The Role of Analytics in Retail

The role of analytics in retail has evolved substantially over the past few years and it’s having a significant positive impact.  The days of hearing a vendor say “Oh, we get an EDI 852 but we don’t really do anything with it” are starting to fade into the rear view mirror.  This blog post will discuss some of the mega trends we see occurring in business intelligence in retail and their impact on demand planning and forecasting.   

Retailers are much more open to sharing point of sale (POS) data with vendors now than they were a few years ago.  Wal-Mart paved the road with Retail Link, which gives vendors access to a wealth of data, and most other retailers use EDI 852 or a web site of some kind to make data available.  [As a side note there are some major retailers like ACE Hardware and Publix that still refuse to share POS data, which is pretty amazing]  Mega-trend:  retailers will begin to expand the metrics they share and they will slowly move toward providing daily data.  We have recently seen retailers begin to share on hand data and sales dollars which they had not shared previously.  Providing those additional data elements enables category management and demand planners to greatly expand their analytics.  We are also seeing retailers begin to make daily data available, which is probably the most exciting development in business intelligence for retail.  Demand planning and forecasting for retail is dramatically improved by daily data vs. weekly data and daily data creates the opportunity for things like weather analysis.   

Key performance indicators for retail are pretty easy to define and calculate.   Sell-through, weeks of supply, year over year comp or % change, gross margin, gross margin return on investment, etc.    We find however that many demand planners do not have the time or tools to monitor KPI’s at the store / SKU level of detail which diminishes the value that should be realized.   Mega-trend: vendors are using cloud based software as a service (SaaS) to get access to sophisticated retail reporting without having to invest into business intelligence tools and a bunch of expensive development.   Retail point of sale reporting and analytics can basically be purchased ‘out of the box’ and then customized to fit your precise business needs in a very small amount of time.  When a large customer like The Home Depot is asking you to get into the POS data, you don’t have the luxury of waiting on your IT team.   Outsourcing your retail POS reporting and analytics provides a very fast path to keeping your customer happy. 

Mega-trend: Vendors use of EDI 852 and POS analytics will become more and more sophisticated.    Not that long ago, when a vendor invested in POS reporting, they were getting ahead of their peers by using technology to improve their business.  They would build relatively simple retail dashboards with key performance indicators for retail stores, like units and dollars sold.  Today, however, we are seeing increasingly complex analysis for demand planning and forecasting, complex retail replenishment models, category management and even weather and demographic analysis.  This is a natural evolution of business intelligence in retail and it is driven by the availability of SaaS tools and very real results that vendors are experiencing.

Retail POS Reporting - Getting the ROI

Numerous research studies demonstrate that retail point of sale reporting (POS reporting) provides vendors with a critical advantage in sales and inventory management.  But we often find a disconnect between the POS report and a hard ROI.  Why is that?

Many vendors that create retail POS reporting systems are managing what we call “rear view” metrics.   A rear view metric tells you what happened yesterday or last week, but it is not very helpful in making actionable plans for the future.  For example, a POS report which shows units and dollars sold for the last 4 weeks is a rear view report.  It’s helpful to know what occurred, but without additional analysis, it does not indicate to you what actions should be taken.  What you should be looking to understand is the trend that sales are likely to follow in the upcoming 4 weeks.  Is the trend positive or negative?  That is the key information you need to put action plans in place.   An inventory weeks of supply is another very strong future looking POS reporting metric.  By understanding your lead time to put product on the shelf, and then comparing it against current weeks of supply inventory, you can quickly identify potential stock outs, which kill your vendor performance scorecard and your sales. 

Many vendors do not connect the dots between the POS reporting at corporate headquarters and the store.  I have personally sat in many meetings reviewing POS reports with a vendor and asked what actions they have taken to address low inventory levels seen on a POS report, only to hear, “Well, there’s not much we can do.”  Although I know many vendors feel that is the case, I know from practical experience it is not true.  The retail buyer or replenishment manager will listen to a well thought out and well documented business case on modifying inventory allocations.  Just make sure you are prepared for that conversation with accurate POS reports and make sure your fill level is not contributing to the problem.   Buyers have sales and profitability goals to hit just like you do, and to do that they need to have the right amount of inventory on the shelf.  A word of advice – focus your pitch on a small set of test stores where you want to change the inventory handling and have a test scorecard report ready to show the buyer so they know exactly how you will track the results. 

In order to get the hard ROI out of retail POS reporting, you have to design the reports the right way.   The tips above are a good start and there are many more good ideas on our blog, so stay a while and dig around.  You can also jump over to the contact us page and ask specific questions.

Outsourcing POS Analysis

Why does an outsourced service make sense? Using an outsourced service for POS data analysis is a great idea, because loading data every week and managing servers is not your core business- it's an expense.  And worse yet, the data and technology change all the time, which makes them very expensive to manage in-house.

Accelerated Analytics® eliminates all the cost and hassle of POS data analysis.

The Accelerated Analytics® service includes:

• Automatic loading of POS data for each retailer
• Hosting of a custom database for all your data
• Detailed sales, inventory, and forecast reports
• Training for your users
• World-class analysis tools
• Phone, email, and web support on-demand

Better yet, here's what one of our customers said...

“Accelerated Analytics® allows us to quickly come up with exceptions reports showing when on-hand levels are below desired levels and even red flag zero quantities. With this information we are able to offer support to our retail customers stores that need it most and increase the service level for our customers overall. Having management type reports with charts showing information like our (upward) trend analysis on sales is invaluable.” Steven Pugh VP Operations Howard Products.

Frequently Asked Questions about Accelerated Analytics

What is EDI 852?   EDI 852 is a standard data format used to transmit product activity data. Files are typically sent daily or weekly and will include sales activity by product, and for some retailers, inventory on-hand.  Activity is typically summarized at a distribution center level, unless store level data is deliberately selected. Some EDI 852 forms will also include pricing information, inventory on-hand but unavailable for sale, order point, order quantity, and order status. EDI 852 is provided as a text data file using special character sets to describe the coded data to the decoding software. 

My organization is a manufacturer and our retail customers are offering to send us point of sale data.  Can we use Accelerated Analytics® to analyze POS data? 

Absolutely! Accelerated Analytics® was designed to provide business users with a simple and effective means to analyze POS data from both a buyer and manufacturer/supplier perspective. Our engineers can work with your team as well as the retailer to load the data into Accelerated Analytics® and format your custom reports.  

 

Can we use Accelerated Analytics® to analyze EDI 852 data?

Yes.  As a part of our service we accept EDI 852 data and provide the translation into a useable format for reporting and analysis.    

 

What's the difference between point of sale data and EDI 852?

First, the format of the data is very different.  EDI 852 is provided as a text data file using special character sets to describe the coded data to the decoding software.  If you open an un-translated EDI 852 file, you will have a very hard time understanding what you are looking at.  POS data, on the other hand, is typically provided in a text file with descriptive column headers, which can be easily opened and used in Excel.  Second, EDI 852 contains a basic set of product activity data, while a POS file is usually much more rich.  POS often will include cost and price information, and more detail inventory.

 

What retailers are you working with today?

A list of our currently covered retailers can be found here.

 

What industries do your vendor customers work in? 

Our customers include apparel, footwear, consumer products, specialty hardlines, health and beauty, pharmaceuticals, and grocery.

 

Do we have to setup our own reports?

Not unless you want to.  Our service includes many pre-configure template reports that we customize during the on-boarding process to meet our customers precise needs.  Templates are included for sell-thru, stock-out exposure, inventory on-hand, period over period sale and inventory comparisons, top selling items, and much more.  All reports can be viewed by product, product category, store, geography, time, etc.  The reports are saved and available to end users with one click of the mouse. 

 

What is collaborative forecasting, planning and replenishment (CPFR)?

(CPFR) Collaborative Planning, Forecasting, and Replenishment is a business practices that combines the intelligence of multiple trading partners in the demand planning and fulfillment of customer demand. CPFR was pioneered by Wal-Mart as a next step to efficient consumer response (ECR) and vendor managed inventory (VMI) and is now promoted by the Voluntary Interindustry Commerce Standards Association (VICS). CPR is a proven retail supply chain improvement process.  

What is the bullwhip effect and why is it important?  

The bullwhip effect among supply chain partners is a situation in which the supplier has a clearer view of demand than the retailer, but a less accurate forecast. Traditional supply chains are extremely prone to this bullwhip effect; typical order fluctuations of +/-5% on the customer end can easily balloon to +/-40% on the manufacturer end, thus showing an increasing demand variation of 2:1 at each level of the supply chain. Accurate forecasting can help to eliminate the bullwhip effect and increase overall profitability by 5%. The most effective way of smoothing out bullwhip effect oscillations is for suppliers to understand what drives demand and supply patterns. Understanding demand and supply patterns is best accomplished through a detailed look at POS data.   

 

What makes Accelerated Analytics® unique?   

Accelerated Analytics® connects buyers and suppliers in a collaborative environment, where point-of-sale data is used to improve forecast accuracy, demand planning, and decrease stock-outs. The Accelerated Analytics® environment is a hosted service including pre-configured reports, world-class analysis tools, and color coded exception dashboards. These tools quickly turn data into actionable information and promote data based decision making.  With Accelerated Analytics®, there is no software to buy or install and Rainmaker Group does all the data processing. Read our full list of benefits. 

 

Who are some companies that have implemented collaborative planning forecasting and replenishment (CPFR)?   

Over 150 companies have implemented collaborative planning forecasting and replenishment (CPFR) including: Sara Lee, Wal-Mart, Schering-Plough, Walgreens, Kmart, Target, Eckerd, Safeway, Ace Hardware, Manco, Canadian Tire, Johnson & Johnson, Carrefour, Henkel, Kimberly-Clark, Marks & Spencer, Metro, Proctor & Gamble, Sainsbury's, Nestle, Best Buy, Scan Disk, and Federated. In all likelihood, there are many more unpublished implementations as well.  

 

How is my retail supply chain improved by demand planning using EDI, DDSN, or CPFR?   

Studies of retailers by Harvard Business, Grocery Manufacturers Association, National Retail Federation, and AMR Research show results of 15% less inventory, 17% better perfect order performance, and 35% shorter cash-to-cash cycles. The close collaboration between buyers and suppliers makes these improvements possible. Accelerated Analytics® provides the technology in a hosted service so there is no hardware or software to purchase.  

 

If our suppliers are not asking for POS data, why should I consider Accelerated Analytics®?  

It's not a surprise your suppliers are not asking for data. Most suppliers are intimidated by the prospect of asking for POS data and they do not have the tools to manage and analyze that volume of data. Successful business transformation does not begin as a reaction, but rather because business leaders have the vision to proactively invest in tools which drive their business forward faster than their competition. Research shows that when retailers proactively engage suppliers to collaborate on demand forecasting, 57% report improved relationships. Demand planning in the retail supply chain and collaboration between buyers and sellers, leads to more accurate forecasts and higher sales.  

  

Why can't we just use our electronic data interchange (EDI) system to send suppliers demand planning data?   

Many retailers have tried using EDI 852 to take advantage of collaboration and demand planning opportunities with suppliers. This is a natural first step; the infrastructure for EDI 852 is already in place, serving as the communication medium between retailers and suppliers. But most retailers are finding that sending out an EDI 852 document with summarized POS and inventory replenishment does not provide much benefit. Why? EDI does not add any new information; EDI is summarized at such a high level, it provides about the same detail as the purchase orders already in the system. The best a supplier can do with EDI 852 is load it into excel, because they do not have an analysis tool. In addition, parsing out a separate EDI 852 file every week for each supplier is time intensive. Most importantly, the supplier rarely has the tools necessary to accept the data and conduct effective analysis.

Improving Buyer Relationships Using POS Data

Time and time again, when setting up new vendors with Accelerated Analytics®, the same dilemma is expressed in some form or other: “We know that this product sells well here, but our buyer won’t listen to us.”  To determine why, the return question is invariably, “What evidence are you giving the buyer to back up your assertions?”
 
Almost as often as the initial question is expressed, the rejoining comment is met with frustration at the inability to provide the evidence the buyer wants to see.  This can be due to a vast array of issues, not the least of which is simply a lack of time to collect and analyze the available POS data and provide the buyer with real concrete evidence.  Conversely, it is rarely the case that vendors have insufficient data to make these conclusions.  As such, it is frequently a third party data analysis company that can provide the additional tools necessary to turn the POS data into actionable information for the buyer. Here are some tips:

1. Buyers fall into roughly two categories—those that are helpful and those that aren’t.  If you have a helpful buyer, you’re already a step ahead.  Work with the buyer to determine key performance indicators (KPIs) like target weeks of supply and preferred sales velocity for given items.  (Since these KPIs need to be managed at an item by store level, it may be necessary to use a third party analyst partner to assist you in building your database and reporting solutions.)  Then, track these KPIs for your products and show your results to your buyer—often you have better insight into your product activity in their stores than they do.  Since your buyer is friendly, work with him or her, using the information you’ve tracked and presented, to improve sales, limit out of stock, and prevent overstock.
2. The unhelpful buyer is more difficult, but by no means a lost cause.  For example, Wal-Mart buyers will almost always refuse to accept a push order of products from you, the vendor. But our experience with Wal-Mart is that this is usually because they have better insight into your product activity than you do.  However, if you can consistently demonstrate that your use of the POS data readily available to you would have rendered a more accurate result or better yield, then the buyer will gradually begin to trust your numbers instead of theirs.  This can be done, for example, by tracking your inventory, computing your weeks of supply, and showing your buyer, by item by store by week, which items you would have shipped to them and when.  If you can cross reference this at the same grain with a report showing out of stock stores, you can easily compute lost sales.   When, over time, the buyer sees the evidence presented consistently and the potential for increased sales, by simply doing nothing on his or her part except accepting an order file from you, you can begin to change your relationship with your buyer, and as he or she becomes more amicable, you can develop the type of relationship that allows you to discuss other KPIs as indicated in tip #1.

Managing POS data at an item by store level can be difficult and time consuming, especially when trying to build detailed, insightful reports like discussed in #2.  Accelerated Analytics® can give you one-click access to reports that will answer dozens of these kinds of questions and more.  

POS Analysis - Analysis and reporting made easy

If you are a vendor supplying to a retailer, you are no doubt receiving POS and inventory data. This can be a real headache since the files can be different for each retailer. Your team probably spends hours each week manually entering data, creating spreadsheets and then preparing reports.

Accelerated Analytics® can eliminate all of this wasted time. We will gather all of your POS data files automatically - no software to purchase or hardware to support.

Using Accelerated Analytics® makes all your POS reporting headaches go away. With Accelerated Analytics®, we handle all the data conversion, database hosting and reporting. We even provide training and the end user reporting tools. 

Accelerated Analytics® benefits:

• Eliminate manual data entry and manipulation
• Consolidate all retail data into one reporting database
• Pre-built exception reports with color coded dashboards
• No software or hardware to purchase
• Sophisticated charts and graphs

Available reports:

• This weeks sales and inventory by store and SKU
• Last weeks sales and inventory by store and SKU
• This months sales and inventory by store and SKU
• 6 week rolling sales and inventory by store and SKU
• Sell-thru
• Inventory turns
• Days supply on hand 

Accelerated Analytics® will give you the ability to anticipate changes in sales and inventory, so you can make adjustments before a costly mistake occurs. Our POS reporting is the best on the market. 

POS analysis for strategic value

Several recent meetings with vendors has highlighted a growing trend - POS data analysis has been and continues to be an operations imperative, but vendors are increasingly finding strategic value in POS analysis. EDI 852 forms the foundation of the analysis with UPC and store level sales and on hand.  But looking beyond sell thru and tradition metrics, a savvy vendor can use the data to present to a buyer planogram compliance and even sales plans based on localized assortments. How many of your competitors do you think have that level of sophistication to present to a buyer? This is a great time to look beyond the regular use of EDI 852 / POS data and become a strategic resource to your buyer.

Walmart Point of Sale Data Reporting

If you are a Walmart vendor, you have access to a wealth of data via Retail Link. As a service provider, we work with a lot of Wal-Mart vendors, helping them to analyze the point of sale data made available by Walmart through Retail Link. Sometimes a vendor will ask us “If I have Retail Link, why do I need to hire someone to help me analyze POS data?”

Retail Link provides a method for getting POS data, but as the vendor, you will be responsible for transforming the data and you will need a database to store the data. Both of these are critical to provide for comp week and comp year comparisons which are the basis for accurate and insightful POS analysis. The complexity of building a database to store Retail Link data is more than most vendors want to bite off since it requires hardware, software, and IT skills to accomplish.

What can you do with Retail Link data if you have it stored in a database?
· Analyze SKU/store level sales
· Analyze SKU/store level on hand
· Analyze average unit selling price by SKU/store
· Analyze planogram compliance by verifying on hand and selling at traited and valid stores
· Identify out of stock stores, and even forecast demand based on prior sales
· Create SCRIPT forecasts for your buyer indicating where inventory is needed to maximize sales and avoid out of stocks.
· Group stores into A, B, C categories based on SKU level sales volume.

Walmart buyers expect vendors to use Retail Link data to analyze and manage their SKU activity. If you are not already using the data, of if you are not using it as well as you could be, then you are missing sales opportunities. Don’t wait for your buyer to call you and ask a question you can’t address – start working with the data today.

Retail Point of Sale Analysis How To Guides

Analyzing point of sale data can be a daunting task for an analyst, especially when there is very little real world training available. That is why the Accelerated Analytics team has written four “how to” guides that share the secrets we use to analyze over 69,000,000 unit sales per week. Now you can get real world insight, available for download right to your desktop!

The retail data analysis “how to” guides provide category management and business analysts with a practical easy to follow approach for narrowing down large volumes of EDI 852 and retail point of sale data into manageable, actionable reports. Many vendors to Wal-Mart with Retail Link or vendors receiving EDI 852 are have a wealth of data available to them, but analyzing the data on a weekly basis can be challenging. These guides provide insights the Accelerated Analytics team uses to turn the data into improved sales and in-stocks.

If you are a vendor to Home Depot, Wal-Mart, Lowe’s, or any other major retailer, these guides can help you be more successful.

The series contains four “how to” guides with simple step-by-step processes for completing a:
· SKU Analysis
· Store Analysis
· Out of Stock Analysis
· SKU Forecast

Learn more and get your copy here:
http://www.acceleratedanalytics.com/download-whitepapers/

Making the most of POS data analysis

The Accelerated Analytics team is hosting an event in New York City on Feb 21.   If you are responsible for using POS data from your retail customers this is a must attend event.

NRF Show 2007

The Accelerated Analytics team had the opportunity to attend "The Big Show" today in New York City.  If  you are not familiar with the show, this is the annual trade exposition sponsored by the National Retail Federation.  Overall, the show is a good source of industry news and provides an opportunity to spend time learning about new technologies and vendors in the market.  The show floor can be a bit overwhelming, with thousands of vendors.  This year, we were struck by the number of empty booth spaces as compared to prior years.  It would seem the declining attendee rate has impacted the NRF like most organizations, although this is still a very big show.   It is very hard to gauge who is attending, but we had the opportunity to talk with representatives from Gap, Jo-Ann Stores, The Andersons, Wal-Mart, and saw many other retailers, so it seems the usual suspects are in attendance.  It does seem most of the attendees are part of the IT, store operations, or supply chain teams.  One conversation we had with a fairly good sized retailer regarding their supply chain vendor collaboration was a bit surprising.  This vendor told us they make weekly product activity data available to their suppliers, but only a handful really use the information.  This was a surprise because, as we work with vendors, most tell us the opposite is true - they request the data, but their retail partners are not filling that request.  In fact, something in between is probably true.  Our experience tells us retailers are generally making the data available, but in many cases, not in the format the vendor would like to receive, so they are challenged to do much with it.  This is unfortunate since there is much that can be done with the data.  Hopefully, more productive programs will be put in place in 2007.

If you are in NYC and have the opportunity to attend the show, make time to visit the Microsoft booth. (full disclosure, we are a MSFT partner)  Their booth is huge and filled with solutions for every aspect of a retail operation.  The representatives working the booth are overly technical, but if you ask questions about their client work, they can provide some very interesting tid-bits of information.  We especially enjoyed our conversation with the Project Real team.  If you want to learn about how a huge data warehouse is deployed at a real customer, you need to check that out.

 We dropped our cards into most of the fishbowls we found, so maybe we will win something:)

Dashboards Make POS Data Analysis Easy

If you are selling products through a retail channel and your retail customers are willing to share POS data, you have a great opportunity to increase your sales and optimize inventory - if you can create an effective solution to manage a large amount of data and distill it into smart business decisions.  This is where a dashboard can be a very effective tool. 

In a recent article, Steve Pugh of Howard Products discusses how he is using dashboards to monitor sales at several thousand retail stores so he can direct buyers on the most effective purchasing strategies. 

Here is an exerpt from the article...

Dashboards can be home-grown, using the graphing and charting capabilities of Excel spreadsheets, for example. There also are specialized software applications. Howard Products, a manufacturer of wood care products, recently contracted with Accelerated Analytics to install Accelerated Analytics, a Web-based dashboard application to monitor purchase order and sales data, in addition to inventories.

The process "allows us to quickly come up with exceptions reports showing when our customers' inventory levels are too low," said Steve Pugh, VP at Howard Products. Pugh said he can immediately identify quick-selling stores or regions, or even individual products.

"I did that just yesterday with a customer we rolled out nationwide," Pugh said. "I can just hit a button and dump sales figures to a spreadsheet with colors, then direct it to the buyer saying we can do one blanket order to bring him up to speed."

At Howard Products, there are different dashboards for different folks; generalized big-picture versions for top executives, team-oriented ones for regions, and job-specific ones for individual sales reps.

You can read the entire article here

Newsletter launch

The Accelerated Analytics team is launching a newsletter for POS data analysis best practices and vendor compliance news.  Take a moment and sign-up here.  Our first issue will be sent out in a few short weeks with the lead article summarizing our research on the "POS Data Analysis Maturity Model."