Retailers are seeing significant results from their big investments in decision-support software, several told SN.
Decision-support software has been in use at headquarters for a long time, but because of the difficulties in managing vast amounts of data, which retailers can't always be sure is correct, retailers don't always find the benefit they are looking for.
Daily duties, managing crises or dealing with promotional announcements often preclude managers from using the analytic capabilities decision-support software offers. The answer to this dilemma is an integrated rules-based system that handles data as it is produced from all points along the entire demand chain, and generates forecasting and financial elements. These might include activities such as pricing or in-store promotion.
With the focus on resolving Y2K issues a fading memory, a number of retailers are expecting to invest in decision-support software and data-warehousing technology to extend their current data-warehouse environment. "We keep upgrading systems to maximize our processing speed," said Marv Imus, vice president and owner of Paw Paw Shopping Center, Paw Paw, Mich. "Also, we are making ongoing investments in software development to use newer OS upgrade improvement and to make implementations in data-mining requests."
Another retailer, who has been using decision-support software for some time, told SN that he expects to make a second investment of $1 million to extend the company's current data-warehousing environment. "To date, our DSS capabilities at the store level have been implemented primarily as data marts. Specific uses include customer loyalty, product movement and pricing analysis. Product and pricing were part of a larger system that integrates many operational store functions, such as purchasing and price. Use of the system helped us gain support and desire at the store level."
Ease of use is a primary requirement when selecting software products. "We evaluated over 20 products and decided on Brio Query from Brio Technologies [Santa Clara, Calif.]," said Elisa McKinnon, database manager of Spartan Stores, Grand Rapids, Mich. "Our end-user community loves the user-friendly features of Brio Query. Keeping things simple interface-wise makes everything so much easier. This includes not only more willingness by end-users to apply the technology, but also simplifies installation and support of the DSS environment by IT associates."
At the top tier of management, DSS makes it possible to link category-management data and customer-loyalty program data but, as Imus put it, "The difficulty is in the amount of data and the time frame used and the comparison set. The software does not make decisions, we still have to interpret the output and there is no standard of measurement. But results have been extremely exciting in an environment of consumer-driven item management."
A top priority is security of customer data. "Only one person at the top of our organization has access to all the consumer data," Imus said.
Levels Food Center, Fort Worth, Texas, started using DSS software just 18 months ago and, subsequently, gross margins have increased by about 0.3% on sales, said Jim Level, vice president.
He said it took about 14 months for returns to cover the initial investment in HQPM (Head Quarter's Price Manager) software from TCI (Total Control Information), Tucson, Ariz.
"The supplier for our eight stores sends an electronic file to us each week with all the cost and allowance changes and new and deleted items," Level explained. "All we are interested in is the cost. We pick that up and put it into our HQPM. We then go through and set the parameters. You can drill down to department, sub-department and item level. We transmit the same file to each of our stores, and we can tailor it to reflect each one's location or even an item in each location."
The DSS has led to substantial savings on pricing costs alone, as well as allowing for careful manipulation of in-store promotions: "We are able to bring in some things that we think really make a difference. We're prepared to add to the manufacturer's allowance and that gives a better price image but without really giving anything away," Level said.
In connection with labor savings generated by Levels' DSS, some employees have been reallocated to price verification, thereby achieving even more accuracy and higher productivity, he said.
Other retailers are only beginning to explore the possibilities of DSS.
"We are very new at this, we went live only about six weeks ago," said Ken Pink, vice president of information systems at Harmons, West Valley City, Utah. "Initially, we are only doing this from pricing-systems and category-management perspectives, but not customer loyalty. In our geographical area, there's been a noticeable backlash against customer-loyalty programs. Since it's pretty early, it's hard to separate out causes at this point. But we've seen some small changes in margin management."
The better understanding retailers have of the items and prices that their best customers are interested in, the better their response is and the less likely it is that the customers will shop elsewhere.
One source close to the DSS software business told SN that dealing with Y2K issues let retailers see what an enormous systems opportunity exists to integrate infrastructure and communications. As a result, many are taking a two-step approach: bringing headquarters under control, then adding in stores.
Initially, this enables managers to provide more real-time information to store managers and head clerks, the source said. The cost of a centralized client server can now be in the $30,000 to $50,000 range. Since a large number of people can access a server without affecting its performance, there is a high degree of flexibility in accessing the resources.
The dramatic drop in the cost of storing and processing data has combined with rapid improvements in the capability of relatively small computers to move around massive amounts of data that is rich in content. Data from multiple locations can be transformed into a highly structured database -- in some cases of more than 2,000 fields -- to which the retailer's rules are applied, according to the source.
Rather than simply generating reports, such integration results in usable information, letting the retailers know, for instance, what item is going to run out in which store in so many days and what the range of possible actions is. The retail strategy can then be translated into automated action to point-of-sale and labeling functions, resulting in better consistency and fewer errors and eliminating 70% to 80% of pricing work, the source said.
"We see our competition being able to make finer category-level and line-level pricing rather than at the department level," said Ken Pink. "We are hoping the DSS will let us manage what we've always known we had to manage, only at a finer level and in a more timely manner."
Retailers told SN that their investment in decision-support software and data-warehousing technology has led to numerous store-level benefits such as improved product analysis (lower credits, less damage, improved mix, identification of slow movers, identification of top profit items, improved purchasing process), improved vendor analysis (increased incentive moneys, more accurate vendor item movement), and improved consumer marketing efforts.
As for the future of DSS, some retailers are looking to link pricing and in-store promotions to movements over a year's time and over a full range of items.