Author: Helen Thomas

Walmart vendors have access to a wealth of sales and inventory data through Walmart’s Retail Link portal. The challenge for many vendors, is that Retail Link can provide access to extremely detailed data, which increases the quantity and difficulty of analyzing the data and making fast business decisions. Without the right tools, the process can be very time consuming and difficult.

If you are a Walmart vendor, invest in a set of tools that will allow you to store and quickly analyze Retail Link data. The tool should allow storage of multiple years of store and item level detail and it should provide filtering and sorting to narrow the focus of your decision making. The focus of your fist analysis efforts should be sales velocity and inventory in-stock. The tool should automatically filter the top 50 and bottom 50 stores by unit sales volume. This allows the vendor to quickly identify which stores are driving the most volume, as well as the stores that need immediate attention. Next, it is critical to identify on a daily or weekly basis, the stores that are out of stock. Fixing the inventory out of stock in these stores will directly increase your sales.

Become proactive in dealing with out of stock at a store level,  by reviewing the unit sales volume for all of your out of stock stores for the 8 periods prior to the out of stock. Determine an average period units sold, and then identify for each store how many periods it takes to get new inventory to the store. So, for example, if a store is averaging 6 units per week, and it takes 14 days to get inventory to the store, then the minimum inventory level that store should maintain at all times is 12 units. This provides two weeks of inventory on-hand and will allow for proactive replenishment to avoid stock-out exposure. As a Wal-Mart vendor, you may be selling into over 3,500 Walmart stores, but if you complete this analysis for the top 70 or 80% of your stores based on units sold velocity, you will have gone a long way toward reducing out of stock situations and increasing sales.

I’m making a prediction – Scan Based Trading (SBT) will gain popularity in 2011 and will emerge in categories not typically engaged in SBT.  In an article today in the WSJ titled “Retailers Are Sold on Frugality”, Walmart, Home Depot and Lowe’s are predicting the upcoming holiday season may be poor.  They believe consumers remain very cautious about spending.  The good news, if there is any, is that retailers have successfully cut expenses during the downturn [see figure 1], so most are making a profit despite lower sales.  The bad news is that they are doing that by tough price negotiations with vendors, more reliance on part time workers and generally lower spending across the board.

“How in the heck can you increase earnings with tighter revenue?  The answer is that we [Home Depot] expect some expense relief.”  Chief Financial Officer Carol Tome.  If you are a vendor to a major retailer – take note of that quote.

Back to SBT.  Scan Based Trade relationships with vendors have been around for a long time, but they have traditionally been reserved for fast moving food and consumer goods.  Things like bread and milk, etc. However, savvy financial executives at retailers have realized moving from a traditional purchasing model to an SBT model removes inventory from their balance sheet, reduces their labor and shipping and therefore dramatically increases their bottom line.  Let me give a real world example.  Accelerated Analytics processes data for an SBT program at one of the largest drug store chains in the US.  This retailer is in the process of moving their entire book department from a traditional model to SBT.  In the past, the retailer had millions of dollars of book inventory on their balance sheet, but today they have no books on their balance sheet and their vendor handles all DSD shipping, in store merchandising and carries all the inventory on their balance sheet until sold.  When the book goes through the cash register, the sale is split between the vendor and the retailer.  The retailer essentially provides shelf space and the vendor handles the category from start to finish.  The vendor benefits because they have more control on merchandise assortment and planning and they get paid faster.  With daily sales and payments based on the actual sales, the vendor no longer has to wait for 90 days to be paid on a traditional invoice.  The retailer wins because their balance sheet is dramatically improved, their labor is reduced, they avoid mark downs, etc, etc.

This is a huge paradigm shift, SBT in the book category is revolutionary.  Think SBT will never apply to your category – think again.  I’ve had conversations with retailers and vendors about moving cosmetics, electronics, clothing and hardware to SBT.  It’s not a question of if, it’s simply a question of when.  Start thinking today about when your organization can support and even recommend SBT to your retailer and you will be way ahead of your competitors.  Trust me, your CFO would like to be paid daily instead of net 90.

Have you heard of “Blue Ocean” strategy?  If not, I highly recommend looking up the Harvard Business Review article and you will see how SBT is a blue ocean strategy for your business.

I’d like to hear your thoughts on the challenges/opportunities for SBT in your category.

If you are a vendor supplying to CVS, you are eligible to receive product sales activity and inventory data via EDI 852. Preparing to setup and receive the EDI 852 files can be confusing, and creating usable reports for your team can be very time consuming. Fortunately, Accelerated Analytics® provides a simple, outsourced service for all your CVS EDI 852 reporting needs.

Using Accelerated Analytics® makes all your 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 CVS store data on all your SKU’s 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 EDI 852 reporting is the best on the market. 

Very few retail organizations are structured to handle the business disruption or cost of being the early adopters of new technology. This is especially true when the technology has a direct impact on the communications with all of their largest suppliers. However, over the past twenty-four months, we have begun to see the adoption of demand driven supply chain strategies beyond the early adopters, and into a much larger and more wide-spread early majority. This is causing many retail executives to take notice and begin to seriously plan out their organization’s approach. This leads to two key questions we consistently hear from these executives; first, what are the world-class leaders doing, and second, how can we quickly and cost effectively realize the process improvement without a huge technology investment?

One of the key lessons learned from watching the early adopters implement the demand driven supply chain is, that technology is only a small part of success. The technology is simply a foundation which allows buyers and suppliers to establish collaborative joint business processes. In fact, if approached as merely a technology project, one might as well just use EDI or Excel and call it a day.

However, world-class leaders are sharing with suppliers a rich data set, including SKU level data, and they are providing the information analysis tools to make the data immediately actionable. Sharing a rich data set provides a supplier and buyer the framework for a valuable and detailed conversation around sales and inventory. End users can begin their evaluation at a category or product family level, and then drill down the hierarchy all the way to an individual SKU.

Rather than a data dump using EDI, Excel or downloadable files in a vendor portal, world class leaders have implemented information sharing tools. Information sharing tools transform rows and columns of data into visual performance dashboards and provide exception condition monitoring, so an end user can quickly interpret the information and take necessary actions. They bridge the gap between bytes of data and the information necessary for managing in-stock levels. With the addition of an exception dashboard, the end user can be quickly alerted to problems and opportunities without having to scrutinize each SKU individually in some massive spreadsheet. The dashboard also establishes one common version of the truth, so time previously spent explaining how reports were calculated, can be spent finding the next big cost savings. Our clients tell us that just having everyone on the same page can save dozens of hours each week, then multiply that times hundreds of suppliers.

The second question we often hear, involves how to most cost effectively implement a demand driven supply chain. Here, the lesson to be learned from the early adopters is the cost they paid to build the infrastructure. For example, Wal-Mart estimates a $4 billion dollar investment into Retail Link, which is a shocking number, until you consider the scope and complexity of the project for over 10,000 suppliers. For example, a mid-sized specialty or hard goods retailer with 600 stores, is likely to have about 2,000 suppliers, 400 of which are on active replenishment and will be part of a data sharing program. On average, each of the 400 suppliers will have two users (one sales and one operations), and the retailer will have approximately 50 users who need to directly collaborate with the supplier community, so there is a universe of approximately 850 users to provide with data, software, training and help desk support. The end user reporting tools sit on top of a database, which can easily grow to multiple terabytes because world-class leaders are using a very rich data set, including SKU level sales and inventory across a historical timeline of 18 months. Anytime there is a large technology infrastructure cost to support a business process for several hundred globally dispersed end users, you have a good candidate for outsourcing. And as previously stated, the value is derived from the collaborative exchange between the buyer and supplier, not from the transfer and management of bytes of data, so why not turn that variable cost into a fixed monthly purchase and let the provider manage the risk. Outsourcing also provides the additional benefit of a service level agreement, so all parties can be confident the system will be available and ready when they want to use it.

Our article titled “The Case for Supply Chain Collaboration”, and published in vol 1 of the Journal of Trading Partner Practices, identified the financial opportunities associated with the demand driven supply chain. These benefits include increasing sales by 5 to 10% and operating margin improvement of 5 to 7%. Now that the early adopters have paved the way and learned the tough lessons, we are seeing the early majority start to move. Now is the time to talk with your team and determine how best to implement a demand driven supplier collaboration program at your organization.