Jun 09 2015
The benefits of sharing demand and inventory data between retailers and their vendors are numerous and well documented. So-called “downstream data” can be a key enabler of supply chain collaboration leading to inventory and marketing optimization for both retailers and their vendors. Even the smallest of retailers are often asked by their vendors for ‘sell through’ reports to give vendors more insight in to what’s happening at store level with the product that they’ve shipped in.
But running ad hoc reports for vendors who request them is time consuming and inefficient. To get the maximum value and efficiency out of this practice, it needs to be programmatic and process driven. Most importantly, it needs to be a key part of the business relationship between retailers and vendors.
The above graphic represents the spectrum of data sharing that we see in our discussions with retailers. While some retailers fit nicely into one of these buckets, quite often the same retailer will be in more than one simultaneously depending on the vendor they are sharing – or not sharing – with.
To measure the effectiveness of each of these approaches, one must consider how they deliver on three key dimensions that ultimately drive business value:
Accessibility. If only some vendors have access to their retail-level information, money is being left on the table and opportunities are being missed. Why bear the cost of building systems and processes to share data when not everyone is using it? Reasons for not giving universal access to information can vary: perhaps the process is too labor intensive to support all vendors; perhaps the technology deployed by the retailer cannot handle too many vendor users at once. And what about mobile accessibility? If the user base of this data needs it at their fingertips when they’re in the field at store-level, it’s not much help if the data they’re getting is in a spreadsheet on their desktop or in a paper report sitting on their desk.
Actionability. How does the information provided directly lead to a change in behavior or decision that positively impacts the business? If there’s too much data and not enough information, this can lead to data overload where nothing is accomplished. In other words, if it’s too difficult to pull the needle out of the haystack, the needles won’t be found. Similarly, if the information shared isn’t granular enough, tactical decisions can’t be made. While aggregate product data is better than nothing, it masks the challenges and opportunities at the store and SKU level that drive sales and production. You can’t action an ‘average’.
Efficiency. Does the sharing mechanism require significant time, effort and expense for vendors to use and analyze? Are vendors spending time cleaning, organizing, reformatting data that is being shared, rather than turning that information into greater sales or faster inventory turns? Perhaps vendors need to invest in additional software tools to handle and report on all that data. Perhaps they need to hire additional resources or contract with an outside ‘POS reporting services’ firm to do this work. In the end, if it’s too expensive – either in terms of time or money – then the data won’t be used for the purpose intended.
Let’s compare the above approaches using these criteria:
Ad-Hoc Spreadsheets and Reports
Accessibility: By definition, this is not a universal process and will only be initiated by the ‘squeaky wheel’ vendors who make enough noise to the right people to get their own information. Everyone else will remain in the dark and opportunities will be lost.
Actionability: Because these reports are typically snapshots that are periodic in nature, it’s almost impossible to draw any conclusions about trends that require attention such as out-of-stocks or sales velocity.
Efficiency: This approach gets poor grades for efficiency on both sides of the ledger. Retailer personnel – whether it’s store-level staff or corporate merchants/buyers – have to take the time to run the report for each vendor that gets one. This takes time away from the customer in the case of store staff or in the case of a buyer, for example, completing their line review in time for the reset. On the vendor side, too much time is spent chasing down these reports, time that is better spent elsewhere.
EDI Data Sharing
Accessibility: EDI data sharing is not an option for retailers below a certain size, simply because they don’t use EDI. Even for larger retailers, there are many that don’t mandate the use of EDI with their vendors and EDI has subsequently not been adopted. Quality of the data will also vary across vendors depending on which EDI provider they are using. Data that is obtained is typically locked in spreadsheets and therefore not accessible when and where it is often needed most – on a mobile device when in store.
Actionability: EDI’s main function is to process transaction documents like orders, invoices and remittances between retailers and vendors. Accordingly, the information sharing functionality within EDI (e.g., EDI 852 report) is generally an afterthought which leads to sparsely populated reports and less than comprehensive data. If it only contains sales data, then inventory corrections cannot be pursued. If it’s only aggregated and not SKU level, then key store-level opportunities are missed.
Efficiency: The key problem with EDI data or EDI-driven spreadsheets lies in the amount of work and expense that vendors have to incur to turn it into something useful and understandable. It’s not unusual for vendor salespeople to build and maintain their own tracking spreadsheets to take in this weekly update and track how they’re doing against budget, for example. But this amount of manual manipulation takes away from the time needed to pull out the store-level, product-level account opportunities (assuming that data is there in the first place).
The largest vendors may have the large IT budget required to deploy a custom data warehouse and reporting tool that automates some of these activities, but those dollars can be better spent on customer and retailer programs that can drive sales. Similarly, an outsourced POS reporting service that repackages this data into ‘better’ spreadsheets is only minimally helpful as it still leaves a significant amount of data manipulation and interpretive work for vendor personnel despite the dollars spent on this service.
Accessibility: In theory, a web-based portal should be accessible to all vendors; however, quite often this is not the case. Within some retailers, these reporting databases are shared by both vendors and internal retailer users leading to a rationing of their availability to only the largest vendors. In other cases, vendors are required to buy portal-specific software seat licenses in order to interact with the data, licenses that cannot be leveraged across other retailer portals. Furthermore, because these portals were built before mobile computing on smartphones and tablets became ubiquitous, these portals are not accessible from a mobile device by vendor or retailer staff who need it to drive store-level execution improvements.
Actionability: Many vendor reporting portals only share forecasted demand information or aggregate product-level sales data. While at a high level this latter set of data is valuable from an overall market trending and production requirements perspective, it is less useful for the store-level optimization that drives the out-of-stock reductions and market-understanding analysis that data sharing is supposed to enable.
Efficiency: The same problems that plague EDI spreadsheet data – the massive data dump that can overwhelm a vendor – are seen here too, if not more so. Vendor reporting portals are notoriously difficult to work with. Archaic database queries with foreign syntax is the norm here. Not many sales and marketing professionals have training in database administration, but that’s what you need in order to pull useful data out of these systems.
And ‘pull’ is the operative word here. As opposed to automated spreadsheets that arrive in your inbox, salespeople have to manually log into the portal to get this information on a regular basis. Even if a vendor has dedicated analysts (or an outside firm) to do this, the time spent fetching, manipulating, and reformatting the data and then distributing static reports to others in the organization is not value-added.
One large, successful manufacturer that we’ve worked with has a process whereby they manually pull data from their largest retailers’ portals, dump it into their expensive ERP system, pull it out of this ERP system using another BI tool and then finally dump it from that tool into spreadsheet pivot tables. And despite all this effort and expense, these reports are only used by the production planning department, whereas the Sales team still has their own processes to manipulate and manage this same data.
On the retailer side, continually maintaining and upgrading this portal infrastructure along with training and supporting vendors who struggle to use it is a constant and expensive headache. For all these reasons, it is perhaps not surprising that retailers are increasingly seeing their vendor portals as something they need to replace with an alternative that costs less and delivers more value to their vendor base.
Towards a Better Solution (the Good)
While great strides have been made in sharing data in the retail supply chain, as outlined above, the tools that are in use today have in many cases held back vendors and retailers from maximizing value from these initiatives. When state-of-the-art tools are essentially web-enabled spreadsheets, there is much room for improvement.
Fortunately, the convergence of Big Data processing, cloud analytics and mobile technology has created a new option for retailers who are keen to realize the benefits of supply chain information sharing and collaboration without an internally managed, custom developed solution. These tools are characterized by universal accessibility to all vendors, insight-generating functionality like data visualizations and alerting that focuses a vendor’s attention on what’s most important, and mobile functionality that puts insights into the hands of sales professionals when they need it most.