BI in the retail sector: a transformational asset

As a transformational asset, business intelligence (BI) can provide organisations with decision-making power, eliminating the need for thumb-sucks, and enhancing communication and planning abilities across the organisation.

Nowhere is this more applicable than in the retail sector. Chris O'Connell, COO at Knowledge Integration Dynamics (KID), looks at some of the challenges facing this sector, and at the ways in which BI solutions are tackling these.

It is increasingly common for retailers to provide their partners with visibility into inventory levels, performance metrics and other supply chain data to collaborate in developing efficiency improvements. BI technical requirements have to address such business imperatives as:

* Security and user/role-defined access to the warehouse
* Data freshness and common metadata definitions
* Benchmarks and performance targets

While less revolutionary than some of the changes rippling through the telecommunications and financial services markets, the changes rumbling through the retail sector are evolutionary and demand greater flexibility and analytical power from BI solutions than the sector required in the past. These include:

* Increased merchandising efficiency
* One-to-one marketing
* Promotion analyses
* Supply chain collaboration

Retailers are applying great effort to squeeze higher margins out of better category management and are seeking ways to leverage insight from the new data available to provide customised offers. Retail organisations require increased analytical rigour on promotional activities with the intention of boosting margins, and they are enlisting the help of suppliers to reduce supply chain costs. Retailers are steadily expanding beyond sales and merchandising and financial data, their traditional sources of information for retailers. Rather, they are beginning to pull from a variety of new source systems, including supply chain data and customer-specific data, to give them a more comprehensive view of their cost structures and areas of potential profitability.

Leading retailers are also beginning to open some of their BI systems to vendors, enlisting them to help wring costs out of the supply chain. This allows partners, suppliers and vendors to contribute to an overall improvement in cost-effectiveness and efficiency.

Retailers must balance a complex set of business parameters - including product mix, pricing, inventory levels, labour levels and marketing expenditure, to name a few - over the long term, through periods of economic growth and downturn. Faced with aggressive competition, rising marketing costs and slim margins, retail companies must leverage BI solutions that provide them with the ability to define, track and respond to the essential business parameters that are critical to running a retail enterprise.

A solid BI platform can help retailers ensure success in maintaining this balance, by improving visibility and analysis of classic retail challenges such as: how to improve product movement through the stores, increase sales per square foot and improve management of the upstream supply chain. A successful BI solution will also allow retailers to use data from existing transactional IT systems, including point of sale (POS) and enterprise resource planning (ERP), to provide a comprehensive view on the entire business.

Enhanced analysis of transaction-level and customer data allows retail decision-makers to uncover trends in customer buying patterns, more effectively track inventory levels and ensure that the right products are available to their customers at the right time.

With the array of challenges affecting the retail industry, customers are demanding BI solutions that address industry-specific needs. And retail is not alone: manufacturing, healthcare, pharmaceuticals, government and hospitality to name a few more, all grapple with their own, unique challenges and pressures that they are increasingly looking to BI platforms to help them address. BI providers must be able to understand these industries' visions, business processes, regulatory and competitive environments, and the compelling needs of their information customers.

All industries seek solutions that enable more rigorous analyses on larger data sets than in the past. The technology is important, but the relevance of the technology to an industry's environment is just as crucial. BI customers are choosing solutions that provide next-generation level reporting and they will prefer BI vendors with targeted industry savvy and experience to those selling mere technology.

Organisations that assess their information needs, and then develop an enterprise information strategy will be best positioned to leverage BI as a transformational asset. A BI platform can turn the key to enable an information strategy that addresses internal and external information customers and helps a company cope successfully with its own, industry-specific challenges.