Use business intelligence to make better decisions - Guest Column - Column

DSN Retailing Today, Jan 6, 2003 by Tim Loving

Information is the key to competitive advantage in today's business world, and nowhere is this truer than in retailing. At each of its locations, a retailer will deal with large numbers of customers every day, each buying different products.

This sales data is collected and used for administrative and practical reasons--to manage inventory, to prepare financial statements, to reward sales staff. But, effective use of information technology will enable the retailer to turn this sales data into knowledge, and to use this knowledge to make informed business decisions. Decisions such as which products to stock at which stores, when discounts should be offered on certain product lines and which sales people should be encouraged to sell which products.

Long before computers became available, retailers used information about sales and customers to make their businesses more successful. Today, the owner or manager of a single store selling a relatively small number of products to a known customer base can collate enough relevant sales information in his head to make profitable decisions.

But for the vast majority of retailers today, there are simply too many transactions taking place to form anything other than the most basic "gut feel." And, in an increasingly competitive retail environment, making crucial decisions on instinct alone is almost certain to lead to business failure.

Most retailers are now adept at using POS systems to capture their sales data effectively and efficiently. However, few turn this data into information to support decision-making. One problem is what happens to the data after it is initially captured. Generally, it is stored in the company's back-end accounting system database. And, because of the way this data is is stored in most databases, it is not a simple or timely process to find out specific details, such as what sort of customers are buying what category of products.

Business intelligence software enables all of this information to be quickly and easily discovered. Put simply, business intelligence is any software tool that allows an employee to access up-to-date and accurate information about the business' performance in a timely and simple manner. It might consist of a "dashboard" of key sales and performance indicators or something more sophisticated.

The most common business intelligence tool is OLAP (OnLine Analytical Processing). Though it sounds complex, it is simply the ability of a user to see company information, such as sales, in a variety of ways. Think of it as a multidimensional Excel spreadsheet. Still sound complex? Well, in a normal spreadsheet, you might show sales of shirts over time, such as in two dimensions. Or, you might show sales of shirts by each store: again, two dimensions. But what OLAP enables is for the user to see sales of shirts over time, by store, by region, by style, by salesperson, etc. These trends can also be viewed in a bar chart, pie chart or other graphical presentation. All of this is accomplished simply by pointing at the category of information the user would like to see.

In addition, you can "drill through" each category or dimension in order to see the underlying transactions making up that category. The end result is a retailer equipped with vital sales information and, therefore, better able to make important business decisions.

Large retailers, such as supermarket and department store chains, have been using business intelligence tools for several years to assist them in their decision-making. Until recently, such tools were too expensive to be within reach of most retailers. While integrating OLAP cubes with a business's underlying database can still be an expensive and time-consuming process, it is possible to buy OLAP cubes already integrated with an accounting software package, thus reducing the overall cost and implementation time. If you are interested in the possibilities that business intelligence can bring to your business, consult your accounting professional.

Tim Loving is founder and CEO of AccTrak21, a developer of accounting and business intelligence software for small-and medium-sized businesses. Visit www.acctrak21.com for more information.