Optimizing Retail Inventory using Predictive Analytics How Data Analytics is Impacting Supply Chain Management Fred Jezouit Vice President of Finance & Treasurer Southern States Cooperative, Inc. @SouthernStates Business Leadership track March 7, 2013 1:15 – 2:00 pm
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Optimizing Retail Inventory using Predictive Analytics How Data Analytics is Impacting Supply Chain Management Fred Jezouit Vice President of Finance & Treasurer Southern States Cooperative, Inc. @SouthernStates
Business Leadership track March 7, 2013 1:15 – 2:00 pm
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Who is Southern States? • Agricultural cooperative founded in 1923 • East coast from Florida to Maine • 2,400 employees, $2.3 billion in annual sales
Introduction to Southern States
Complex and Diverse Business Model • 140 owned Retail locations — Over 1000 retail distribution points including dealer network (Agway)
• Four Wholesale Divisions — Feed – 8 feed mills — Crops – 17 facilities managing fertilizer, seed and crop protectants — Petroleum – 10th largest propane retailer in US — Farm & Home – 3 distribution centers
We Help People Grow Things
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Data Mining – Significant Potential • Most of 300,000 customers purchase on an account
• Wide variety of third party demographic data and customer insights
• Numerous infrastructure and process improvement opportunities
Opportunities…and Challenges
Obstacles We Face • Cultural awakening on how we measure and evaluate our business
• Limited functionality within certain information systems in place today
• Prioritizing projects and available resources
• No two retail locations are the same – different sizes, markets and products – decentralized decision-making
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Impact of Alteryx Felt Across the Company • Customer segmentation
• Financial variance analysis – sales, margins, unit volumes down to customer level – complete overhaul of operational metrics
18 Short Months – Alteryx is a Game-Changer
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Multi-Faceted Project • Data-mining provided valuable insights into performance and business rules resulting in
significant cultural and operational changes
• Initial focus is on our farm & home, animal health and packaged crop protectant products
• Emphasis on two specific areas of improvement
• Slow Moving Inventory (SMI) — Global initiative to reduce inventory and positively impact working capital at wholesale and retail
— Identify root causes of SMI and implement business rules
— Strategy to monetize excess inventory
— Set stage for transition to centralized inventory management
— Implement ongoing reporting structure to ensure achievement of goals and compliance with business rules
Supply Chain Improvement
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Multi-Faceted Project Continued
• RIGHT inventory at the RIGHT stores at the RIGHT time — Given limited showroom capacity, clean-up SMI to allow space for appropriate seasonal inventory
— Insight into seasonality
— Establish product start / stop dates for seasonal products
— Drive exit strategies
— Evaluate minimum / maximum stocking levels
— Forecasting to determine stocking levels and drive inventory purchasing decisions
— Lost sales due to outages analysis
Supply Chain Improvement
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Reporting Capabilities Shed New Light on Inventory Management • Slow moving defined as “dead”, no sales in last 12 months
or inventory in excess of 12 months sales
Magnitude of the Challenge – Attention Grabber
• Symptomatic of open purchasing rules for retail locations – business rules now in place — Accumulate order requirements across all retail locations — Expectations established for SMI management and reporting developed to
ensure compliance
RETAIL Total SKUs Slow Moving Crop Protectant Products 13,361 4,476 34% Farm & Home + Animal Health 165,690 54,400 33%
WHOLESALE Total SKUs Slow Moving Crop Protectant Products 2,377 716 30% Farm & Home + Animal Health 24,568 6,841 28%
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Multiple Initiatives to Reduce Inventory – Global and Local • Changed behavior from the store manager
all the way through buying group
• Dead and excess reports by store, by SKU delivered to operations personnel
• Ability to identify nearest retail location to move excess inventory
• Impacted buying decisions immediately – working with suppliers
• Clearance sales at retail locations
• Centralized liquidation effort in process, completed in spring
SMI Reporting Drives Action
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Still Early In Process – Benefits Already Realized
Impact on Inventory
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2011
2012
Inve
ntor
y on
Han
d
Total Inventory Farm & Home,
Animal Health & Crop Protectants
Retail division maintaining sales
with 31% less inventory
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Learning Process for Buyers and Retail Operations
Right Inventory at the Right Time
• Needed better understanding of seasonality of products – many products kept on shelves year round
• Developed quick view of sales at the SKU level – used to drive entry/exit timing
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Needed to Provide Greater Visibility Into Inventory Requirements
Ensure Products In Stock for Spring Season
• Expected sales compared to inventory on hand • Identify replacement SKUs • Incorporate marketing efforts – products included in circular advertisement
SKU and Item Description
Day 1-30 Avg
Units
Day 31-60 Avg
Units
60 Days Units
60 Day Sales $ Total Inv On-Hand On-Order
Days to Sell
Current Inv
Past Fut Circ Circ Inactive repl_SKU DO WHSE
02142803 – SS PREMIUM TURF FESCUE 20 LB (BG) 40 193 223 $ 8,904 1 1 0 60 X X 02142804 X X
02142783 – SOUTHERN STATES TALL FESCUE 20 (BG) 79 495 574 $12,030 777 777 0 60 X 02142804
• Restructuring of business rules around inventory management at retail and wholesale
• Actionable data delivered to multiple operating units to improve inventory management
• Greater insight into seasonality, impacting timing of delivery of seasonal products
• More accurate sales forecasting, tied to inventory levels, to ensure in-stock positions – driver of sales
• Reduction in inventory levels – impact on working capital and debt levels
• Facilitated transition to centralized inventory management – 20 stores now in centralized pilot program
• Most important – cultural shift in use of information to improve our business – less decisions based upon gut feelings, more based upon analysis of the business
Thank You!
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Fred Jezouit Vice President of Finance & Treasurer