Archive for January, 2010

Use twitter to keep up to date #edi852

January 30, 2010

Follow news on EDI 852 and retail pos analysis on twitter. You can find us @rainmakergrp or #edi852

Join the social networking community for retail professionals here

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Lesson on the Golf Course

January 29, 2010

I went golfing the other day and got paired up with a guy named Henry. During the course of the afternoon I came to find out Henry is a very successful business man who spent part of his career in insurance and now owns more than a dozen hotels in ‘retirement’. To me retirement means nothing but golf and sitting on the beach so I’m not sure Henry is ‘retired’ but anyhow. He shared an interesting story with me, he was having lunch with another very prominent business man which if I wrote his name 80% of you would recognize. Henry asked him “what is the key to your success” and this man considered the question for only a brief moment and said “oh it’s very simple”. “If a job is worth doing then I hire someone to do it, if it’s not worth doing then I don’t do it at all.” I was struck by how profound and simple that was. He had created a simple method for deciding how to focus his energy where it counts the most and avoid becoming entangled in the day to day details. I was thinking about this in relation to our business and was stuck by the fact many vendors that come to us for EDI 852 and POS reporting are only doing so because their buyer told them they needed to or because an executive at their company thought it might be a good idea. They are not committed to analyzing and using the data to improve their business. On the other hand we have vendors who dig into the details of the data every week and find out of stock issues and sales opportunities. They are making the most of the data and the results show in their growth and inventory GMROI. So the bottom line is this; if you are considering EDI 852 / POS data analysis don’t stick your toe into the water, jump in all the way and make the most of the data and your business will improve.

Home Depot Cuts Jobs, Focuses on Supply Chain improvements

January 27, 2010

According to an article in the WSJ Home Depot is cutting 1000 jobs but CEO Frank Blake was careful to note the cuts are not due to business performance or economic concerns but rather a reorganization of the business. The article contained a couple interesting insights into Home Depot’s business: they expect to add an average of 1.5% annually to their retail square footage, or about 20 stores in 2010; and they will focus spending in 2010 on improving supply chain and existing stores. Also interesting in the article is research from Harvard University’s Joint Center for Housing Studies suggesting remodeling activity will bottom out in Q12010 and then begin to increase. If that prediction is accurate it could be a good sign for Home Depot.

Store Sales Analysis

January 24, 2010

The primary purpose of a store analysis is to identify the stores which are making the largest contribution to total sales. When the highest contributing stores are identified, an analyst can study the characteristics of those stores, including SKU assortment, demographics, promotions, min/max on hand, and make recommendations on how other stores can be improved to enhance performance. An important objective of a store analysis is to grade stores by performance into major categories to save time and focus out of stock and forecasting on the highest contributing stores in future analysis. The data provided in an EDI 852 document provides all the necessary information to conduct a store sales analysis.

Buyers often have a store list with categories defined A,B,C,D based on sales performance. However, the buyer’s categories are typically assigned based on the total sales for a given store or total sales for a product category. This may result in a different performance ranking than the analysis on your specific SKU’s. Because plan-o-gram decisions are made based on the retailer’s store categories, you may find that an A store for your items is considered a B or C store based on total sales. Request a list of store categories from your buyer and compare to the categories from your analysis. If there are variances, we recommend you meet with your buyer and discuss adjustments to the plan-o-gram based on store performance for your SKU’s.

Why should you conduct a store sales analysis using your EDI 852 data?

· Identify variances between the retailers general store grade and the actual store grade for your SKU’s.

· Understanding a stores performance relative to its peers allows you to focus your attention where it is most needed.

· Identify the best allocation of promotional dollars

· Work with the buyer to put the right plan-o-gram in each store

· Retail replenishment decisions are usually made based on their store grade, if it’s not correct for your SKU’s there is a problem you can correct

· Compare store grades across retail partners in the same geographies so you can identify new expansion opportunities.

Additional information and detailed instructions are available at http://www.acceleratedanalytics.com/analyst-training.html

Top Questions About Point of Sale Data Analysis

January 15, 2010

Vendors are working hard to understand how to best use retail POS and inventory data which is made available via EDI 852 or a web portal. Here are five very common questions vendors ask as they work with our team to put a data analysis solution in place.

What is the difference between EDI 852 and data available on my retail customers web site? The most obvious difference is the format of the data. EDI 852 is a standard document template but it is encoded using line identifiers and other language necessary for computers to make sense of the data. EDI 852 must be parsed and translated to be of any use to a business user. Data available in a retail portal is typically either presented on screen or saved into a text or spreadsheet format. These files do not require translation and can be opened in a variety of Windows programs. A second difference is the level of detail available. An EDI 852 document always includes units sold by UPC but it may not include on-hand data. And receiving store level EDI 852 data is often an additional selection and cost. Most retail portals will provide detailed store level data files, or presentation of detailed data on the screen. Finally, and most importantly, EDI 852 values for each UPC can be different than the values reported in a file available on the portal. This can be due to different reporting periods, different source and/or additional source system data, or a different method of handling of returns.

If I can choose between EDI 852 and a file from my retailers’ portal which one should I choose? This decision comes down to a few factors. First, does the retailer charge a fee for sending data via EDI as opposed to accessing the data on the portal. Second, does the EDI 852 data provide less information than the portal. For example as noted above some EDI 852 files do not include on-hand or store level data. Finally, research the data accuracy of the two sources and choose the one which will best support your decision making process.

What types of reports should I be using? There are three reports that form the backbone of retail POS data analysis: item sell-thru by store, inventory on-hand by item and store, and top selling items. From these three reports you can create a library of very useful decision support tools segmented by geographic region, product category, and by retail partner.

Why should I consider an outsourced service for POS data analysis? For most vendors working with POS data falls outside their IT organizations typical scope of expertise and tools. Simply put there is a fairly large volume of data which requires translation, scrubbing, and organization into a sophisticated data warehouse. The data does not fit into most organizations ERP, forecasting, or accounting system so the IT department if faced with building a custom application. Then end users need a simple and quick tool to access the data for analysis and decision making. An outsourced service can deliver the necessary engineering and software tools in a very short period of time without an expensive investment. And outsourcing provides a cost effective monthly expenditure which aligns with your cash flow instead of a large capital expense.

Why can’t I just use a spreadsheet for analyzing POS data? Spreadsheets have many limitations when it comes to analyzing POS data not the least of which is simple row and column limitations. But more importantly there is a significant amount of work required each day or week to accept, transform, format, and analyze data in an Excel spreadsheet. Time which your staff can avoid all together by using more sophisticated tools and/or an outsourced service. In addition spreadsheets are generally not well suited for team based collaboration on data. Each time a spreadsheet is opened the user has the opportunity to change/edit data which can rapidly deteriorate the quality of the data and cause significant duplication of effort.

To stay current on EDI 852 topics follow us on twitter: rainmakergrp and visit our blog

6 Big Ideas for a new decade in retail

January 13, 2010

This blog post is worth reading http://retailprophet.com/blog/?p=550

Gross margin return on investment (GMROI)

January 13, 2010

GMROI is one of the most important metrics in the retail/supplier world because it allows you to understand both the velocity with which your inventory is turning and the return you are getting on your investment. GMROI is a measure of inventory productivity that shows the relationship between total sales and the gross profit you earn on those sales in conjunction with the amount of dollars invested in inventory.

GMROI can be expressed as either a percentage or dollar multiple. Many retailers calculate GMROI at a product family or department level but it can also be calculated at an individual item level.

GMROI (%) = gross margin (%) x [sales / average inventory at
cost]

where gross margin (%) = (sales – cost of goods sold) / sales

and average inventories at cost for one year = add ending inventory at cost for every month of the year plus the ending inventory at cost for the previous year and then divide by 13.

Analysis software which automates the calculation of GMROI at an item level and then allows the user to input exception monitoring based on business logic is ideal. This setup provides significant time savings and proactively alerts a user to problems.

How to get a buyer to accept a forecast recommendation

January 11, 2010

Moving into 2010 most retail economists are predicting a continuation of the “do more with less” retail buying strategy. This will mean high fill rates, accurate forecasting, and proactive out of stock analysis will be critically important to maximizing sales.

I would like to begin a discussion on the best practices for getting a replenishment manager to act on a SKU forecast recommendation. Here are a couple thoughts to get the conversation going.

  • Carefully analyze fill rates and ensure all orders are completed on a timely basis before approaching the buyer with a forecast recommendation. It’s basic ‘blocking and tackling’ but if your fill rate is below expectations the buyer is not likely to accept a recommendation for more inventory.
  • Whenever possible use actual comp period historical sales demand as the basis for forecasting current year sales. Conservative forecasts built on actual sales history have higher credibility and less chance of error.
  • Concentrate your analysis on A stores and position your recommendations to the buyer on 100 or 200 ‘test stores’ to start.
  • Carefully document the ‘before’ and ‘after’ performance so when you go back recommending an expansion beyond the test stores you have a positive business case.

Please chime in and add your thoughts and experiences.

Brighter Days Ahead for Retail in 2010

January 11, 2010

Retail economists now predict solid growth for 2010. The International Council of Shopping Centers projects annual sales will increase 3% to 3.5%, the biggest jump since 2006. "It’s a story of the turning of the corner for the retail industry," said Michael Niemira, the group’s chief economist. "We are probably now outside of the recession, and getting the first slow recovery."

"There is more stability and more visibility," Macy’s Chief Executive Terry Lundgren said in an interview. "Last year, it was like we were all falling off a cliff, grabbing for vines to catch on to something, because we couldn’t really see what was happening."

The less-is-more strategy is expected to continue well into this year as merchants cautiously move forward in light of continuing high unemployment and a recent spike in energy prices that is reducing consumers’ disposable income.

Maintaining high fill rates and carefully watching inventory on hand will be critical for success in 2010. EDI 852 provides the raw materials necessary to analyze sales and inventory on hand however vendors will need to be diligent in analyzing and working with replenishment managers to ensure out of stocks do not occur.

Take action now:

1. Identify you’re A and B stores by sales volume.

2. Perform an out of stock analysis for A and B stores for your top SKU’s.

3. Review your fill rate for these stores/SKU’s and take any corrective actions necessary.

4. Work with your replenishment manager to ensure order min/max will support expected sales and avoid out of stocks.

Additional resources:

· Detailed instructions for A/B store analysis and out of stock analysis can be found here

· Tools for analyzing EDI 852 can be found here

· Network with other retail industry analysts by joining the Accelerated Community

Avoiding Out of stocks

January 10, 2010

Brrr, it’s cold outside. I live in south Florida and we have been experiencing record low temps for well over ten days now. Last night it got down to 28 degrees at my house! I know-28 degrees would be a welcome heat wave many places in the US right now but down here this is a record cold. The cold temps have resulted in stock outs of space heaters at Home Depot stores in the central Florida. "The majority, if not all, Home Depot stores in Florida are out of stock of space heaters," said Craig Fishel, a spokesman for the company. The company continues to sell them online. We blog all the time about how to use POS and EDI 852 data to avoid stock outs. It’s not very complex, simply look at the current on hand inventory and the current rate of sales and weeks of supply can be easily calculated. This stock out was pretty easy to predict, weather forecasters have been predicting the abnormally cold temps for 10+ days. More than enough time for buyers to work with their suppliers to bring in sufficient inventory to handle the upcoming demand. I wonder how many lost dollars have resulted?