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OBI and Tandem

Published
  • July 01 1998, 1:00am EDT

When Europe's leading home improvement retailer wanted to launch one-to-one marketing and improve inventory management, they turned to Tandem to build a Web-based customer information system.

Founded in 1970, OBI, Inc., is the largest home-improvement retailer in Europe, generating expected revenues of more than 5.6B DM in 1997. In a tight competitive market, OBI cannot afford to stand still. Expansion has been a key strategy. Using a franchise model, the company now operates more than 400 stores in countries throughout Europe and will soon open in China. OBI has also expanded the average store size from 9,360 to 43,200 square feet with the company's largest stores reaching 126,000 square feet. The number of active items has jumped to 250,000, with an average of 65,000 in-store offerings at any time.

In the last decade, OBI has shifted from offering only raw building materials to becoming a supplier of home improvements. In addition to hardware, electrical and plumbing supplies, customers now find full displays of assorted kitchen fixtures, wallpaper designs, cabinets and cookware. The company continues to find creative ways to serve customers, moving from a "do-it- yourself" to a "buy-it-yourself" philosophy. From OBI, customers can buy not only the materials they need but also the services to install them. And in partnership with a construction company and a leading savings and loan bank, OBI even offers the ultimate in home improvement--a complete home.

OBI's most important business strategy is to develop a one-to-one relationship with each customer, learning as much as possible about their needs and purchasing patterns in order to serve them better. This has been a pressing requirement, because the customer base is changing dramatically. A significant increase in the number of single-adult households and dual-income families, combined with changing family dynamics, is bringing more women into OBI's stores. As a result, OBI has to incorporate women's styles and preferences into store displays and product assortments--without turning away loyal male customers.

Four years ago, OBI recognized that managing the franchise expansion, the growth in SKUs and the wider assortment of products demanded the help of a data warehouse. But as the company began collecting data, it quickly pushed the existing system's limits of manageability. Tandem, a Compaq company, proved to OBI management that it could build a data warehouse with the scalability, price performance and manageability needed to handle the massive amounts of data required for inventory and vendor management. More importantly, with the help of Tandem Directional Consulting, OBI realized that the same data warehouse could also help meet the goals of one-to-one marketing by helping OBI better understand its new customer base.

OBI and Tandem have begun implementation of an enterprise-wide information system that links transaction detail (where, when and which items) with customer information (demographics, history and purchasing patterns). This wealth of information opens the door to product, service and customer profitability analysis, assortment planning, one-to-one marketing programs, replenishment management and other day-to-day management and service improvements.

The new data warehouse operates on a Tandem NonStop Himalaya S7000 server running Tandem's NonStop SQL/MP database. OBI plans to migrate the system to a Windows NT Server-based clustered environment in September 1998. OBI is launching its data warehouse with approximately 60 gigabytes of raw data and plans to grow quickly from there. While previously OBI only had been able to store aggregated sales data for item, store and day, the new data warehouse will store every point-of-sale (POS) transaction. Data will be extracted from the operational systems and refreshed nightly.

The initial 25 users are expected to grow quickly to 100. Plans are for these power users to access the database using MicroStrategy's DSS Agent. Using MicroStrategy's DSS Web tool, the user base should grow to 500 users within one year--including the company's top 20 suppliers. By incorporating Web technology, OBI plans to extend system access to more than 25,000 employees in stores worldwide.

OBI's decision support solution from Tandem is expected to generate a number of cost-saving results that will help strengthen our company's market leadership position in Europe and improve our profitability:

Launch one-to-one marketing. As part of its one-to-one marketing program, OBI is tracking customer purchases through the use of "virtual loyalty" cards. Once we identify customers at the point of sale and understand their purchasing patterns--which stores are frequented and how often, and which items are purchased in which quantities--we can use that information to refine our marketing strategies and optimize our in-store assortments for the specific store demographics.

Improved inventory management. OBI expects to see improvements in inventory management in three areas. First, "no sales" from out-of-stock products should drop to an absolute minimum, increasing store turnover 10 to 15 percent. Second, OBI expects to shrink item overstocks, reducing inventory costs and clearance markdowns across the company's franchises. In addition, OBI intends to transfer much of the responsibility for on-time deliveries to vendors that will be linked to the system. OBI then would be able to negotiate minimum guaranteed-profit contracts, increasing vendor loyalty while yielding dramatic improvements in reduced inventory costs and on-time delivery.

Enhanced customer service. The near real-time system should help retail staff respond quickly to customer queries. If an item is out of stock, an employee would be able to check the status using a simple Web-browser interface and tell the customer immediately whether the item has been ordered, when it will arrive or whether it is available at another store.

Some Practical Advice

Think business, not technology. It is crucial to understand all the business drivers before building the data warehouse so you leave the door open to potential opportunities. Initially, OBI intended to build a warehouse for inventory and vendor management populated only with item-level information. Tandem helped us think bigger and build a corporate-wide information system for any kind of analysis and reporting. For example, linking transaction detail with the customer profile enables us to analyze customer profitability and perform basket analysis. This provides the foundation for our one-to-one marketing efforts.

Build for growth. Data warehouses grow quickly as you add more history, users and subject areas. We knew scalability was a critical requirement, but we didn't fully appreciate how much scalability impacts manageability. Our previous system had proven difficult to manage for optimum performance--backing up took several hours, restoring data consumed five to six days and adding new database fields took several weeks. Tandem proved to us that its products could manage the huge amounts of data that come through OBI's stores every day and still remain both user friendly and cost effective.

Data warehouses are only successful if they are used constantly to impact the business. This means putting information in the hands of employees authorized to take action. We had our first taste of the power of this warehouse from Tandem on the pilot's first day. Our buyers uncovered evidence needed to eliminate five suppliers; the following day, they took action. With customers, even a day is too long. We know we need to give sales staff real-time information so they can immediately respond to customers. We believe this responsiveness will enable OBI to retain its market leadership.

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