SOURCE: NEWYORK TIMES SINGAPORE
HOW well is your business performing, and what adjustments can be made — right now — to improve its fortunes?
Chances are the answers are swirling around in the many computer systems that track your company’s finances, inventory, payroll and sales activity. The hard part is collecting and making sense of the bits of information.
Now some retailers, frustrated after years of using big, expensive software projects that promised to answer every question but were too complex to answer the simple ones, are taking a more measured approach, using so-called performance management software.
The Casual Male Retail Group, which sells clothing for big and tall men, adjusts its wholesale orders weekly to balance its assortment of styles, sizes and colors. This minimizes the number of items it has to sell at a discount.
That is an especially difficult task for a retailer like Casual Male, based in Canton, Mass., which has many more sizes to manage than a typical retailer.
“We have 49 sizes of a pair of pants, starting at 40 up to 70, and all the inseams in between,” said Dennis R. Hernreich, the company’s chief financial officer. “No one does that.”
Mr. Hernreich said that the company started using performance management software in 2003. The software looks for relationships among bits of data stored in the company’s many old mainframe systems and generates reports any business manager can read.
This makes it much easier to spot trends that might otherwise remain hidden in the various systems that track things like sales volume, prices and orders, Mr. Hernreich said. It also enables the company to adjust its advertising programs, ordering patterns or employee schedules during the seasonal sales cycle rather than wait and hope that its projections were right.
For example, if Casual Male’s merchandisers notice that gray cable-knit sweaters are selling well in one region but slowly in another, they can shift most of the next shipment of the sweaters to the better-selling stores. Previously, both regions would receive the same “prepack” orders throughout the season, possibly leading to shortages and gluts of items.
Mr. Hernreich said that making such adjustments in the Web and catalog business had increased the company’s gross margins about 5 percent, or $1.5 million. He said he expected that number to climb as those same abilities are applied to the company’s roughly 500 stores over the next few months.
The gradual approach is a departure from the sweeping “business intelligence” projects that were popular early this decade, when many organizations hired armies of consultants for multiyear analysis projects costing millions of dollars. Often the goal was to rebuild a company’s databases from scratch and consolidate many of them into one. The dream was to form a complete picture of a business, with the ability to drill down in fine detail.
By contrast, Casual Male has paid its software vendors, Oco, in Waltham, Mass., and QuantiSense, in Acworth, Ga., a few hundred thousand dollars each for its first two data-analysis projects, as well as a monthly fee of several thousand dollars each. The setup time for these projects is also economical, measured in weeks, not years.
“ ‘Performance management’ says you can’t solve everything at once,” said Lee Geishecker, a vice president at AMR Research in Boston.
Retailers, particularly those selling clothing or food, are paving the way because many are being bought out and restructured, and their new owners are insisting on quick turnarounds, Ms. Geishecker said. Such was the case in 2002, when Mr. Hernreich’s company, Designs Inc., which operated a chain of outlet stores, acquired Casual Male, and he was assigned to help revamp it.
Many retailers are also saddled with dozens if not hundreds of old databases that only a few people can gain access to, one database at a time. Performance management software can combine information from many databases and create reports for employees directly over the Web.
Anchor Blue, which operates about 250 stores, including Levi’s and Dockers outlets, uses software from SeaTab Software of Bellevue, Wash., to distribute reports to clients as varied as finance managers, buyers and store managers. It took two weeks to set up.
With employees in various departments scrutinizing the company’s performance from different points of view, better decisions can be made, said Harrison Kang, Anchor Blue’s information technology director.
“The retail business, it changes on a dime, every day,” he said. “To be able to handle those changes and business initiatives coming up, you need information to make the correct decisions.”
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