BI in FMCG Industry - Raj Basu

Company confidential

Major changes in FMCG industry

Indian Consumer changes Larger disposable income
Middle class segment bulging Greater global exposure Greater appetite & demand for global products Differentiated product & service requirements

FMCG space dynamics Explosion of products

Explosion of markets (Kirana & Organized Retail) Rush of new players Global players bringing process and intelligence maturity Increasing competition Supply chain bottlenecks

Impact on FMCG strategy & operations Increasing Flexibility

Outsourced Contract Manufacturing Demand driven supply chain Improving Customer service Retail outlet segmentation Customized Retail service Supply Chain segmentation Greater Organizational Alignment EPM, Divisional Scorecards Integrated Sales & operations planning Greater Customer focus Demand analysis Product charateristics Company confidential

EPM/BI needs of the FMCG Industry

Rapid EPM adoption for Org Alignment & strategy management Balanced Scorecards (Strategy Maps, Business Scorecards)
Budgeting, Planning & Consolidation systems Operational performance management

Financial Analytics for greater ROCE Working Capital Optimization (C2C Cycle)
Debtor Analytics Payables Analytics Inventory Optimization Treasury Cash Analysis

Operations Analytics Plant Performance Management

MES Analytics

Customer Analytics Trade Promotion Analytics

WD Profitability Outlet performance Channel Analysis Integrated Consumer Demand & market performance visibility

Supply Chain Analytics Supply Chain Performance Management

Product Cost & profitability analysis Operational Planning efficiency Inventory visibility & optimization Supply Network efficiency Spend Analytics

Company confidential

Key BI Trends in the FMCG industry

Major Indian FMCG players are making rapid strides in enabling Business & Competitive intelligence as a key differentiator

Most of the large FMCG companies are centralizing BI as a shared service on a common platform across its businesses and brands with a razor like focus on getting Best-In-Class service

Most of them are already deep into state of art Business Intelligence ability to check on an outlet consumption pattern on a handheld before meeting the owner ability to analyze secondary sales based promotions rather than primary uptake ability to provide outlet based actionables rather than market level inputs like OOS, poor AVF scores etc

Global players are even further ahead Trade Promotion Analytics, Segmentation based promos, supply chain bottleneck alerts, route optimization and advanced forecasting and predictive demand models
Company confidential

EPM Objectives
FMCG majors are interested in implementing a Performance Management (PM) program across the enterprise, in order to align goals and strategies with operational objectives, plans and responsibilities within the organization.
Incr Share Holder value

Sustained Profitable growth Accelerate Organic Growth Improve Productivity

Effective Model To Identify Capability Measure Performance Development Needs

HR Effectiveness Process Efficiency Customer Satisfaction Financial Performance Objective Measures Initiatives

Key Business Benefits

Organizational Alignment Strategy Communication

Business Performance

Vision

Level 0 : Corporate

Closed Loop - Feedback

Functional Objectives Unit Objectives

Level 1 : Business Functions

Individual Objectives

Level 2 : Units

Strategy Communication

Strategic Objective

Adopt New Technology For Develop Superior Manufacturing Flexibility Consumer Insight

Company confidential

Classic Balanced Scorecard Framework

Perspective
Vision & Strategy Effect Financial Results Profitability Return on Capital Employed
To Satisfy our shareholder, what financial objectives must we accomplish

Key Imperatives

Key Questions

Customer

Consumer Satisfaction Market Share

To achieve our financial goals, what customer needs, must we satisfy

Internal Process

Efficiency

To satisfy our customers, what internal business processes, must we excel in

Cause Learning & Growth

Action Knowledge Innovation

To achieve & maintain our competitive position, how must the organization the Organization learn & improve

Balanced Scorecard incorporates a double loop feedback around both internal business processes and external outcomes

Company confidential

Decision-making challenges at ITC Businesses

Organizational Alignment
Business Performance Mgmt Executive, Functional, Unit Level Scorecards Employee Performance Mgmt Personal Scorecards

Fact Based Decision-Making / Actionable Intelligence

Tactical
Targeted Promotions & variable pricing Outlet Segment specific service packages Profitability based supply routes Demand driven inventory management

Operational
Exception based operations at the Factories Stock optimization across supply chain nodes Fast tracking complaints from High Value Cust Personnel workload mgmt across stores

Performance Visibility
Promotion & marketing impact tracking Supply Chain bottlenecks SKU velocity Logistics impact on operating margins Store Allocation efficiency Reservation Pipeline vs Forecast 360 deg Customer Views 360 deg Supplier views Cost variance tracking Order-To-Fulfillment, Cash To-Cash, Procure-To-Pay cycle times

Analytical Capability
Outlet Service Route Optimization Outlet Segmentation Analytical Forecasting Six Sigma Analytics Price Elasticity Analysis BCG Portfolio Analysis Human Productivity Analysis Loyalty Analytics

Integrated Analysis across value chains

Impact of Food FG Warehouse location on Food Categories operating margins Impact of Leaf stock at ILTD on price elasticity at ITD Impact of potato sourcing bottlenecks on Bingo Freshness Company confidential

EPM driven BI at a US Food Distribution Major

Strategic Goals Strategic Metrics/Scorecards

Demand Initiatives

Sourcing Initiatives

Supply Chain Initiatives

Customer Initiatives

Some Analysis Areas

General Analysis Sales Force Effectiveness Trade Promotion Effectiveness Marketing Effectiveness Market Analysis

Some Analysis Areas

Spend Analysis Supplier Performance Analysis Item & Brand Analysis Bid Analysis Competitive Analysis

Some Analysis Areas

Delivery Effectiveness SKU rationalization Effectiveness Backhaul Effectiveness Carrier Performance Analysis

Some Analysis Areas

General Analysis Segmentation Analysis Contract Compliance Business Review Analysis Customer Profitability Analysis

Business Functions - Functional Metrics, Reports, Alerts, Scorecards, What-If Analysis, Guided Analysis

IT Functions - Dashboards, BI Tools, Databases, ETL, Data Models, Metadata

Company confidential

A single BI System should support the EPM Model

Performance Management Model
Corp

TM&D HR Perf

CBSC, Food, PCB Brand Perf Mgmt Mkt Research Perf Network Eff Logistics Perf Scheduling Eff Carrier Eff Emp Eff NPD Perf Operations Perf R&D Perf

Emp Perf

Sales

Finance Planning Perf

Distribution

Finance

HR Perf

Category Perf Dist Perf Branch Perf WD Perf AM Perf AE Perf

Promo Perf

Portfolio Perf

Procurement Perf

A common data set populates the entire model enabling : Scalability EPM, Data, BI Model System Performance Integration data linkages business rules

Warehouse Perf Outlet Svc Eff Route Eff

Channel Perf

Plant Perf

Workforce Eff

WSD Perf

BI Layer (Business logic, number crunching, metric/report generation )

Outlet Sales, Invoices, Purchase Orders Inventory, Transport Orders, Stock Tr Orders, Salary Advice, re-distribution Costs

Data Warehouse
(Data Storage)

Business Plan, Forecast, A/R, A/P, Visual Merch Audit, Production Plans, Market Research, Production Jobs

Data Extraction, Cleansing, Staging, Transformation & Loading

ETL Layer Source Systems

SAP

Visual Audits

Sales Force & CRM

WD System

Excels

PLM

HRMS

Company confidential

Some benefits of integrated modeling for FMCG

Impact of raw material shortage on retail offtake Analysis of a request for a short runner on Factory productivity vis--vis customer service Correlate/factor-in market demand (IMRB) into AE performance Decision on extending Promotions based on raw material availability Analyze impact of sales strategies/norms on Market standing Analyze synergy opportunities like sharing warehouses, transportation sharing and backhauling, reverse logistics etc across categories

Company confidential

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Typical BI Transformation Roadmap

Major Organization Transformations..
Brand Management Transformation

Process Improvement Transformation

Supply Chain Transformation

Need a Performance Mgmt & BI Transformation to empower & measure effect of transformation !!
BI Transformation Roadmap EPM & BI Workshops Define Performance Mgmt Model
Framework Metrics Models Scorecards Alerts Linkages/Alignments Analysis Flows Dashboard Designs Biz Case/ Info Needs Get Mgmt Buy-In

Define BI Strategy

Create BI Governance Model

Identify Sponsor Create Steering Comm Create Execution Comm Comm to all stakeholders Set expectations/Time Create Project Plan

BI Implementation

BI Change Mgmt

BI Value Mgmt

Awareness Creation Appreciation of Best Practices Intent Generation

Technology Drivers App Architecture Data Architecture Platform Selection Vendor Selection Initiatives Roadmap Effort Estimation

Business Requirements System Requirements Design Development Testing Deployment

Training Communication Biz Process Changes Expectation Mgmt Usage Monitoring BI Support Processes Risk mgmt

KPO Customer Service Business Impact BI Perf Mgmt BI RoI BI Enhancements

Company confidential

11

BI Program Change Mgmt Challenges & Strategy

An effective Change Management strategy for BI Program starts at the Kickoff and ends at satisfactory system adoption and positive customer feedback. However, Change Management is an ongoing process and is part and parcel of an effective BI Governance Model. bringing people on board, convincing them of the value, goading them to use it the right way, measuring business improvements. BI, being a non-critical business application needs cultural process changes to leverage the investment, which makes it even more challenging and critical aspect of achieving success Key Questions for Change Mgmt Planning What will change ? Why will it change ? Change How will it change ? Who will change it ? Change is enabled through 4 key change perspectives

People Participation

Processes

Systems

Culture
Business Driven Program Showcase Business Benefits Keep business in loop during change in scope Embed in biz processes like sales review etc Pre-empt business needs Communicate effectively Repeated Multi-media training Measure adoption, usage and publish figures Publish success stories

Business Sponsorship Business Buy-In, Ownership Identify Business Change Agents Remove Business IT gaps Remove fear of Retrenchment Create Senior Mgmt Champions to spread the message

Identify and Plan for process changes early on Create effective communication channels and joint project plans with other process owners Cultural and governance change needs to go along with process changes

Identify & Plan all system changes early on (Frontline systems may need to have more checks and measure to improve data quality) Create effective communication channels and joint project plans with other System owners Communicate all system changes to the Organization

Company confidential

12

Enterprise BI Strategy for ITC

Business Intelligence Mission (SYSCO): Strategy BI Provide a single view of timely,Needs/ BI accurate, BI Business Case BI Vision consistent & actionablePainpoints across information the enterprise through a common user interface accessible anytime, anywhere toPlan Execution authorized users, thereby enabling fact Execution Model Implementation based decision making.
Scope Definition Roadmap & Project Plan (Inhouse/Outsource) Vendor Selection BI Budget

Architecture (Data, System) Tool Selection

BI Business Case
Service & Maintenance
Service Model (Outsource, Managed BI Svc)

Customer Focus

Unique Sales & Customer view Service Service Quality Unique Spend Improvement & vendor view Management Supply chain wastes Asset utilization gaps Higher employee productivity Governance Model Greater IT ROI Organization Risk Value Single Analysis Platform across biz Alignment Management Assessment areas Excel intelligence democratization !
Service Vendor Selection 13

Company confidential

So Whats Driving Trade Promotions?

 New product introductions. In 2003, 33,700 new FMCG items in the US marketplace alone up from about 32,000 in each of the previous two years. Declining shelf space. Median US store size has declined since its 1999 peak of 44,843 square feet, following nine consecutive annual rises. Wider assortment range in both North American and European stores constrains shelf space yet more. Private-label products. Private-label products now account for between 15% and 20% of items sold in US supermarkets, 22% in Europe, and a staggering 42% in the UK. Result - large and rising trade promotion spend 10 FMCG firms interviewed by Forrester planned 2003/4 trade promotions at 16% gross revenues It all adds up to more than $100 Billion per year Based on 2003 revenues, the 50 largest FMCG manufacturers. Its the single largest element of expense for FMCGs, but the least well controlled. Typically CFOs use a complex tangle of spreadsheets and enterprise app extracts to track trade promotion dollars but have no way accurately to estimate in advance the impact of a planned promotion. CRM based approaches typically just rely on sales estimates of trade promotion impact, thus ensuring that trade promotion accruals and supply chain preparations are based only on guess work Source : Forrester Research No wonder senior execs get mauled by regulators and shareholders alike
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Company confidential

Closed Loop Process BEGINS with Analyzing Performance and Opportunities in the Business

2 1 Analyze Performance - During and end of promotions 3 Analyze Opportunities for Brands and Markets Plan, Simulate and Evaluate Scenarios

7 Execute Deals

FINANCE TRADE MANAGEMENT OPERATIONS SALES BRAND / CATEGORY MANAGEMENT

MARKET INSIGHTS

Collaborate and Approve New Plans Generate new Promotions Plan/Forecast 4

Negotiate & Sell in Deals 6

5 Analytics Operational

Linking Insight and Performance Management with Decision Support

Company confidential

15

Despite such large spends, not many manufacturers have succeeded in measuring promotion effectiveness
Only 7% of Manufacturers say that they are highly effective at evaluating promotion productivity.

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Of all investments, promotional spending is the highest whilst knowledge about their return and effectiveness is the lowest. For promotions, the driver is what was done the previous year Most promotions are NOT evaluated in an objective and systematic fashion

30 14 7

There are no management KPIs to measure the business.

Inneffective

Neutral

Somewhat Effective

Highly Efective

Half of all promotional expenditure is wasted ... the problem is nobody knows which half!
William H. Lever, Chairman, Unilever Corporation
Source: Brandweek November 25, 2002/Cannondale Study

Company confidential

16

Substantial Opportunity for Manufacturers

Research suggests that FMCG manufacturers can achieve up to a 40% increase in return on sales through improved trade promotion management.
 80-90% of promotions are not profitable for manufacturers
RETAIN
More Impactful Events

EXPAND
A B B C C A A A A A A B

 Consumers are unaware of 51% of items

B

C B B

bought on sale
A

 Only 50% of manufacturers measure event

Manage Promotion Driven Costs Redeploy Inefficient Spending

profitability
1.5%

C REDEPLOY (OR IMPROVE)

C C

COST MINIMIZE

Less Impactful Events

2.5%
Potential Manufacturer Value Chain Improvement
(as a Percent of Sales) .4-.6% .2-.3% .2-.4% Percent of Sales .3-.6% .1-.2% .2-.3% 0-.1% Up to 2.5%

10.0% ROS

Manufac-turing Labor

Freight

Fixed COGS Salesforce

Distribu-tion Inventory Diverting and labor Carrying Cost All Other

Source: Accenture Industry Experience and Trade Promotion Study

Company confidential

17

Some typical Trade Promotion Effectiveness KPIs

Process Steps  Measure the efficiency of the entire supply network to ensure that product is available on the shelf at all times during the promotion KPI  Shelf Availability Description  % of time that product is available on shelf in the correct shelf during the total time of the promotion Type of KPI  Operational Source of Information  Retailer Inventory System by SKU by shelf location Role Impacted  Brand Manager  Account Manager  Supply Chain Planner  Retail Buyer/Merchandiser  Brand Manager  Account Manager  VP - Marketing

 Measure the profitability of each promotion for the entire lifecycle

 Promotion ROI

 Incremental Revenue less campaign costs, creative costs,

 Tactical/Strategi c

 Manufacturer Sales & Costing systems

 Measure the lift in sales volume due to the promotion  Measure the extent of cannibalization due to promotion on other SKUs/Stores

 Sales Lift%

 % increase in base demand post promotion

 Tactical

 Retailer POS systems

 Brand Manager  Account Manager  Demand Planner  Brand Manager  Account Manager  Demand Planner

 Sales Drop %

 % drop in base demand of nonpromoted SKUs in promoted Stores and promoted SKUs in nonpromoted Stores  Mismatch between POS sales volume and Store/Account Buy volume during promo period

 Tactical

 Retailer POS Systems

 Measure the extent of Forward Buy by Stores/Accounts

 Store/Account Volume

 Operational

 Retailer POS systems  Manufacturer Sales systems

 Demand Planner  Account Manager

Company confidential

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Trade Promotion Analytics Hierarchy of Needs

Operational Tactical Strategic

Demand Management

TP Scenario Planning Customer Behaviour Analysis

What will happen

Inventory Management

A N A L Y T I C S

Ensure shelf availability

What is happening Why did it happen

Measurement of Sales KPIs Store level, SKU level, Lift%, Drop% Determine and analyse Causals Evaluate Promotions Effectiveness Determine Promotion Costs Evaluate Store/Account Profitability

Determine Order Status

What happened

Measure promotion impact on sales volumes

Company confidential

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TPM Applications Key Interfaces

Customer Master Data Store Promo Adoption Channel Spends Consumer Off-take

ERP

Product Master Data Price Master Data Sales Performance

POS

Inventory

Customer Analytics
Stock-Out data Consumer Billing Price

SCM

@ Brand-Account level Historical Sales Trend

CRM

Base Demand

Operational Application

Store level forecasts Planogram Compliance Sales Returns

Forecast Accuracy Order Backlog Inventory Availability Retailer Invoice data Total cost of promotion Retailer Promo penetration data

Market/Cateogry/Channel Outlook Retailer Panel Data

Analytical Application

Consumer Panel Data

SYNDICATE DATA

Reports

Exception Alerts
Retailer Applications

What-If Analysis
FMCG TPM Application

Causal Analysis
Third Party Data

Optimisation
TPM Analytics

FMCG Enterprise Applications

Company confidential

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Thanks !

Company confidential

21

Evolution of BI

Maturity

BI Affordable, Democratized, Mobilized Pervasive BI (Business Planning, Collaboration) Data > Insight, Alerts, Root Cause Analysis Static Reports -> On-The-Spot Answers BI > EPM/CPM BI -> Greater Integration Business Intelligence -> Intelligent Business (Exception based Mgmt, predictive analytics etc)
1990 1995 2000 2005 2015

B1 2.0

MIS/EIS Reports

Increasing

Company confidential

22

Evolution of BI
BI 2.0

Excel

Excel

Excel Collaborative BI

What-If Analysis Text Intelligence

Maturity

Desktop OLAP Reports Expensive Data Integration

OLAP Reports

EPM CPM
Dashboards Scorecards Alerts Analysis Trails

Predictive Analytics

Increasing

Static Mgmt Reports

Web based OLAP Reports Integrated Data Repositories

Exception Based Management

Mainframes

Data Silos

Packaged ERP BI

Real Time Analytics

1990

1995

2000

2005

2015

Company confidential

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Unilever Akili
Unilever Global Working together with the business to fulfill consumercustomers Akili : Network : Connects all regional business units and its under one global data pool cheaper whishes better, faster and
Global Intelligence Framework Supply Chain Intelligence
Global Consumer, Shopper & Registry Trade Analytics Trade Dynamics, promotion management

Enablers
Common Identification Standards Single Platform all regions Global Data Synchronization Standardized Processes & Systems Global Information Service Center

Market Trends & Consumer Segmentation

Network Planning & Optimization

Competitive Intelligence

Supply Chain & Demand Planning Global Manufacturing Integrated Sourcing Hubs
Regional Supply Chain Data Pool Disperse d R&D Regional Demand Planning Regional Distribution Structure

Category & Channel Marketing Collaborative Shopper Value Creation Regional Category Support
Regional Channel Strategy Category Development By country Country Specific Intelligence Brand Activation Plans

Integrators

Common Business Performance Models Collaborative Planning

Company confidential

24

Nestle GLOBE (Global Business Excellence)

GLOBE - Objectives
Implementation of harmonized Nestle Business Excellence Best Practices All Regions Managing Data as corporate assets Implementation of single data standard All Regions Implementation of standardized information system & technology all regions

Key Initiatives

Supply Chain
 Demand Planning  Manage risks to targets  Global Sourcing  Effective hedging  Working capital optimization  SKU optimization  Customer profiling & categorization

Marketing Effectiveness
 Consumer & shopper behavior  Trade dynamics & channel intelligence  Micro Marketing intelligence specific to regional needs  Drive operational channel marketing programs

Portfolio Enhancement
 By Geography, Category & by Product groups  Help to optimize product offerings  Identify new opportunity for growth of existing products in the global portfolio

Strategic Partner
 Help in M&A  Identify Cash Flow issues  Currency risks  Aid in investment opportunities

Business Benefits

Effective decision making

Enables Shared Services Speed to share & Implement & reduces cost of operations new best practices

Company confidential

25

Reebok Global Business Intelligence

Sales & Marketing Analytics Purchase Analytics Supply Chain Analytics mySAP portal Vendor Analytics Financial Analytics

SAP BW

SAP R/3 - AFS

(Apparel & Footwear solution)
[NAM, Canada, Japan, Europe, Russia]

SAP R/3 - AFS

(Apparel & Footwear solution)
[NAM, Canada, Japan, Europe, Russia]

SAP R/3 - AFS

(Apparel & Footwear solution)
[NAM, Canada, Japan, Europe, Russia]

SAP R/3 - AFS

(Apparel & Footwear solution)
[NAM, Canada, Japan, Europe, Russia]

Enterprise Exchange Service

Sales Force Customers Logistics Vendors Forwarders Customs Financial Institutions

Key Benefits
a. b. c. d. e. Consolidated picture of performance By brand, By Geo, By Period Fact based decision making exception based Supply Chain management Driving accountability across organization metrics ownership from top to bottom Better vendor control vendor scorecarding Improved sharing of best practices within organization visibility across organization
Company confidential

26

Managed-BI Service Model for ITC

Clients Client
SLAs, Joint Planning, Escalations, Business requirements, Financials, Change Management

Client Business Team

Client Partner

ITCInfotech Client Management Team BI Program Management Business Analysts BI Support Complexity Firewall

Security Control

BI Application Portal (ITD, FBD, Hotels, LRBD)

ITC Infotech Governance Measures

Managed Service Vendor Facilities Analytics Services Knowledge Services Business Analytics Services (Segmentation, Price Elasticity etc) Business Optimization Services (Stock optimization, Route Opt) Reporting Services Generate OnDemand reports, Alerts, Dashboards Maintain ETL Reporting, Database applications Data Management Services Master Data Management & Datacenter Systems Data Quality Management Infrastructure Services Software Server Management Hardware & network Management

Quality Control (Scorecards)

SME (SCM, CRMetc) Analytics Experts Architects BI Engineers ETL Engineers DBA Data Administrators Data Analysts

Methodologies & Processes

Hardware Engineers Network Engineers

Company confidential

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Business-Analytics Scope of Integrated BI

Financial Analytics Profitability Analysis Financial Planning Accuracy Working Capital Analysis Brand Analytics Category & Portfolio Analysis Marketing Spend Effectiveness Brand & Market Analysis TM&D Performance Scorecard Operational Analytics Production & Planning Efficiency Unit Level Scorecard & Automation New Product Lifecycle Analysis Vendor Scorecard SCOR Measures
Company confidential

Customer Analytics WD Profitability Analysis Retail Outlet Analysis Customer Service Effectiveness Trade Marketing Analytics Sales Analysis Salesforce Analysis Channel Analysis Category Analysis Trade Promotion Analysis Workforce Analytics Employee Attrition Workforce Productivity IR Effectiveness Resource analysis 28

Business-Analytics Scope of Integrated BI

Distribution Performance Supply Chain Planning efficiency Supply Chain effectiveness Supply Network efficiency Warehouse Performance S&OP Analysis Forecasting Accuracy Planning Adherence & efficiency Variance Analysis HR Performance Recruitment Efficiency HR Spend analysis Working Environment Regulation Effectiveness Payroll Efficiency
Company confidential

Project Performance Mgmt Project Planning efficiency Project Spend & vendor Analysis Project Execution effectiveness Project Risk Analysis Corporate Sustainability Performance Carbon footprint, variance & credit analysis Sustainability Spend Analysis

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Integrated EPM/BI Capability

Corp Performance

HR Perf

TM&D Perf

CBSC, Food, PCB Perf Brand Perf Mgmt Mkt Research Perf Network Eff Logistics Perf Scheduling Eff Carrier Eff Emp Eff NPD Perf Operations Perf R&D Perf

Emp Perf

Sales

Finance Planning Perf

Distribution

Finance

HR Perf

Category Perf Dist Perf Branch Perf WD Perf AM Perf AE Perf

Promo Perf

Portfolio Perf

Procurement Perf

Warehouse Perf Outlet Svc Eff Route Eff

Channel Perf

Plant Perf

Workforce Eff

WSD Perf

Company confidential

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