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Minding the Store: Retail Business Intelligence
How an Integrated Business Intelligence Solution Can Help Retailers Optimize the Return on their Technology Investments
Within a week of the end of a somewhat disappointing holiday shopping season, venerable retailer Montgomery Ward shut down after more than a century in business, and one-time leading retailer Sears closed more than 100 stores. These days, even the most vibrant retail stores operate on razor thin margins, and wrong guesses about trends and customer tastes can have an immediate and devastating impact on profits and ultimately, viability. Perhaps more than any other business sector, retail companies must devote the utmost attention to planning and analysis.
Retailers of all sizes have made impressive gains in managing and responding to customer demand, from point-of-sale (POS) promotions to merchandise flow. The rapid shift from running cash register tapes to using data from the sophisticated POS computers in today’s stores clearly illustrates how comprehensive collection and use of information can increase sales and promote efficiencies.
Unfortunately, while retailers have excelled at capturing vast amounts of data, they have often overlooked the fundamental need to make sense of it all. While many retail organizations have invested significant capital to implement unified, enterprise-wide platforms for their operational systems, they have often neglected to provide an equivalent unified platform for their business intelligence (BI) solutions. Even the largest retailers still face barriers in using all this information for strategic planning and deployment of resources beyond the current quarter.
The crux of the problem is that many of these retail organizations lack an integrated BI approach that can take data from disparate information systems, combine it in a centralized, easy-to-access repository, and enable reporting, analysis and collaboration based on common business rules. A basic definition of BI, defined as “any information that pertains to the history, current status or future projections of an organization,” illustrates the problem. Retailers have a strong command of sales history, but where future projections are concerned, even the best chains often depend on straight-line projections and guesswork.
Although there is certainly no argument against acquiring “best-of-breed” systems to support operational initiatives, without a common analytical layer across the enterprise that supports the analysis of the data captured by these various transactional systems, their effectiveness is limited. A common analytical platform that translates that data into consistent, meaningful and actionable information can help retailers to fully leverage their data across the enterprise. In today’s increasingly competitive retail environment, retailers that employ truly integrated, enterprise-wide Business Intelligence (BI) solutions based on collaboration, unified information and common analytical applications will position themselves to reap the benefits of this strategic approach.
Communications Gap in Business Intelligence
Retailers have become accustomed to investing millions of dollars in the latest software and hardware systems to support mission critical operational systems. In fact, the logistical side of most successful retail information solutions reflects top-notch thought and organization. These organizations have implemented highly sophisticated systems that control the flow of merchandise throughout the enterprise, and also feature planning, budgeting, forecasting and reporting systems.
Most have sophisticated merchandising systems that support a vast number of internal buyers and the vendors they buy from. Store transactions are also well covered, with new POS systems sitting on store counters collecting enormous amounts of data. Many retail chains have also spent millions of dollars on Enterprise Resource Planning (ERP) systems that improve accounts payable, general ledger and other accounting functions.
Yet these systems generally operate on different IT platforms that do not communicate with each other. At most companies, the information in these systems is not effectively integrated into a common “analytical layer” that utilizes common databases and information delivery mechanisms. As a result, even at the biggest retail chains, the larger dimensions of Business Intelligence — analytics, applications and platforms — can be surprisingly archaic.
Often, information is not shared beyond the confines of any single corporate group. For example, reporting typically requires re-keying information into basic spreadsheets. Furthermore, financial teams in different units may be cut off from store managers, who traditionally have done their “analysis” through hard-copy reports mailed to them by the home office after the information is potentially several weeks old.
However, with the advent of the web and sophisticated analytical applications that run through a browser, reporting and analysis can be pushed to the front-lines where store managers and associates are able to access and act quickly on the information. This creates the potential for collaboration between skilled analysts at corporate and valuable resources in the field.
For example, one large chain uses Arthur planning software for its merchandise planning and OFA by Oracle for its expense planning. The company spent millions on each system, but the programs do not integrate. As a result, basic information such as comp store and new store sales plans must constantly be extracted between the systems, or re-keyed from hard-copy reports. Unfortunately, this lack of integration between Merchandise and Operations Planning is the rule rather than the exception for most retailers.
By focusing on a Business Intelligence Architecture that utilizes common databases and end-user applications, it is possible for today’s retail organizations to address the various information needs of their different departments. From a technical perspective, this architecture would lay above the transactional systems that feed it with the appropriate information. The architecture would typically consist of three layers:
•A relational database layer that supports meta-data and more granular-level information for more detailed analysis.
•An Online Analytical Processing (OLAP) database layer that provides speed-of-thought access to more summarized information with read-write capabilities to support modeling and planning.
•A delivery layer that consists of common interfaces across the enterprise, capable of easily communicating with the underlying databases that support them.
Optimizing Return On Investments for Business Intelligence
Critical competitive pressures on even the largest retailers make it imperative that return on investment (ROI) be measured at both a total company level, and within each functional area. This is especially true for technology investments, yet many retailers are not effectively exploiting technology to optimize their ROI. They tend to focus on “point” solutions—those that solve a given objective—without seeing the opportunity to fulfill multiple needs with a common solution.
That said, deploying a well-executed transactional system on the logistical side for example may still not optimize ROI if the information can’t be extended to the company’s other departments in a way that allows for better analysis and planning. Without an integrated approach to retail business intelligence, the potential extra value in the system simply can’t be leveraged throughout the company.
To quote the CIO of a Midwest specialty retailer, “a well-crafted, integrated Business Intelligence solution becomes an answer that begins looking for questions across the company.” This company leveraged a single platform to address its merchandising and operational planning needs, and has extended it to virtually every other area of the enterprise including advertising, promotions, vendor analysis and supply-chain collaboration. The company leveraged less than $1,000,000 to meet the analytical needs of the entire enterprise and maximize the ROI of their technology-- Hyperion’s Essbase OLAP database.
The real value of business intelligence — true ROI — lies in improved productivity and better analysis. Many organizations are challenged by the 80/20 rule, which suggests that analysts spend 80% of their time gathering information and only 20% analyzing it. Ideally, the reverse should be true. One major regional retailer addressed this and many other issues by implementing a system to combine merchandise, operational and financial reporting with payroll analysis and planning in one common analytical platform. Before the system was implemented, it took the company five days after the books were closed to produce its monthly management book. Now it takes two hours.
Being able to evaluate results and then make decisions in near real time has extraordinary value for any business. In addition, an integrated BI system allows company managers to look at different parts of the business and be assured that everyone else is looking at the same data. This way, operational opportunities and problems can be identified and dealt with far more quickly.
From Data Gatherers to Strategic Analysts
An integrated business intelligence solution can also have a positive effect on the employees who use it. A typical employee doesn’t want to be a “spreadsheet jockey” for his or her whole life. Deploying new technology that makes basic tasks easier and more rewarding is a great way to keep people motivated and retained. In addition, their skill sets will be enhanced as they learn how to use the new technology. An ideal business intelligence solution constantly evolves as the company and the retail industry evolves. This creates an exciting environment for the employees who grow and change with the system, as they will depend on it to meet their analytical needs.
At a top retail company, it may appear that a CEO or CFO is in complete command of the information being produced throughout the company, but the reality is often quite different. Spreadsheets produced within individual business units can easily become islands of information, creating a lost opportunity to leverage critical reporting and analysis tasks. Companies don’t need 100 different analysts doing different things with the data; they need analysts who have access to a single set of data, and who can base their decision-making and collaboration efforts on a common platform.
Ultimately, retailers must empower all users of the technology to become strategic “analysts,” not mere data gatherers and inputters. This does not require reinventing the wheel; we all know spreadsheets are not going to disappear. But retailers must integrate spreadsheets into an environment that provides a more secure and complete system for the data repository, business rules and analytics—the key performance indicators that govern and drives the company.
Extending BI to the Supply Chain
An integrated approach to retail BI allows companies to produce critical planning, analysis, and reporting faster and more accurately. For example, many costs to the retailer are based on sales figures. Items such as margins, bonuses and commissions may all depend on sales. In a truly integrated BI approach, planning sales can take hours instead of days or weeks. Also, an integrated system with seamless interfaces allows changes in one system to be reflected in other areas in near real time.
For instance, if merchandising plans change, sophisticated allocations can be used to literally drive those changes through the retailer’s operating plans, right down to the store level. Furthermore, depending on the retailer’s size, sales projections can have a huge impact on the production schedules and capabilities of its suppliers. Just as the ideal BI solution allows for collaboration and communication within the enterprise, web-based solutions allow for integrating suppliers and other external stakeholders into the analysis and planning efforts while utilizing common front-end and back-end applications.
Rapid Implementation
Surprisingly, shifting to a fully integrated platform for retail business intelligence (BI) is relatively easy for most companies. Many times, all the required systems are in place; the only missing link is a common architecture and the applications for allowing them to communicate. Using a qualified consulting company -- preferably one with consultants who understand retail environments and have people with extensive experience in implementing retail business intelligence solutions -- is usually the best way to get a business intelligence integration project off the ground.
Done right, the implementation process is not about consultants setting up shop in a cubicle only to spend months or years migrating systems and information. It’s about creating a partnership where knowledge is transferred and relationships empower the company’s employees to begin thinking about new ways to use information, rather than about how to obtain that information. The goal is to begin building a foundation or framework, i.e., an architecture, that the retailer can expand upon.
A retail business intelligence project should take no more than three to five months, and once complete, employees should be able to move beyond the basics and uncover new applications almost immediately. For retailers, a good rule of thumb is to seek a consulting company that meets three key criteria:
•The firm is focused on BI.
•The firm that has worked with large retail clients to integrate complex, integrated BI solutions.
•The firm has appropriate resources that can quickly and easily transfer knowledge to employees and other end-users.
Remember that the workforce will provide the insights and cost efficiencies to be gained from new analysis tools. For example, a large retailer has determined that the implementation of payroll analysis and planning as part of its evolving BI solution will save the company $10,000,000 during the next year. The company estimates that better analysis and planning will save, on average, one labor hour per day per store for the entire year. Due to its size and number of stores, this initiative will result in millions of dollars in cost savings while more accurately deploying resources at each store. However, the ROI extends beyond the store level because the integrated approach means that savings and efficiencies will also occur within corporate departments. Furthermore, the same analytical platform is being used to improve margins – the slightest improvement of which will drive millions of dollars straight to the bottom line.
Is there a cost to implementing retail business intelligence? Of course. But because margins are small throughout the retail industry, every nickel saved will eventually add up. Companies need to think in terms of what they could do if they were able to get information to decision makers in a more accurate and timely way. If an executive generally receives weekly information Friday morning, what could he or she do better if that information were available on Monday or Tuesday? Just as a key to retailing is getting the right product into the right store at the right time, the ideal BI solution focuses on getting the right information to the right person in the right condition at the right time.
Keep it Simple
Business Intelligence exists at every retail company, although it still tends to be concentrated in spreadsheets and potentially other disparate repositories. The challenge lies in integrating BI into a platform that can be used by everyone in the company. This integration doesn’t require complicated technical manuals and a massive training program, however. At one large retailer, managers needed to deploy a BI solution to 1,500 merchants around the world as well as to thousands of suppliers. The managers were able to provide users with a one-page training document that has people up and running in a short period of time.
Integrated retail BI—using software tools that deliver the right data, at the right time, with the right applications, on the same platform—transforms users into analysts and drives collaboration. Analysts can get the information when they want it, and how they want it. In this age of shrinking margins and heightened competition, retailers must begin to provide their “analysts” with the right tools to make better strategic planning decisions for their companies.
Within a week of the end of a somewhat disappointing holiday shopping season, venerable retailer Montgomery Ward shut down after more than a century in business, and one-time leading retailer Sears closed more than 100 stores. These days, even the most vibrant retail stores operate on razor thin margins, and wrong guesses about trends and customer tastes can have an immediate and devastating impact on profits and ultimately, viability. Perhaps more than any other business sector, retail companies must devote the utmost attention to planning and analysis.
Retailers of all sizes have made impressive gains in managing and responding to customer demand, from point-of-sale (POS) promotions to merchandise flow. The rapid shift from running cash register tapes to using data from the sophisticated POS computers in today’s stores clearly illustrates how comprehensive collection and use of information can increase sales and promote efficiencies.
Unfortunately, while retailers have excelled at capturing vast amounts of data, they have often overlooked the fundamental need to make sense of it all. While many retail organizations have invested significant capital to implement unified, enterprise-wide platforms for their operational systems, they have often neglected to provide an equivalent unified platform for their business intelligence (BI) solutions. Even the largest retailers still face barriers in using all this information for strategic planning and deployment of resources beyond the current quarter.
The crux of the problem is that many of these retail organizations lack an integrated BI approach that can take data from disparate information systems, combine it in a centralized, easy-to-access repository, and enable reporting, analysis and collaboration based on common business rules. A basic definition of BI, defined as “any information that pertains to the history, current status or future projections of an organization,” illustrates the problem. Retailers have a strong command of sales history, but where future projections are concerned, even the best chains often depend on straight-line projections and guesswork.
Although there is certainly no argument against acquiring “best-of-breed” systems to support operational initiatives, without a common analytical layer across the enterprise that supports the analysis of the data captured by these various transactional systems, their effectiveness is limited. A common analytical platform that translates that data into consistent, meaningful and actionable information can help retailers to fully leverage their data across the enterprise. In today’s increasingly competitive retail environment, retailers that employ truly integrated, enterprise-wide Business Intelligence (BI) solutions based on collaboration, unified information and common analytical applications will position themselves to reap the benefits of this strategic approach.
Communications Gap in Business Intelligence
Retailers have become accustomed to investing millions of dollars in the latest software and hardware systems to support mission critical operational systems. In fact, the logistical side of most successful retail information solutions reflects top-notch thought and organization. These organizations have implemented highly sophisticated systems that control the flow of merchandise throughout the enterprise, and also feature planning, budgeting, forecasting and reporting systems.
Most have sophisticated merchandising systems that support a vast number of internal buyers and the vendors they buy from. Store transactions are also well covered, with new POS systems sitting on store counters collecting enormous amounts of data. Many retail chains have also spent millions of dollars on Enterprise Resource Planning (ERP) systems that improve accounts payable, general ledger and other accounting functions.
Yet these systems generally operate on different IT platforms that do not communicate with each other. At most companies, the information in these systems is not effectively integrated into a common “analytical layer” that utilizes common databases and information delivery mechanisms. As a result, even at the biggest retail chains, the larger dimensions of Business Intelligence — analytics, applications and platforms — can be surprisingly archaic.
Often, information is not shared beyond the confines of any single corporate group. For example, reporting typically requires re-keying information into basic spreadsheets. Furthermore, financial teams in different units may be cut off from store managers, who traditionally have done their “analysis” through hard-copy reports mailed to them by the home office after the information is potentially several weeks old.
However, with the advent of the web and sophisticated analytical applications that run through a browser, reporting and analysis can be pushed to the front-lines where store managers and associates are able to access and act quickly on the information. This creates the potential for collaboration between skilled analysts at corporate and valuable resources in the field.
For example, one large chain uses Arthur planning software for its merchandise planning and OFA by Oracle for its expense planning. The company spent millions on each system, but the programs do not integrate. As a result, basic information such as comp store and new store sales plans must constantly be extracted between the systems, or re-keyed from hard-copy reports. Unfortunately, this lack of integration between Merchandise and Operations Planning is the rule rather than the exception for most retailers.
By focusing on a Business Intelligence Architecture that utilizes common databases and end-user applications, it is possible for today’s retail organizations to address the various information needs of their different departments. From a technical perspective, this architecture would lay above the transactional systems that feed it with the appropriate information. The architecture would typically consist of three layers:
•A relational database layer that supports meta-data and more granular-level information for more detailed analysis.
•An Online Analytical Processing (OLAP) database layer that provides speed-of-thought access to more summarized information with read-write capabilities to support modeling and planning.
•A delivery layer that consists of common interfaces across the enterprise, capable of easily communicating with the underlying databases that support them.
Optimizing Return On Investments for Business Intelligence
Critical competitive pressures on even the largest retailers make it imperative that return on investment (ROI) be measured at both a total company level, and within each functional area. This is especially true for technology investments, yet many retailers are not effectively exploiting technology to optimize their ROI. They tend to focus on “point” solutions—those that solve a given objective—without seeing the opportunity to fulfill multiple needs with a common solution.
That said, deploying a well-executed transactional system on the logistical side for example may still not optimize ROI if the information can’t be extended to the company’s other departments in a way that allows for better analysis and planning. Without an integrated approach to retail business intelligence, the potential extra value in the system simply can’t be leveraged throughout the company.
To quote the CIO of a Midwest specialty retailer, “a well-crafted, integrated Business Intelligence solution becomes an answer that begins looking for questions across the company.” This company leveraged a single platform to address its merchandising and operational planning needs, and has extended it to virtually every other area of the enterprise including advertising, promotions, vendor analysis and supply-chain collaboration. The company leveraged less than $1,000,000 to meet the analytical needs of the entire enterprise and maximize the ROI of their technology-- Hyperion’s Essbase OLAP database.
The real value of business intelligence — true ROI — lies in improved productivity and better analysis. Many organizations are challenged by the 80/20 rule, which suggests that analysts spend 80% of their time gathering information and only 20% analyzing it. Ideally, the reverse should be true. One major regional retailer addressed this and many other issues by implementing a system to combine merchandise, operational and financial reporting with payroll analysis and planning in one common analytical platform. Before the system was implemented, it took the company five days after the books were closed to produce its monthly management book. Now it takes two hours.
Being able to evaluate results and then make decisions in near real time has extraordinary value for any business. In addition, an integrated BI system allows company managers to look at different parts of the business and be assured that everyone else is looking at the same data. This way, operational opportunities and problems can be identified and dealt with far more quickly.
From Data Gatherers to Strategic Analysts
An integrated business intelligence solution can also have a positive effect on the employees who use it. A typical employee doesn’t want to be a “spreadsheet jockey” for his or her whole life. Deploying new technology that makes basic tasks easier and more rewarding is a great way to keep people motivated and retained. In addition, their skill sets will be enhanced as they learn how to use the new technology. An ideal business intelligence solution constantly evolves as the company and the retail industry evolves. This creates an exciting environment for the employees who grow and change with the system, as they will depend on it to meet their analytical needs.
At a top retail company, it may appear that a CEO or CFO is in complete command of the information being produced throughout the company, but the reality is often quite different. Spreadsheets produced within individual business units can easily become islands of information, creating a lost opportunity to leverage critical reporting and analysis tasks. Companies don’t need 100 different analysts doing different things with the data; they need analysts who have access to a single set of data, and who can base their decision-making and collaboration efforts on a common platform.
Ultimately, retailers must empower all users of the technology to become strategic “analysts,” not mere data gatherers and inputters. This does not require reinventing the wheel; we all know spreadsheets are not going to disappear. But retailers must integrate spreadsheets into an environment that provides a more secure and complete system for the data repository, business rules and analytics—the key performance indicators that govern and drives the company.
Extending BI to the Supply Chain
An integrated approach to retail BI allows companies to produce critical planning, analysis, and reporting faster and more accurately. For example, many costs to the retailer are based on sales figures. Items such as margins, bonuses and commissions may all depend on sales. In a truly integrated BI approach, planning sales can take hours instead of days or weeks. Also, an integrated system with seamless interfaces allows changes in one system to be reflected in other areas in near real time.
For instance, if merchandising plans change, sophisticated allocations can be used to literally drive those changes through the retailer’s operating plans, right down to the store level. Furthermore, depending on the retailer’s size, sales projections can have a huge impact on the production schedules and capabilities of its suppliers. Just as the ideal BI solution allows for collaboration and communication within the enterprise, web-based solutions allow for integrating suppliers and other external stakeholders into the analysis and planning efforts while utilizing common front-end and back-end applications.
Rapid Implementation
Surprisingly, shifting to a fully integrated platform for retail business intelligence (BI) is relatively easy for most companies. Many times, all the required systems are in place; the only missing link is a common architecture and the applications for allowing them to communicate. Using a qualified consulting company -- preferably one with consultants who understand retail environments and have people with extensive experience in implementing retail business intelligence solutions -- is usually the best way to get a business intelligence integration project off the ground.
Done right, the implementation process is not about consultants setting up shop in a cubicle only to spend months or years migrating systems and information. It’s about creating a partnership where knowledge is transferred and relationships empower the company’s employees to begin thinking about new ways to use information, rather than about how to obtain that information. The goal is to begin building a foundation or framework, i.e., an architecture, that the retailer can expand upon.
A retail business intelligence project should take no more than three to five months, and once complete, employees should be able to move beyond the basics and uncover new applications almost immediately. For retailers, a good rule of thumb is to seek a consulting company that meets three key criteria:
•The firm is focused on BI.
•The firm that has worked with large retail clients to integrate complex, integrated BI solutions.
•The firm has appropriate resources that can quickly and easily transfer knowledge to employees and other end-users.
Remember that the workforce will provide the insights and cost efficiencies to be gained from new analysis tools. For example, a large retailer has determined that the implementation of payroll analysis and planning as part of its evolving BI solution will save the company $10,000,000 during the next year. The company estimates that better analysis and planning will save, on average, one labor hour per day per store for the entire year. Due to its size and number of stores, this initiative will result in millions of dollars in cost savings while more accurately deploying resources at each store. However, the ROI extends beyond the store level because the integrated approach means that savings and efficiencies will also occur within corporate departments. Furthermore, the same analytical platform is being used to improve margins – the slightest improvement of which will drive millions of dollars straight to the bottom line.
Is there a cost to implementing retail business intelligence? Of course. But because margins are small throughout the retail industry, every nickel saved will eventually add up. Companies need to think in terms of what they could do if they were able to get information to decision makers in a more accurate and timely way. If an executive generally receives weekly information Friday morning, what could he or she do better if that information were available on Monday or Tuesday? Just as a key to retailing is getting the right product into the right store at the right time, the ideal BI solution focuses on getting the right information to the right person in the right condition at the right time.
Keep it Simple
Business Intelligence exists at every retail company, although it still tends to be concentrated in spreadsheets and potentially other disparate repositories. The challenge lies in integrating BI into a platform that can be used by everyone in the company. This integration doesn’t require complicated technical manuals and a massive training program, however. At one large retailer, managers needed to deploy a BI solution to 1,500 merchants around the world as well as to thousands of suppliers. The managers were able to provide users with a one-page training document that has people up and running in a short period of time.
Integrated retail BI—using software tools that deliver the right data, at the right time, with the right applications, on the same platform—transforms users into analysts and drives collaboration. Analysts can get the information when they want it, and how they want it. In this age of shrinking margins and heightened competition, retailers must begin to provide their “analysts” with the right tools to make better strategic planning decisions for their companies.
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