Facing increasing competition from so-called big box retailers, a marketing executive at a major electronics chain retained our consultancy to build a consolidated business intelligence (BI) environment. The company was in trouble because of disappointing same-store sales; Wall Streets questioning quarter-after-quarter revenue/profit losses; and competition luring away existing and potential buyers with more effective promotions, better pricing and friendlier store layouts. The press attacked the company for its poor merchandising and lack of market penetration. If that wasnt enough, auditors were questioning the accuracy of the companys financials.
The marketing executive recognized that the problems were entrenched and that many were cultural. The lack of accurate inventory, financial and merchandise information in conjunction with inconsistent corporate-wide key performance indicators (KPIs) were all impediments to growth. Business managers had not been able to get timely, accurate information in response to external and internal requests. When it comes to knowing how our business is running, said the marketing executive, its lawlessness.
Among other problems, the retailer was unable to accurately measure promotion effectiveness and in-stock inventory levels in its stores. We began with some discovery work, modeling and integrating a subset of merchandising, purchase and inventory data. Almost immediately, we found that lost sales during the first two weeks of a key promotion period was $5 million per week. This was due to the lack of inventory to support the splashy new advertising. Additional modeling revealed an annual revenue impact of $250 million as well as opportunities to improve the customer experience.
Through interviews with the stakeholders, it quickly became apparent that everyone was looking for similar answers that could only come from a single timely and accurate source of information with a consistent view of sales across the company and its various channels, which included its Web site, franchise dealers and company-owned stores. The board of directors had put tremendous pressure on the executive team to deliver a solution in 90 days - before the start of the holiday season.
We knew that in order to meet the deadline, certain activities would have to be executed in parallel. We designated three SWAT teams: the business requirements team, the data warehouse platform team and the BI reporting team. To meet the business requirements of the stakeholders and implement the solution in a short time frame, the business requirements team had to ask structured questions of the business and narrow the broad scope of the effort.
Meanwhile, we worked with the data warehouse platform and BI reporting teams to develop a rigorous architecture to ensure that the initial environment could scale up to meet the additional requirements of the business over time. We then plugged in incumbent technologies, fitting the pieces together, as in an puzzle.
The business requirements and BI reporting teams were quickly able to solidify the scope of the initial deliverable. A one-day consensus workshop with the stakeholders revealed the negative impact of the companys reliance on slipshod and reactive monthly sales reports. Besides an inability to accurately trend seasonal and key event sales and the resulting lackluster promotional effectiveness, a complete set of data that could highlight products, categories and suppliers had heretofore never been available. The company was beginning to realize that its operational and strategic effectiveness was only as solid as its data was complete.
Together, the teams finalized the metrics and identified an initial set of what they called core reports, including Regular and Flash Sales, Inventory Sell-Through/Turns, Top 100 Items, Out of Stocks and Lost Sales. The BI reporting team defined reporting templates and began showing business users report samples, teaching them how to slice and dice across multiple subject areas by product and location.
With the reports identified and metrics at hand, the data warehouse platform team was able to identify and deliver key data to provision subject areas like transaction log, inventory, promotion, and product and location attributes.
The implementation effort was completed slightly ahead of its 90-day deadline to allow users to get their hands dirty prior to the formal rollout for the holiday seasons promotional activities.
The post-holiday analysis demonstrated a significant lift in sales during the first two holiday weekends. The reports resulted in inventory-level improvements across the company. Business users and executives praised the three SWAT teams for providing actionable information that enabled them to make good buying and allocation decisions.
However, the most powerful testimonial to the success of the initial BI program was that the CIO leveraged the resulting business impact of the Lost Sales report to build a business case to finance the entire data warehouse and integrated BI analytical reporting environment. The company was not only able to understand and improve its operations, but also drive additional sales and customer satisfaction in the bargain. Problem solved!
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