NUS Business School AY18/19 Analytics @ Work of BMS5205 ...

FRUITLANDPRODUCT DISPLAY OPTIMISATION

By Team 2: Li Yilin | Mai Pham | Mauricio Moreno | Sabhya Kumar

NUS Business School AY18/19Analytics @ Work of BMS5205

AGENDA

1. Background

2. Analysis

3. Key Takeaways

4. Implementability

5. Conclusion

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▸ Effective application of Solver to optimize profit at a fruit store.

▸ The impact i.e. increase in profit margin from 34% to 41% is commendable and in line with gains typically accrued from the development of an optimisation worksheet.

▸ Verdict: The planogram example we discussed early in the course has inspired this project. I hope more of the Analytics we have covered will inspire you to more fruitful applications at the Workplace and in the pursuit of life.

▸ All the BEST on the journey ahead.

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To apply analytical tools to help a young entrepreneur tasked with improving sales and reducing cost

BACKGROUND

To identify top products with the highest profit margins (Pivot)

To optimise the product display frequency (Solver)

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WHY

HOW

WHAT

FruitLand is facing issues of decreasing sales and high scrapping cost

JAS Sales Data & Shopper psychologyTo provide a comprehensive analysis with key takeaways for the entrepreneur to apply on his daily operations straightaway

▸ Fruit Store cum Coffee Shop located

in the expatriates’ area with high

traffic and spending power

▸ Faces issue of high scrapping cost

(~10% of revenue) due to:

▹ Complex storage time

▹ Inadequate focus on the top

selling products

BACKGROUND5

FruitLand is facing issues of decreasing sales and high scrapping cost

ANALYSIS - PIVOT TABLE6

Pivot Table: summary of all the sales transactions in JAS ‘18

▸ The products with the highest sales quantity are not the same as the products bringing the highest profit, e.g. Cherries versus Coconut in July▹ Top sellers: Apple, Cherries, Grapes (July and August) and Avocado (September)▹ Important factor of seasonality and long term partnership with suppliers

ANALYSIS - PIVOT TABLE

Top Products with the highest profit margin and contributing profit in JAS

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▸ Local fruits have the highest profit margin yet imported fruits have the highest sales▹ Top products with the highest profit margin: Jackfruit, Papaya, Mango & Avocado▹ Top products contributing to the store’s profits: Apple, Cherries, Grape, Plum & Orange

ANALYSIS - SOLVER8

Refrigerator Section Display Problem

▸ In the store, the refrigerators have a total of 10

display compartments. There are 16 types of

fruits that need refrigeration.

▸ The store owner lacks a systematic decision-

making process to select which fruits to

display.

▹ Display not well planned; often leads to

scrapping (fruits have maximum storage time)

▹ Current display does not maximise seller’s profit

ANALYSIS - SOLVER9

Refrigerator Display Strategy for Cost Reduction & Profit Maximisation

Assumptions

1. Customers’ purchase decisions are affected by the display

1. Strategy in a 30 day month

1. One type of fruit only needs to be display in one compartment

1. One compartment can only have one fruit type

Top

Stretch

Eye

Hand

Bottom

LEFT RIGHT

Top

Stretch

Eye

Hand

Bottom

4 Days

5 Days

7 Days

14 Days

30 Days

Coconut → TopGrape → StretchApple → Eye

7 ≤ Display Days ≤ 30

ANALYSIS - SOLVER10

Refrigerator Display Strategy for Cost Reduction & Profit Maximisation

Quarter Profit Margin

33.8%

Display Weighted Avg. Profit Margin

40.8%

KEY TAKEAWAY #1 - Pivot Table Analysis11

Profit Margin & Sales Quantity:

▸ The fruits with the highest quantity in sales do not have the highest profit margins; local fruits

have the biggest margins but imported fruits have the highest sales

▸ The top sales are from Apples, Cherries and Grapes in July and August and from Avocado in

September

▸ Jackfruit, Papaya, Mango and Avocado have the highest profit margins while the biggest

contributors to store profits are Apples, Cherries, Grapes, Plums and Oranges

Implications:

▸ The month based differences in sales may be attributed to the seasonal nature of fruits and

high sensitivity to natural conditions; additionally, expats may favour fruits from overseas

▸ Profit figures will be critical inputs to our shelving model; continued monitoring of these figures

is essential

KEY TAKEAWAYS #2 - Solver12

Solver Decision Criteria:

▸ Profit Margin

▸ Shelving specification

*Persistent when varying the minimum display days requirement (</= 8 days)

Interpreting the Numbers:

The allocation to each compartment

serves as a reminder for the owner to

check for expiry date, if the fruit is

displayed in a continuous manner.

▸ E.g. in the case of strawberries

Flexible Strategy:

▸ Shelf level differentiation is only made for certain types of fruits. For others, it is possible to switch compartments as

long as there is a matching period (i.e. if the owner prefers not to change the positioning)

▸ Considerations are only by compartments, therefore, if there is extra space in one compartment after all has been

displayed, additional displays of other seasonal fruits can be done

IMPLEMENTABILITY FROM KEY TAKEAWAY #01 13

Display top selling products or products with high profit margin at Eye Level.

Adjust the positions of products with lower profit margin at Stretch/Hand or Upper/Bottom level accordingly. E.g. Display Blueberries 1 week at Stretch and 1 week at Hand level.

59%

100%

92%

Step 1

Adjust and Experiment FruitLand’s Planogram to improve profit

Keep track of the sales record during the experimentation to identify the shelf level impact on sales. E.g. Display Blueberries 1 week at Stretch and 1 week at Hand level.

Assign compartments to specific types of fruits according to demand trends while optimising the use of the remaining compartments.

Step 2

Step 3

IMPLEMENTABILITY FROM KEY TAKEAWAY #02 14

● In the long-term this shelving strategy can be replicated in other areas ofthe store to strategically place second tier products.

Current profit margin: 34%

Current total profit: VND 310 M

Max profit margin: 41%

Max total profit: VND 376 M

● Increase intake of high-profit-margin fruits instead of high-storage-time fruits.

● Execute promotional programmes to increase sales of profitableones → Improve profit margin in the long run.

Low-Hanging Fruit Display Strategy to Reduce Wastage and Maximise Profit

+21%Profit!

CONCLUSION

Next Steps1. Would recommend

Fruitland estimate market demand for its fruits; would allow consideration of demand before optimizing shelf space

2. Adjust and experiment with the Planogram to utilise the shelf level impact and increase sales as a result

Limitations1. Products with high profit

margins are not necessarily the best selling products.

2. Demand figures and fridge’s capacity information was unavailable for this analysis.

3. Profit margin per product fluctuates from month to month.

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Process1. Strategized on the

intake level for products with high and low profit margins

2. Ensured a full refrigerated display at all times to maximize weighted average profit margin to 40%, subject to logistical storage considerations

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THANK YOU!Any questions?