External Factors are factors that influence the base for next year but are outside of the direct control of the supplier account team or retailer merchant team.
Maybe the retailer is opening or closing stores next year? Perhaps the weather was unusually warm this year, and that's driven sales up or down but we can't expect the same for next year? Part of the category could be trending to growth whether we promote it or not? These are examples of External Factors because they are assumptions that need to be made about what could influence next year's base volume. Otherwise, the value of activities in your plan for next year (e.g. multi-buy promotions) may be over- or underestimated.
To create an External Factor, you first need to click on '+Add Component', 'External Factor', and add a 'Name' and 'Description'. What you add is up to you e.g. 'New Store Openings / Retailer is opening 15 new stores this year', but bear in mind this will be visible to the retailer.
Once you click 'Save' some new tabs will appear, and you need to click on the 'Calculations' tab and proceed to 'Add Calculation' to financially value your External Factor.
A new Calculator will appear, and it's here that you can choose the Type from the drop-down. 'Base Volume Change' as the External Factor calculator type, so select that.
Once you've chosen the Calculator Type, you need to select the SKU(s) this External Factor applies to. An SKU is the stock-keeping unit that denotes the exact product a retailer sells to its customers. You can either pick the individual SKU one by one or choose a defined group of your SKUs by picking the Sub-Category they all sit in.
With the products selected, you now need to define the Weeks when the External Factor will occur. It could happen from the very start of the year, or you may decide it won’t have an impact until later in the year. It should last for the rest of the year from when it starts. Pick the relevant weeks, months, or whole year.
You now need to capture any Fixed Investments associated with the External Factor. When these relate to External Factors, they are likely to be payments you make to the retailer to support overall relationship you have. Click on '+Fixed Investment' to add a new Fixed Investment, choose a Type from the drop-down menu (these are pre-loaded by the retailer), and select the weeks the Fixed Investment needs to run for, e.g., store opening contribution to help the retailer pay for merchandizing your products in their new stores.
You should now determine the Store Volume Coverage %. This is the proportion of the SKU(s) base volume that this Ongoing Change applies to. If the SKU(s) is in all stores, the Store Volume Coverage is 100%. If the retailer has 1,000 stores, all with similar ACVs (All Commodities Volumes), and the SKU(s) is only in 500 of them, then the Store Volume Coverage is 50%. But if 100 (i.e., 20%) of the retailer's stores deliver 40% of the combined ACV and the Ongoing Change only applies to these 100 stores, then the Store Volume Coverage is 40%.
Finally, you need to determine the Volume Increase or Decrease %. This is the uplift or decline in volume of the SKU(s) associated with the External Factor on the Store Volume Coverage. Following on from the example above, if the retailer is opening 10 new stores, but only 5 of the new stores will list your product, then a Volume Uplift % would apply to 5 new stores on top of the 500 stores where you already have coverage, so a 1% uplift.
Once you have completed the required input fields and clicked 'Save' the new External Factor will be created and valued.