[CASE STUDY] In-depth Plan Profitability Calculations for Violeta
Updated: Jan 20
Excel is probably the most commonly used tool in companies and offices globally. Initially imagined as a productivity tool, Excel outgrew its original purpose and became much more: a personal notebook and planner, calculator, budgeting tool, project management tool, CRM, database tool, etc.
In the finance world, Excel is still a must, but companies using Excel exclusively to plan for their finances, eventually face serious problems. Simply put, the tool is unsuitable for complex enterprise operations and user collaboration. In larger companies, Excel cracks under the weight of large quantities of data, numerous calculations, and problematic user collaboration - distributing spreadsheets throughout the organization via email is obviously not an optimal solution to track and plan company finances.
Sales planning challenges in Violeta
One of the companies with problems mentioned in the previous section is Violeta.
Founded in 2001., the company is one of the largest producers of hygiene products in the SEE region. Violeta’s explosive growth made the company and its products an important part of every household in the region.
Violeta currently has 4 factories in two countries, active business units in Bosnia and Herzegowina, Croatia, and Slovenia, with more than 1200 employees, and a product portfolio of more than 300 products in their assortment. Besides manufacturing its own products, Violeta also distributes various products made by other companies such as Ferrero, PIK, Paladin, Barilla, Mulino Bianco, Filiz, Dr. Oetker, etc. The company also deals in exporting, retail, and hotel industry, and it even owns a kindergarten and a retirement home.
With this many business activities and annual revenue of more than €200M, it is reasonable to assume that finances and sales planning in Violeta is an extremely complex task. This is also what the team in Farseer realized once we got a chance to talk about Violeta’s FP&A challenges.
We found out that one of the key challenges the company faces is sales goals planning. The team of 35 sales representatives and brand managers in Violeta is in charge of sales planning. This means that they have to define the sales strategy for 30 brands in their portfolio, plan the activities and SKU amounts they want to sell, and set specific prices and rebates for individual key customers. All this makes the task of planning fairly complicated.
As planning in Violeta is crucial, the planning team faces the critical and complicated task of making in-depth sales plans every year.
Detailed and in-depth sales planning without manual work
One of the biggest challenges in Violeta was the complexity of planning the investments needed to realize the target revenues for individual key customers and partners.
It was hard for planners to define the sales numbers on the SKU (stock-keeping unit) level in detail. Also, they had trouble generating the plan profitability numbers on the brand, key customer, and business branch levels.
Luckily, Farseer is created for situations such as this one. Together with Violeta’s IT team, we connected Farseer to their ERP and BI systems, so that all historical data can easily be imported into Farseer, and get a starting point for creating all future plans.
Centralized modeling in Farseer enabled all users to connect and work on the same source of data, and it eliminated the need for constant updating and exchanging of multiple versions of spreadsheets.
All users started to create their financial plans in Farseer. As the planning became centralized and Farseer automated most of the key calculations, the planning process became significantly quicker and more efficient.
It took one month of active work from the first moment Violeta’s planners got access to their user accounts to them using Farseer independently. Onboarding and user education were relatively short because Farseer relies on Excel’s UI/UX practices, which users already know and like.
Optimization algorithms and smart planning adapted to the real-world conditions
For Violeta, one of Farseer’s key features was the automated top-down distribution of sales numbers. This feature enables users to set a single target number at the top, and the system uses it to automatically and smartly fill out the rest of the plan.
Production and distribution companies such as Violeta have thousands of SKUs and hundreds of sales/distributor locations. This results in tens of millions of time series, which is somewhat impractical for making detailed plans. In Farseer, it is possible to enter a number of units sold, for example, on any level - SKU, client, business unit/branch, or any combination of these variables. The optimization algorithm then distributes the amounts across all relevant dimensions, solving systems of several thousand equations. Unlike standard machine learning systems, Farseer’s optimization algorithm does not work as a black box, generating random results that cannot be influenced in any way, but it places users in the center of the process, giving them a chance to affect any number and adapt it to the real-world conditions. The rest of the plan optimizes automatically and adapts to the number that is manually entered.
For example, planners in Violeta can set a general number of 500 000 SKUs sold in the next year, and, based on all available data, the system automatically calculates sales goals for every customer, together with amounts, detailed prices, and specific rebates for each one of them. If the collaboration with a client goes better than initially planned, users can manually enter the SKU number just for them, and all other values across all other relevant dimensions automatically and momentarily adapt to the newly entered value.
Farseer got additional points from Violeta for drastically easier calculations of plan profitability: in just a couple of clicks, users can generate complex and detailed reports about the profitability of any segment of their product portfolio, client, or business partner.
Also, users in Violeta liked the Farseer Dashboard reports that show key calculations in real time because they previously had to build and refresh them manually in Excel.
More time for sales
Planners in Violeta say that everything “clicked” after they started using Farseer. People working in sales finally have enough time for sales and do not lose time on supporting activities.
Except sales planning, they currently use Farseer to plan for CAPEX, expense tracking, and for P&L generation.