Business Intelligence: Will It Improve Inventory?

By Brian P. Watson  |  Posted 05-14-2007

Business Intelligence: Will It Improve Inventory?

Weekend warriors and fitness fanatics alike canfind all their gear at Dick's Sporting Goods. But until the retailer revamped how it analyzes its product lines, building and tracking reports for sales and inventory took a marathoner's effort.

Until 2003, the company relied on merchandise management software that tracked inventory for its stores and distribution points. The software could compile sales figures for athletic gear and clothing into a report, but it couldn't aggregate and drill down, for instance, on how products were being sold and stored in different regions, according to Miles Mewherter, vice president of application development and enterprise reporting.

Beyond that, Dick's had no single repository where reports and figures were kept, says Mark Schroer, the chain's director of enterprise business intelligence and reporting. Instead, employees kept their own sales and inventory analyses, derived from the merchandising system, within their own business units and often on their own computers. There was no standard formatting of sales and inventory reports. And the company hadn't put in place any format for naming reports, so some were lost by the people who had created the reports because they couldn't remember the file names, Schroer says.

Still, employees insisted on using the system, shunning attempts by information-technology managers to push tools from Cognos, a maker of business intelligence software, which helps companies mine, analyze and report corporate data. "They were used to it," Mewherter says of the merchandising system. And since Dick's didn't set up a formal training program, users found it easy to ignore the new tools, he adds.

To move toward standardizing reports, the team at Dick's decided to build a data warehouse a single repository to store all of the company's sales and inventory statistics with an Oracle database. The chain then deployed business intelligence software from MicroStrategy to mine the warehouse and create standard reports displaying, among other things, how apparel and equipment were selling from store to store and in different regions across the country. At the same time, the company initiated a training program to promote user adoption. And to make sure users embraced the new system, Dick's got rid of the merchandising system and its reporting tools.

The company built the business intelligence and data warehouse system, Schroer says, with a key purpose in mind: "Our goal was to have it be the place to go, for anyone in the business, when they wanted information." How it got there, though, is a lesson for all companies and particularly mid-market firms looking to grow in change management, systems planning and, above all, finding the sweet spot in data analysis.

Gutting the Store

GUTTING THE STORE

Business intelligence software wasn't around at the retailer's humble beginnings, when Dick Stack, at the spry young age of 18, left his job at an upstate New York Army/Navy store in 1948 to open his own bait-and-tackle shop. According to company lore, Stack's former boss scoffed when the young employee suggested expanding the store's product line to include fishing supplies, telling the teen he'd "never make a good merchant."

Turns out the boss underestimated the entrepreneur. Nearly 60 years later, Stack's company now publicly traded and led by his son, Edward offers everything from cricket bats to yoga mats across the U.S. The chain now boasts 268 stores in 34 states, with $3.11 billion in revenue in the 2006 fiscal year.

But as Dick's grew, it needed a game plan for analyzing how it inventoried and sold its various product lines.

Back in 2003, the company had some basic reporting tools included in a merchandising system from STS, a specialty vendor acquired in December 2000 by the U.K.-based NSB Group, a competitor in the retail software market.

While acknowledging that the STS system is not primarily a reporting system, Schroer says it took too long to create reports. Gathering data to run a report required several steps, he says. To start, an employee had to go to a computer connected to a Microsoft Access database, where financial reports and statistics were stored. Once there, the employee had to define the specific data he wanted for instance, how batting gloves were selling in the stores.

Then the system sent that data through a Unix server to the employee's personal computer, where it had to be downloaded into an Access database or Microsoft Excel spreadsheet and checked for accuracy. If the employee needed another data set, he had to start all over again.

The entire process, on average, took up to an hour, Schroer says. But for more complex analysis for instance, incorporating separate data sets, like how those batting gloves were selling in off-season months, or what regions sold more that could stretch several times over. Beyond that, though, the quality of the data in those reports was questionable. Since there was no warehouse storing all the company's statistics, there was no telling whether the data sources used to create a report were accurate, Mewherter says.

Dick's had deployed some business intelligence tools, including Cognos Business Intelligence Series 7, as well as Crystal Reports (a product of Business Objects) and Brio (now owned by Hyperion, which was bought in April by Oracle). But users never embraced the software.

Mewherter says it was an internal issue namely, the absence of a training program and not technological blips that forced out Cognos, Crystal Reports and Brio. "We had tools that were being poorly used because we hadn't trained people well," he says. That led employees to think the Cognos tools didn't work.

Part of the problem was that users weren't included in mapping out how Dick's would use the software to mine data and create reports, Schroer says. The dismissal by users meant going back to the drawing board. "Instead of taking what we had with Cognos, which in their mind was a failed package, we decided to go through the whole process again," he says.

That effort began with the data warehouse. Under Mewherter, Dick's built the warehouse on an Oracle 8i database, with customized capabilities to extract data, transform it to meet business requirements and load it into the warehouse. (They've since upgraded to 9i and were moving to 10g at press time.)

Building Adoption

BUILDING ADOPTION

Then Dick's set up a bake-off between business intelligence vendors. "We said, 'Let's involve business users and do the whole selection process the way it should have been done all along,'" Schroer says.

Mewherter and Schroer agreed that MicroStrategy's flexibility along with its experience with retailers put the software over the top of other big-name competitors, like Cognos, Brio and Business Objects, who were also brought in for testing.

The vendor's technology, in fact, does set it apart from the competition. MicroStrategy uses relational online analytical processing, or ROLAP, which works directly with a relational database. The MicroStrategy server sits between the user and the relational database that powers the data warehouse and calculates data based on the dimensions the employee prescribes; it thus changes the relational data into multidimensional data, or data combined from various sources, according to Boris Evelson, principal analyst for business intelligence with Forrester Research. MicroStrategy is the only large ROLAP vendor today, Evelson says, though Business Objects and Microsoft have experimented with the technology.

Right out of the box, Schroer saw improvements in how users created reports. Since MicroStrategy interfaces directly with the data warehouse, employees no longer had to download figures or statistics to their computers, as they did with the STS system.

MicroStrategy allows Dick's to create two types of reports: "canned" and "self-service." For "canned" reports, the team analyzed thousands of reports created via the STS system taking into account the specific needs of each business unit, based on their past reporting experience and winnowed them down to templates. Those templates were organized around business functions like ordering and receiving or sales and margin analysis. Users could then narrow the focus by region, department or product, Mewherter says. Dick's went from more than 2,000 reports derived from STS to about 200 on MicroStrategy. The chain has since cut that to 50 since upgrading to the latest version, MicroStrategy 8, Schroer says.

Customization became a big plus for users, he points out. Instead of going back into the system to add levels of granularity, the MicroStrategy tool lets users expand their options. For instance, if an analyst wants to examine how one store's sales stacked up against others in the district, or how that district compared with the entire chain, he can add those fields right into the report. Before, he had to locate reports, plug in the data and then re-run the report. That was one of the scenarios Schroer says took hours. With MicroStrategy, in most cases, the same task takes less than five minutes, because the figures and statistics all come from the data warehouse instead of being scattered in different databases.

The vendor also offers a "self-service" report tool that walks users through a series of prompts, asking them which elements they'd like to include. For example, the tool might ask the employee if he wants to track sales of a specific item, by its style or color, at a range of stores. "It's really looking at the elements available and seeing if that's what you want," Schroer says.

Still, even after all that effort, the team watched as users retreated to STS, for no other reason than a high comfort level with the system's tools, despite requiring more steps and time. "The difficulty we had was that it was too easy for them to go back to the old way of doing things," he explains.

Initially, the team tried to find managers with influence in departments like allocation, planning, procurement, replenishment and store operations to use and promote the software to their teams. "You can't involve everyone," Schroer says. "But you have that person help in the design, and they can go back to their area and say, 'Look at all the things this can do.'"

Still, the plan had only marginal success, he says: Only about 25 employees became users. But the team at Dick's anticipated a bit of an uphill battle, since they had both systems implemented at once. So, right as they finished deploying the software, Mewherter, Schroer and company launched a computer-based training program for the MicroStrategy software. Employees got at least three hours of instruction on how to create, customize and run reports, Schroer says.

As they learned the new system, Dick's, as planned, began phasing out the STS system and implementing new JDA merchandise management software. "That forced adoption," Schroer says, noting that the number of users on the MicroStrategy system jumped tenfold, from about 25 to 250, in less than a year. They've since added at least 50 more users, he says.

Dick's would not reveal how much it paid for MicroStrategy's suite or any estimated return on investment. (Both Mewherter and Schroer say that management has never requested one.) But recent financial results show that Dick's has improved its operations while boosting revenue.

Earnings have more than doubled since the business intelligence initiative began, according to regulatory filings. In the fiscal year ended Jan. 31, 2004, Dick's pulled in $1.47 billion in net sales. In the most recent annual filing, for the year ended Feb. 3, 2007, the company reported $3.11 billion in revenue.

And Dick's operating income has grown year over year by at least 20% since going with MicroStrategy. In the 2005 fiscal year the first full year since the deployment operating income rose 28%, to $110.87 million, from $86.33 million the previous year. In its most recent filing, Dick's reported a whopping 49% jump, approaching $200 million in the 2006 fiscal year.

Instead of drawing a direct line between the business intelligence project and the company's operational improvements, Mewherter calls the initiative an "enabler" a system that helps users fine-tune their reports. "Rather than saying here's Mike's purchase order reports and Betsy's purchase order reports, now we have one report that users can customize and make their own," Mewherter says. "That's business intelligence."

Smooth Operator

Dick's Sporting Goods: Smooth Operator

In 2003, the national retailer deployed business intelligence software to improve operations by better analzying the way it sold and stored items across its stores. Since then, the company's annual operating margins have bested the average of its top competitors.

Dick

's Sporting Goods Base Case">Dick's Sporting Goods Base Case

Company: DICK'S SPORTING GOODS

Headquarters: 300 Industry Drive, RIDC Park W., Pittsburgh, PA 15275

Phone Number: (724) 273-3400

URL: www.dickssportinggoods.com

Business: Sells athletic equipment and apparel in 268 stores in 34 states. In February, Dick's acquired Golf Galaxy, a specialty retail chain with 65 stores and $274.7 million in sales.

Financials for 53-week fiscal year ended Feb. 3, 2007: Revenue of $3.1 billion, an increase of 18.7% over the previous 52-week year; net income of $112.6 million, an increase of 54.3%.

VP, Application Development and Enterprise Reporting: Miles Mewherter

Director, Enterprise Business Intelligence and Reportin: Mark Schroer

Challenge: Upgrade data analysis and reporting capabilities—and get employees to come along for the ride.

Baseline Goals:

  • Gather thousands of disparate inventory and merchandise reports into a single data warehouse, with a single business intelligence tool to mine it.
  • Reduce the number of available reports by 50% or more.
  • Cut the time it takes to build an ad-hoc or customized report from at least an hour to a matter of minutes.