Inspire 2013 - Optimizing Retail Inventory Using Predictive Analytics - Southern States Cooperative

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One of our nation's largest farmer cooperatives, Southern States Cooperative, needed a way to ensure that their farmers and retail stores receive the right products as buying preferences change with the seasons. This session will describe how they use the predictive capabilities of Alteryx to identify the individual SKUs and product groups that have strong seasonal buying patterns, set start/stop stocking dates at the wholesale and retail level, and determine the optimal inventory levels at each store. In addition, you will learn how Southern States Cooperative was able to reduce inventory carrying costs through the proactive identification of Slow Moving Inventory (SMI), and use this insight to modify processes and business rules to minimize SMI volume

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Inspire 2013 - Optimizing Retail Inventory Using Predictive Analytics - Southern States Cooperative

  1. 1. Optimizing Retail Inventoryusing Predictive AnalyticsHow Data Analytics is Impacting Supply Chain ManagementFred JezouitVice President of Finance & TreasurerSouthern States Cooperative, Inc.@SouthernStatesBusiness Leadership trackMarch 7, 20131:15 – 2:00 pm
  2. 2. Introduction to Southern StatesWho is Southern States? We Help People Grow Things• Agricultural cooperative founded in 1923• East coast from Florida to Maine• 2,400 employees, $2.3 billion in annual salesComplex 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 #
  3. 3. Opportunities…and ChallengesData 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 opportunitiesObstacles 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 #
  4. 4. 18 Short Months – Alteryx is a Game-ChangerImpact of Alteryx Felt Across the Company• Customer segmentation• Customer activity – new, lost, regained, increased/decreased wallet share• Wholesale and retail distribution study• Marketing initiatives — Predictive analytics - optimize mailers and marketing programs (John Deere Financial partnership) — Customer insights – defining customer purchasing habits• Financial variance analysis – sales, margins, unit volumes down to customer level – complete overhaul of operational metrics #
  5. 5. Supply Chain ImprovementMulti-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 #
  6. 6. Supply Chain ImprovementMulti-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 #
  7. 7. Magnitude of the Challenge – Attention GrabberReporting 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 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%• 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 #
  8. 8. SMI Reporting Drives ActionMultiple 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 #
  9. 9. Impact on InventoryStill Early In Process – Benefits Already Realized $140,000,000 Total Inventory $120,000,000 Farm & Home, Animal Health & $100,000,000 Crop Protectants Inventory on Hand $80,000,000 2011 $60,000,000 2012 $40,000,000 Retail division maintaining sales $20,000,000 with 31% less inventory $0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec #
  10. 10. Right Inventory at the Right TimeLearning Process for Buyers and Retail Operations• 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 #
  11. 11. Ensure Products In Stock for Spring SeasonNeeded to Provide Greater Visibility Into Inventory Requirements• Expected sales compared to inventory on hand• Identify replacement SKUs• Incorporate marketing efforts – products included in circular advertisement Day Day Days to 60 1-30 31-60 60 Day Sell Past Fut SKU and Item Description Days Total Inv On-Hand On-Order Inactive repl_SKU DO WHSE Avg Avg Sales $ Current Circ Circ Units Units Units Inv 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 88861300 – PGMG F/SPECIAL TURFGRASS (EA) 37 154 191 $10,697 1 1 0 0 88861200 – PGMG F/KENTUCKY 31 (EA) 23 159 182 $ 2,479 1 1 0 0 02132070 – FESCUE KY 31 50 LB (BG) 25 27 52 $1,349 7 7 0 90 X 0213207 X X 02132074 – FESCUE KY 31 20 LB (BG) 9 38 47 $1,057 148 148 0 90 X X 02145220 – GRASS SUNNY/SHADY MIX 3 LB (EA) 6 31 37 $ 335 0 0 0 60 X X 02132074 02145221 – GRASS SUNNY/SHADY MIX 10 LB (EA0 5 8 13 $ 300 0 0 0 60 #
  12. 12. Measure Impact of Out of StocksProvide Insight into Effectiveness of Inventory Initiatives• Are stores being too aggressive on inventory control?• Identify trends at store and within buying group• Impact of centralized purchasing pilot Stores with Outage Sku Group Outages Resulting Lost Lost Product Type Group SKUs in Group Days with in Sales Sales Units Lost Sales Lost Sales Farm & Home 05900001 05900001 - STATESMN WOOD PELLET FUEL 40LB (BG),) 23 377 $28,991 6,610 Farm & Home 58892066 58892066 - SS COMPLETE SPORT 24-20 40LB (BG) 52 719 $24,534 1,577 Farm & Home 58893066 58893066 - SS DOG FOOD 21-9 40LB (BG) 39 982 $17,414 1,458 Farm & Home 58890066 58890066 - SS COMPLETE ADULT 21-10 40# (BG) 44 723 $16,630 1,174 Packaged CPP 11100511 11100511 - QUIK QUAT 265 GA RUP (EA) 1 25 $15,484 3 Packaged CPP 11100233 11100233 - ETHEPHON 2.5 GA (EA), 11102995 - PREP 2.5 GAL (EA) 15 39 $12,244 241 Farm & Home 10237218 10237218 - SSC PELLETED LIMESTONE 40LB (BG) 20 182 $11,242 3,578 #
  13. 13. Summary – What Have We Accomplished?Changes to Our Organization Have Been Dramatic• 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 #
  14. 14. #Thank You! Fred JezouitVice President of Finance & Treasurer Southern States Cooperative, Inc. @SouthernStates

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