How BI facilitates a decision-making process that saves millions
At the core of every business decision is the desire to drive value for the company – whether that’s increased sales, higher margins, elevated profits, or return on investment. Decision makers should use all the resources at their disposal to drive this value, including their business intelligence software, which may include guided analytics (i.e. dashboards), ad-hoc analysis and collaboration capabilities that contribute to informed decision-making. Today I’ll explore how BI software facilitates decisions in a retail scenario. But this article isn’t just for retailers – anyone can extrapolate this information to their business to see how BI can provide concrete ROI.
arcplan serves a number of customers in the retail industry, including two of the largest grocery chains in the United States. Retailers are well-known for the small net revenue margins – on average, 3% across the globe for all types of retailers – which pose significant challenges on process controls and efficiency in supply chain decisions. One of the key areas of interest for all retailers, especially grocery chains, is the reduction of shrink – the loss of inventory due to product spoilage, waste, theft and other causes. It’s estimated to account for 2-3% of overall sales. Perishable shrink even goes up to 5% within a typical grocery chain. So for one of our customers, whose revenue reached $6.25 billion in 2012, a reduction in shrink of just 0.1% means $6.2 million to their bottom line.
So a simple question that would catalyze a decision-making process at this grocery chain might be: How can BI help reduce my shrink by 0.1% while balancing availability of goods and customer satisfaction? They would want to meet high customer expectations without over-ordering, which leads to shrink through spoilage.