrades, knowing what you need and how you plan on leveraging the benefits are critical steps to take before you engage. Here are some areas for consideration:
DATA
AI starts with data. Retailers need to access their data landscape and prioritize data quality through cleaning and standardization. Teams need to identify inconsistencies, missing values, duplications and other idiosyncrasies. Clean data can then be structured within a robust data governance model to preserve its integrity and compliance. This will now allow for connected teams and sources to be part of a standard unified set of data that can easily and accurately be analyzed by AI models.
USE CASES
Project teams should create a strategic roadmap that articulates what business drivers will impact profit, what tasks are involved in identifying those drivers and what relevant use cases exist that can benefit from AI (like forecasting, budget planning, variance analysis or risk assessment). Focusing on what and how you can apply AI will best allow for your organization to realize the value of AI at scale.
TOOLS
Auditing your tech stack and systems/tools is also a prerequisite for leveraging AI. Can your current tools integrate AI into their solutions? Are your software/platforms aligned with your goals and can they grow and pivot easily? Defining what your business has, what it is capable of today and where and what it needs to get to in the next 1-3 years will help define a clear roadmap for development.
TALENT/CULTURE/LITERACY
Asking your organization if you have the right people on board to execute against the roadmap is critical as well. An organizational assessment should entail a review of not only the people and their skill sets, but the organizational structure and available training capabilities. In many cases talent will be required to elevate their level of engagement with more strategic thinking and will need to be AI/data literate to interpret and apply AI findings. Knowing who you have on your team and which areas you need to increase/decrease investments in will serve you well once AI is in place.
CHANGE MANAGEMENT-TESTING-TRAINING
While you are placing the right talent in the right roles, you should be building a change management plan. Preparing the organization through training and then maintaining engagement through routine communications ensures that teams are aligned, informed and supported throughout the journey. The plan should include test and pilot milestones and solicit feedback along the way.
WHERE TO GO FROM HERE
Financial Planning and Analysis professionals have become key players in business planning. They are no longer just functional players who provide snapshots of a moment in time, but are business drivers who can identify in real-time which areas of the business are underperforming and which are the most vulnerable. This knowledge allows for retailers to pivot. They can recommend the reallocation of inventory/products to channels/locations that are more profitable, minimizing the need for promotions/mark-downs. They can adjust investments to fuel higher impact initiatives. They can also note at more micro levels any changes in customer/shopper patterns, geographical issues and even product trends.
As organizations look to artificial intelligence to build efficiencies through speed and accuracy at scale, retailers are taking a hard look at their own FP&A function to see how they can better optimize their teams, processes and platforms to empower profitable growth. Incorporating software solutions that are AI enabled is only one piece of the roadmap. Information at scale is not the answer. Rather, an approach that considers the state of your data/inputs, your ability to maintain consistency through a unified view across the organization, and that defines not only the business drivers/needs, but also the capabilities of the culture and the talent are all mandatory components of successful growth.
ABOUT PRESTON FLOWERS
Preston is a Partner at Columbus Consulting. He is a highly successful financial planning and analysis professional with over 20 years of experience in retail finance. Preston brings extensive experience in budgeting, analytics, modeling, and financial system development across all areas of the business.
ABOUT COLUMBUS CONSULTING
Columbus Consulting delivers solutions that drive true value and have been transforming the retail, grocery and CPG industries for over two decades. We are a retail consulting company of industry experts. Our approach is simple, if you do it, we do it. We are more than consultants; we are experienced practitioners who actually sat in our clients’ seats. We understand the challenges, know what questions to ask and deliver the right solutions. Columbus offers a unique, consumer-centric approach with an end-to-end perspective that bridges functional & organization silos from strategy to execution. Our specialties include: unified commerce, merchandising & category management, planning & inventory management, sourcing & supply chain, data & analytics, accounting, finance & operations, people & organization and information technology. Let us know how we can help you. To learn more, visit COLUMBUSCONSULTING.COM.
