A vendor to a large home improvement retailer called Friday, and asked a very simple question: “What can the EDI 852 data our retail customer is sending us tell us about our business?”
This is a great question and one we hear often. It’s worth exploring for a few minutes. Here are six things your EDI 852 data can tell you about your business.
(1) At a store level, what items are out of stock or will go out of stock soon. The key measure here is units on hand. By isolating each of your items at a store level and applying filtering for your desired min/max inventory position, you can quickly determine where the problems exist. We recommend you also calculate an average units sold based on a reasonable time frame for your business (last 4 weeks or last 8 weeks) and then use this to calculate inventory weeks supply on-hand. If your products move very quickly, convert this to days supply on-hand. The weeks/days supply on-hand is a predictive indicator that will alert you to trouble while you still have time to take action.
(2) At a store level, what items are overstocked. The key measure here is also units on-hand, but again, the weeks or days supply is very helpful in identifying an overstock situation.
(3) Top selling items. The key measure here is units sold. Isolate one item at a store by store level and then filter the top items by units sold. e.g. top 10 items or top 25 items. We also recommend calculating sell-thru for each of your items. Sell-thru is a composite measure that shows sales and inventory in one metric. Sell-thru is very useful as a filter for top selling items. Maybe more useful than simple units sold.
(4) Poor selling items. This is essentially the same as #3 but simply a reverse on the filter.
(5) Period over period comparisons. We encourage vendors to save all EDI 852 files for at least 18 months. This provides a great opportunity to compare sales and inventory for similar periods and gain an understanding of how to adjust your inventory min/max. (e.g. sales for week 3 2006 vs. week 3 2007)
(6) Regional comparisons. Isolating item sales and on-hand by geographic regions can provide very useful insight. Especially with store level detail that includes zip code and major metro descriptions. Most retailers provide a detailed store list with a hierarchy by region, state, city and zip. Some retailers will also provide rich demographic information, which can be integrated into this analysis.
Most EDI 852 data arrives with only a couple very basic measures for units on-hand and units sold. By extending these units and calculating weeks supply and sell-thru, you can learn a great deal about your business. The coaching we provided to this vendor also included this advise – if you are spending more than 10 minutes manipulating data, it’s too long. Engage an outsourced service to do the EDI 852 translation, database storage and number crunching. Focus your team on the analysis activities and engaging with the retail buyers to improve your business.
Related posts
