What You Need to Know to Be a ‘Go-To’ Wal-Mart Supplier
By Tom Ryan
Many retailers are gaining new insight into
their businesses by analyzing downstream data, with Wal-Mart being perhaps
the leading practitioner. A new RetailWire white paper, Providing
Bottom-Up Support for Wal-Mart and Other Retail Accounts, underwritten
by Shiloh Technologies, is designed to be a primer for manufacturer support
teams that are feeling increased pressure to be more involved in this daily
decision-making process.
The extraction of insights from demand data,
according to Shiloh Technologies, is being greatly facilitated by new Business
Intelligence (BI) apps, such as Demand Signal Repositories (DSRs) – evolving
technology that is making the daily capture, summarization, and reporting
of daily item store level sales feasible. Traditionally this data would
have been loaded into a data warehouse and become the basis for after-the-fact
inquiries. Now, with DSRs and other BI tools, it can be analyzed quickly enough
to impact results as they unfold. Shiloh Technologies attests that can
be a very good thing for the trade relationship, but only if both parties
are up to speed on the technology. Suppliers that are slow or unable to
adopt these BI practices could find themselves “out of the loop.”
Store item demand data is more precise and
timely than the old warehouse shipment and order data. This granularity
offers never before-realized opportunities, given the proper tools. DSRs can
generate predefined reports and data ‘dashboards’ targeted to business
users. They also provide the flexibility for business users to generate
their own reports or dashboards.
DSR-enabled demand planning, according to
the Shiloh Technologies’ report, includes activities such as:
- Evaluating actual results against previous forecasts
to adjust forecast parameters; - Adjusting seasonality factors because of actual
weather deviations; - Requesting physical inventory audits because of
zero sales exceptions; - Projecting future promotion performance based
on past results that evaluate shelf allocation, depth of discount, and
outside advertising; - Adjusting assortment recommendations based on
peer comparisons; - Recommending case pack changes based on normal
replenishment; - Automating the updates to retailer and supplier
planning applications based on actual results; - Analysis of price elasticity by regions to ensure
that items are at the right price in each store; - Monitoring of replenishment settings and in stock
to be certain that you understand the true demand for your items.
With all these capabilities, Shiloh Technologies
said it’s clear why manufacturer support teams are feeling the need to
speak this new language fluently and work intelligently with retailers
on demand-based planning.
Discussion questions: What hurdles will suppliers
face in adopting Demand Signal Repositories and other BI technologies?
When will DSRs essentially become a requirement
for servicing most retail accounts?
This is not a new concept. DSR is a relatively new acronym but the concept has been out there for many years. Relational Solutions specializes in DSRs for the consumer goods industry. It is not just a matter of knowing what is selling and when, it’s a matter of servicing the retailers and end customers better. It’s a matter of streamlining internal efficiencies to improve corporate profitablities and it’s a matter of identifying stores with inventory issues quickly so that problems can be resolved quickly.
POSmart does exactly that. It partners with Shiloh. Walmart is a major player, but companies have other retailers to support as well. Therefore a true multi-retailer solution that will integrate downstream data with internal data is where the real value is to CPG manufacturers. Experience is key. Reporting solutions should not be confused with a true architecture that will allow companies to grow and expand with the users’ needs.
Relational Solutions has been building DSR solutions since 1996. It’s far more than just a reporting tool.
Knowing that a comprehensive DSR solution:
1. Identifies and predicts out-of-stock and overstock situations at a store/SKU level,
2. Provides recommended actions to a specific actor or system to rectify out of stock and overstock issues – prioritized by profitability impact,
3. Improves day-to-day CPG DC to Retail/Wholesaler DC replenishment,
4. Manages the process to drive execution…one can drive measurable sales lift as a result of effective implementation. A major hurdle is data. Not the capture of it, but the confidence level of its accuracy. Too many retailers still do not trust their store-level data. However, that is no reason to procrastinate the investigation of utilizing a DSR. Benefits can include a set of standard reports to identify the extent of OOS and lost sales by root cause – at a store/SKU level, and an analysis and specific recommended actions on how best to mitigate out of stock and overstock situations by root cause.
Another challenge beyond trustworthy data, is the measurable results of the DSR solution. Non-promoted items can experience lift from promoted items, as an example. However, further improvements could be made by leveraging data mining capabilities of the solution:
– Optimization of SKU-store clustering to improve seasonality modeling across product groups and territories.
– Predictive modeling of seasonality to take movable calendar events into account (e.g., Easter)
– Predictive modeling of promotional effects to take promotional parameters into account (e.g., coupons, discounts, BOGO, signage, end caps, targeted mail, free standing inserts, etc.)
– Predictive modeling of cross-promotional effects to forecast promotional impact on non-promoted items (lift or cannibalization)
– Predictive modeling of trend-cycle to take market factors into account (e.g., demographics, economic conditions, competitor statistics, etc.)
– New store forecasting based on climate, floor space, demographics, economic conditions, competitor statistics, etc.
Another data compilation and interpretation tool is great, but will not solve the basic issues-actual OOS at store level and eliminating these. Transparency at store level is clear from RetailLink and other systems that are being used today. However, getting these OOS filled by the buyer on a regular basis is very difficult. This combined with getting the products to each store is a tactical situation, that most retailers have to overcome, and haven’t. Without this deployment, all of the information and data compiling is useless.
We have worked with over 300 manufacturers over the past 16 years and their message to us has been very consistent over time. The industry can come up with new names like DSR for tools that have been out there for years, like Shiloh’s, but the bottom line is any BI tool that is going to help a manufacturer drive retail results needs to perform a number of functions customized to the nuances of each specific retailer.
Our customers tell us they need to look holistically at all their retailer data alongside their orders, shipments, syndicated data, weather forecast, etc, with best practices gleaned across all clients and retailer requirements. Automation around data collection, integration, and reporting is important for efficiency but managing forecasting, in-stock, improving promotion and store level execution, and finding selling opportunities are where ROI is generated from a DSR.
From my own business standpoint, with so many of my clients being small brands, entrepreneurs, niche, and start ups, my concern is that the technology and the information might not be used properly by suppliers or Walmart in itself. Or, even more concerning, that the information will be used counter productively, or too generalistically, or too historically, without ample thought about future trends. Retailers and suppliers need to consider any type of historic data as being what it is; the past. Intuition and vision are needed as important ingredients to make historic data useful.
DSR and other BI technologies are here to stay and will evolve, but they may be applied in different ways by various retailers as they search for ways to surpass Wal-Mart. DSRs and BI are part of the passing parade toward more efficient retailing today. Wal-Mart leads the technological and informational pack and its dividend to consumers is lower prices.
But the sunrise that I’m still waiting for is the Wal-Mart of the future; the retailer who can transform retailing via technological insights from a price-focused industry to a consumer-satisfying one, i.e., the retailer who becomes the word-of-mouth icon that gets universally praised by consumers as “the most satisfying place to shop.”
There is too much data in the marketplace. Manufacturers and retailers need to decide on what is essential and what they can do without. The essential data needs to be analyzed and put to use. This will require manufacturers to have the people and technology in place to do the analyses and retailers to be receptive to the results.
Then it needs to be implemented. Will retailers be willing to place orders that eliminate out-of-stocks? Will manufacturers be willing to eliminate underperforming line extensions?
Hard data can be a potent tool, if both manufacturers and retailers are ready to see the results in the same light and then act in concert.
To take the elephant out of the room, many retail suppliers wouldn’t know a DSR from an MRI and much of the data-speak that gets thrown around is so intimidating from the get-go that suppliers that might otherwise seek to expand their data management worlds just back off. While many suppliers have the expertise and the drive to leverage these terrific tools, I see a real need for data solution providers to build bridges of understanding (and with the the analytical teams that are already in place; some of which are comprised of folks who learned on the job). At least that’s the feedback that we have gotten from some. I’ll echo David’s point also by saying that anyone who planned this last year based on history most likely didn’t fare very well in terms of inventory management. We are telling our clients that “history starts now.”
Sure, any new acronym is going to cause the retail industry to roll its collective eyes. But the bottom line here is that companies will soon have the ability to to monitor not only what sold, but WHEN it sold. This glimpse into sell speed has the potential to fix the out of stock problem that stunts sales. Let’s get behind the concept, regardless of what we call it.