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Lesson on the Golf Course

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?” 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 struck by the fact that 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.

Store Sales Analysis

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 store's 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/download-whitepapers/

Top Questions About Point of Sale Data Analysis

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 customer's 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 organization's 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 organization's ERP, forecasting, or accounting system so the IT department is 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.

Brighter Days Ahead for Retail in 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 your 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 store analysis and out of stock analysis can be found here
· Tools for analyzing EDI 852 can be found here

#edi852

Started a new category on Twitter for EDI 852 research and information. Follow rainmakergrp and watch for #edi852 to stay up to date on all things regarding point of sale data analysis, and specifically EDI 852. Topics will include how to best use EDI 852 for analyzing retail sales performance, on hand inventory forecasting and replenishment and how to turn the data into actionable plans for your buyer.

Using EDI 852 data to audit Planogram Compliance

Many of the vendors we work with have a specific planogram they agree to with a buyer on an annual or semi-annual basis. After reaching an agreement with the buyer on the planogram, the vendor estimates sales and then creates a production forecast based on the number of facings and estimated sales. The problem many vendors encounter is that with multiple planograms, each with a different SKU assortment at thousands of stores, auditing the execution can be a challenge—so much so that most vendors do not conduct a detailed review on a regular or even semi-regular basis. If the planogram is not executed properly, sales are lost, the vendor can end up with extra inventory, and ultimately the retail buyer may conclude incorrectly that the vendor’s products are not performing well.

The good news is that with some effort the EDI 852 data provided by the retailer can be used to audit planogram compliance. Here’s how. Create two planogram files; one file will list the SKU’s that are included in each planogram, the second file will list each store and the planogram assigned to the store. The layout for the first file should be SKU # | SKU description | POG Name 1 | POG Name 2 ,with as many distinct planograms as you have. The second file should be Store # | City | State | POG Name. Using these two files and the EDI 852 sales data, you can load these into a database and then analyze compliance, where compliance means that a store has the intended SKU(s) on hand, or has sold the item(s). If either of these conditions are true, the SKU is “active.” (Depending on where you are in the roll out process and how quickly your SKUs move, you may need to consider more than one week. For example a 4 week average of OH and sales might be appropriate.) For any store that does not have all SKUs “active,” calculate a planogram compliance percentage by dividing the active SKUs / planned SKUs. Then sort the final table descending by planogram compliance percentage. This provides the top down action list you need to go back to your buyer or replenishment manager and address execution issues.

Retail buyers and replenishment managers are busy. They don’t have the time, or in most cases the tools, to ensure proper execution of your planogram. You do not want to get to review time and find out that poor execution on the planogram caused lost sales.

Note: If you want to take planogram compliance to the next level, you can also include the minimum inventory OH for each SKU in the first file described above. That will allow you to not only check if the SKU is “active” but also if the SKU is properly stocked at the stores.

Home Depot EDI 852 Reporting

If you are a Home Depot vendor, you are eligible to receive product sales activity and inventory data via EDI 852 from Home Depot.

The Home Depot EDI 852 document will contain SKU/UPC level units sold, units on hand, and dollars sold for every store where your products are sold. The files are sent one time per week, summarizing the prior week’s activity.

What can you do with EDI 852 from Home Depot?
· Analyze SKU/store level sales
· Analyze SKU/store level on hand
· Analyze average unit selling price by SKU/store
· Analyze plan-o-gram compliance by verifying on hand and selling at planned stores
· Identify out of stock stores, and even forecast demand based on prior sales
· Group stores into A, B, C categories based on SKU level sales volume.

Home Depot merchandisers expect vendors to receive and use EDI 852 data to analyze and manage their SKU activity. If you are not already using the data, of if you are not using it as well as you could be, then you are missing sales opportunities. Don’t wait for your merchandiser to call you and ask a question you can’t address – start working with the data today.

Learn more about what your organization can do with Home Depot EDI 852 click here

Handling On-hand inventory

While EDI 852 is set up to report on-hand inventory quantities, many vendors come to realize the quality of the data reported can be suspect at best.  In this case there are strategies to handle the missing or poor quality data.  One such strategy is to use the shipping quantity and then subtract reported EDI 852 product sales to arrive at a 'calculated on-hand.'  This method has some limitations, but over time this can become an effective decision making tool.  Our Accelerated Analytics service provides the vendor with a simple and effective means to accomplish this data matching.  By incorporating purchase order and shipping data, we are able to synthesize the on-hand value.

Don't allow the on-hand to become a barrier to using the EDI 852 data. Reporting and tracking sales alone is valuable, and the on-hand issues can be dealt with by using simple business rules.

The EDI 852 Dilemma

In the past week, the Accelerated Analytics team has been contacted by 6 vendors looking for a solution to their EDI 852 data analysis problem.  Simply put, their retail customers are sending weekly sales and invenotory data, but they are challenged on how to translate the data and turn it into smart business decisions.  If you are reading this post and nodding your head, you're in good company.  These vendors range from small to very large and they all have the same issues.

Don't allow the challenges to divert  your attention away from this important data.  If you seek out a tool that can reduce the dirty data work, the business value will be significant.   Focus on what business questions you need answered.  A good place to start is to identify what minimum on-hand you need at each store to ensure your desired sell-thru is met.  Then create simple reports that draw out the problem stores and focus your attention on working with the buyers to make sure inventory is manged properly.

Understanding EDI 852 Product Activity Data

We have been receiving a lot of phone calls lately from manufacturers trying to understand the EDI 852 data files their retail customers are sending.

We posted a new page on our web site for understanding EDI 852 product activity data that you might find helpful if you are dealing with this issue. The Accelerated Analytics team would be happy to answer questions if you need help. contact us

Collaboration comming of age?

A recent shared strategy study titled "The State of Collaboration 2005", by Consumer Goods Technology, RIS, and Forrester, sited some encouraging results our team felt needed to be shared.  read the study

Finding #1: almost two-thirds of retailers and manufacturers feel they suffer adverse business effects when they do not collaborate.

Finding #2: EDI 852 is still the primary tool most firms use to collaborate.

Our conversations with manufacturers indicates they are having a hard time dealing with the EDI 852 data provided by retailers.  Plus many retailers have developed web portals which provide data files in even different formats.  There are simply too many different formats, and too much data to wade through on a weekly basis.  This points to the need for a tool to make the most of the opportunity.

Still, this is good news to see momentum continues to grow.

Making sense out of EDI 852 data

We have been contacted by many vendors to major retailers in the past two weeks, looking for a solution to EDI 852 reporting.  It's not surprising since many major retailers send the EDI data out and simply hope vendors are able to use the data in some beneficial manor.  The fact is, most vendors are not in a good position to make this happen.  Especially since most vendors have many retail customers, all of which have different EDI templates and reporting requirements.  What a mess.

What is the point of making sales and inventory data available to suppliers if the data is unusuable, or inaccurate?

To make sense out of EDI 852 data requires a reporting tool capable of presenting summarized views (e.g. sales by month for each SKU and store) and then drill down capability to investigate problems.  In addition, a solid reporting tool needs to provide exception based management of the data.  This provides the vendor the ability to ingrain business logic like min and mix inventory turns and then be notified when something is out of whack. 

If you are struggling with EDI 852 data reporting, take solice.  You are not alone.