Business Intelligence: Identifying hot sellers, cutting costs and finding new business opportunities

By Allan Pulga

What’s the big deal about Business Intelligence (BI)? Many retailers are happy about getting a fast return on a relatively low investment, and in cellular retail, there’s no reason to be left out of the winnings. More than just data mining, the key is to use BI to drive decisions and facilitate growth.

“(Unused data) is still a great source of untapped productivity and competitive advantage for most companies,” says Larry Downes, strategy consultant and author of Unleashing the Killer App and The Strategy Machine. In a 2003 article of CIO Magazine, written by Alice Dragoon, Downes estimated most companies only extract value from about 20 per cent of their data.

Investing in BI software is only half the battle. You need the tools to get what you need out of the data: accurate, relevant information presented in an understandable form. Once you have that information in hand, you also need to make sure your staff knows how to interpret it and make the right decisions for your business. That leads to another investment: training.

 Salespeople and executives need to get at the data and it must be refreshed daily, in real-time. Once executives understand the relationships between different areas of the business, they can implement changes to increase profits both internally (salesperson performance, staffing) and externally (ordering inventory, marketing). “Besides making data accessible, BI software can give companies more leverage during negotiations by making it easier to quantify the value of relationships with key suppliers and customers,” wrote Dragoon. 

Discover Opportunities, Drive Decisions 

In the cellular retail environment, there are plenty of opportunities to save money by optimizing business operations and focusing decisions. “BI yields significant ROI when it sheds light on business bloopers,” wrote Dragoon. Find ways to cut unnecessary costs on every angle of the business and track the progress of the changes you decide to make. Companies are also using BI to further support or disprove initiatives within the organization. “Too often, evaluations of opportunities for growth are based on gut feelings, estimations and assumptions because it would be too expensive and time-consuming to get hard data,” said Rebecca Wettemann, vice-president of research at Nucleus Research. “BI can let you run some quick numbers to justify that gut.” 

Track What’s Hot and What’s Not 

Many companies use BI in their merchandising, identifying which products sell well and where, quickly redirecting merchandise from less profitable locations to the sales hot-spots. The same goes for marketing: by tracking the performance of certain promotions, executives can determine what’s working and what’s not; where that promo was a hit and where it flopped. On the other hand, some companies use BI to reduce “red zone” inventory, identifying a product that’s been sitting in the warehouse longer than it should (say, 120 days, for example). Feeding that information into supply chain software, these companies pulled the merchandise from their distribution centres and sold it member stores at or below cost, thus saving thousands, even millions in inventory carrying costs. 

Pick the Perfect Price 

Deciding on an optimal price for a product is always a balancing act, but BI can help you crunch data quickly to zero-in on the right figure. Look what it did for Ace Hardware:  “Although stores are encouraged to adapt pricing to their location, BI has helped Ace show store owners how much they could expect their gross margins to increase if they were to raise their prices to Ace's suggested retail,” wrote Dragoon. “In many cases, it was more than $50,000 annually per store. Ace had hoped to increase its wholesale margin by $19 million in one year. It actually increased by $175 million.” Whatever your BI needs, Nucleus’ Wettemann advises keeping it simple. Irving Tyler, Quaker Chemical CIO, agrees: “Build a simple infrastructure. You can always do more, but you can never do less. There’s tendency to do something fancy.” Build a basic foundation, put it in users’ hands, and let them suggest what more they need. “Don’t deliver reports,” he says. “Deliver tools.” 

Rebecca Wettemann’s “Seven Rules to Rolling Out BI”: 

1. Make sure your data is clean.

2. Train users effectively.

3. Deploy quickly, then adjust as you go. Don’t spend a huge amount of time up front developing the “perfect” reports because needs will evolve as the business evolves. Deliver reports that provide the most value quickly, and then tweak them.

4. Take an integrated approach to building your data from the beginning. Make sure you’re not locking yourself into an unworkable strategy further down the road.

5. Define ROI clearly before you start. Outline the specific benefits you expect to achieve, then do a reality check every quarter or six months.

6. Focus on the business objectives.

7. Don’t buy BI software because you think you need it. Deploy BI with the idea that there are numbers out there that you need to find out, and know roughly where they might be. “It can’t be a needle in a haystack,” says Wettemann, “but you should (at least) know what field it’s in.”