Retail and Hospitality

Feature:

BI strategy in retail

8 July 2008

Crucial business decisions often have to be made promptly far from the headquarters of an organisation. The challenge is to make BI completely mobile both online and off-line

Cesare Dania, of software developer Atelier98 Duncan Jefferies discovers that retailers are using BI tools at the sharp end of the business to inform decisions and plan strategy.

The effective use of Business Intelligence (BI) tools is fundamental to success in a complex and competitive retail environment. Stock forecasting and planning are often carried out across hundreds of stores, with sales results judged against the previous month, week, or even day.

It can often be difficult for a retailer to appreciate the effect actions in one area of the business will have on another due to multiple data sets not being adequately pulled together. To be effective, BI tools must take into account all the information – both structured and unstructured – that a retailer uses to make strategic decisions.

“The whole trend of using BI tools in a much more operational sense is really picking up,” says Jan De Jong, Microsoft’s worldwide retail industry solutions manager. “The concept of using real-time actionable data, rather than traditional data sources, is now understood. That’s a significant change in the industry.”

Today one of the biggest challenges retailers face is managing the sheer wealth of data available and selecting what is relevant. Information must be made available in the format that best suits the people who will be utilising it. “Retailers have always gathered an enormous amount of data, but they didn’t always use it very well,” says De Jong. “Now they have the infrastructure in place to allow the effective use of data and they are beginning to see the benefits.”

As storage systems and the sheer amount of data that can be analysed increases, the issue becomes more one of what data to store and for how long. As Oyvind Stige, manager of the retail division at ProfitBase, says: “The data warehouse must be able to handle a large amount of information and also be highly scalable in order to support all the users.”

Instead of giving senior executives a paper mountain to trawl through, sophisticated BI solutions provide them with interactive reports that clearly flag up areas of poor performance.

“In the past BI solutions would tell a retailer some of the facts, such as, ‘you have sold this number of this stock and you made this margin’, but didn’t tell them where they lost margin, in the sense that they didn’t have the right product with the right availability,” says Paul Makin, sales director at K3. “The sophistication of today’s solutions allows people to do far more of that investigation work.”

Store managers and senior executives increasingly demand near real-time data analysis. “We’ve been talking about real-time data analysis for the past four or five years now,” says De Jong. “It’s clear that that message has been picked up by a lot of companies in the top tiers, but also in the smaller tiers too. Companies are beginning to realise that it is the way to go.”

The supply chain of a tier one retailer can cover several continents and time zones. Decisions about short life inventory investment often need to be made months in advance, something that can only be done with access to accurate up-to-the-minute data. “It’s near impossible for any person to get their head round how a decision they’re about to make will effect the entire business,” says Roy Lee of Cognos. “Technology provides an environment where all of the criteria can be entered, the business rules and the business assumptions can be modelled, and those ‘what if’ scenarios can be effectively managed and worked through.”

For the fashion sector, accurate and up to date information must be immediately accessible. “The fashion sector is characterised by the frenetic way it has to manage its own business,” says Cesare Dania of software developer Atelier98, which specialises in providing systems for fashion retailers. “At every trade season, everything starts again and the times are cut drastically. As a consequence, to get information in real time becomes vital.”

The number and different locations of a retailer’s stores means collaborative tools are essential for making the most of data. Web enabled BI software means data can now be accessed by managers from around the globe, enabling them to work together on setting business targets. Microsoft Office SharePoint Server was built specifically to enable such collaborative processes. Data can be stored centrally allowing teams access to all the company’s structured and unstructured data. “Collaboration tools allow you to distribute your information, which is enormously important in retail because of its geographical spread,” says De Jong. “The more global your retail business becomes, the more important these tools are.”

According to Oyvind Stige, one current industry trend involves using Microsoft .NET technology to bundle BI functionality into the POS applications, into the handheld terminals, and into SharePoint and other applications. “It’s going from a tool for management, to one that is used throughout the organisation and bundled together with other applications,” he says.

Retailers often struggle with departmental silos, particularly in finance, merchandising, operations and marketing. Cognos recently announced the launch of a new performance solution designed to help retail executives and managers standardise company-wide operational plans and track performance. The Cognos Retail Financial Workbench & Scorecard Blueprint provides a performance management framework – including planning, score carding, dash boarding and reporting – that enables retail executives to ensure all departments are working towards the same business goals. “It’s now possible to set off the different departments to do their own work, to add their own individual knowledge, expertise and value, and then for all the resulting data to be brought back together into a single view,” says Lee. “It enables not just efficiency but effectiveness. People can be really efficient in doing the wrong thing, and what retailers absolutely need is for people to be really efficient at doing the right thing.”

The 2007 Microsoft Office System improves integration and functionality of data, allowing senior retail executives to analyse their data by means of a familiar environment. They can also use the tools in Microsoft Office PerformancePoint Server 2007 to build a performance management program that supports decisions across the business.

ProfitBase’s data warehousing product, ProfitBase 2007, provides ready to use business system connectivity and a rapid configuration data warehouse that results in faster implementation and deployment of BI solutions. ProfitBase solutions utilise Microsoft SQL Server 2005 and Analysis Services to deliver performance information to scorecard, dashboard and reporting systems, thereby providing decision makers with one consolidated view of the information they need. “Good quality retailing means good quality information and being able to use it efficiently to make the right decisions,” says Stige. “If you go ten years back it was only the largest retailers that could afford BI solutions. With Microsoft tools and ProfitBase solutions, small and mid-sized retailers can now expect a good return on investment from BI solutions.”

Paul Makin agrees. “BI solutions were only an option for companies who had the budget and technical skills to implement them,” he says. “We’ve now got some quite small customers using our system and the solution scales in terms of the number of users. You don’t have to have a huge IT team to manage all the data.”

Microsoft Excel is the key interface people use to analyse corporate BI data. It helps retailers to rapidly move the decision-making process forward by putting together the centralised, secure data from a corporate BI system and the disparate data they receive daily. “We are able to provide all of the power of the Cognos 8 platform and fully integrate that into Excel, so that if you build a report in Excel it flows through the same data structures,” says Lee. “If the core transaction system updates a data warehouse for example, and that has an impact on what you read in Excel, you can simply hit the refresh button to go straight back to source. That way you’ve got confidence that if you’re doing a monthly report, it’s guaranteed to be accurate.”

Microsoft SQL Server 2008 is due to be launched this year. It allows data to be stored and accessed from a retailer’s largest servers within the data centre, all the way down to desktops and mobile devices.

“Crucial business decisions often have to be made promptly far from the headquarters of an organisation, for example at fashion week or showrooms,” says Dania. “The challenge is to make BI completely mobile both online and off-line; and for information to be accessible even through mobile devices.”

The Cognos solution fully integrates with Windows Mobile Devices. “All the reports and analysis that you can get on your desktop are available with no re-ordering on your mobile device,” says Lee. “We’re giving store managers the ability to see what’s happening in-store in real-time irrespective of where they are.”

RedPrairie Performance Management (RPM) for Retail is a web-based analytic solution that leverages the wealth of existing information from RedPrairie’s retail operations and workforce management applications to monitor, analyse and report on the key performance indicators (KPIs). The solution is integrated with Microsoft Office PerformancePoint Server 2007.

“We’ve always worked on the optimisation of people and resources within the physical supply chain,” says Martin Hiscox, EMEA president and managing director of RedPrairie. “But when you start to get into task management for the retail outlet, that’s where the real money and the real savings can come.”

Task management of activities is historically the responsibility of the general manager of a store. They often plan resources based on history, rather than with real data tools that allow them to predict it efficiently. “By introducing our task management activities, we’ve found there’s been a fundamental improvement in the way many of these store operations work,” says Hiscox. “In reality you can’t manage what you can’t measure. But if you can get to a stage where you’re looking at individual people’s productivity, you can actually enable the staff themselves to look at how they can make themselves more efficient. That ultimately makes the business they work for more profitable and makes their job more secure.”

Clearly BI tools can help retailers reduce wastage and forecast stock requirements accurately. But the true capabilities of the latest solutions are only unlocked once robust collaboration tools are in place, enabling the right people across the business to utilise data and work together to make better informed decisions.

This article first appeared in the Summer 2008 issue of Retailspeak magazine.