Teradata

Few constants remain in today’s ever-changing business world. One is the 80/20 rule – that 80% of sales come from 20% of SKUs. All too often, retailers invest up to 65% of their inventory dollars in slow moving or dying items, in SKUs that contribute just 5% to sales. The result? Inventory dollars tied up in unproductive items – and a dramatic decrease in return on investment.

You probably face the same challenge as most businesses: having to dispose of excess inventory at the end of a season because you have no tools available to manage items according to their impact to the business. That means you’re likely to repeat over-inventory conditions in future merchandising plans.

But there is a tool that can help you optimize inventory productivity and profitability: Teradata® Contribution for Demand Chain Management (DCM). The Contribution module provides you with dynamic stratification rankings of merchandise categories and location combinations according to their importance to the success of your business. It ranks all SKUs “A” through “E” based on the percent of sales dollars, units and gross margin they deliver.

Teradata Contribution for DCM re-ranks merchandise weekly as items progress through their life cycles, reporting detailed performance based on 28 distinct business attributes. In addition, the Contribution module can provide weekly, 6-week, 12-week, and 52-week rankings. The system automatically uses these results in forecasting algorithms and in exception management and replenishment strategies to execute more accurate orders. Plus, you can share the results with a merchandising planning tool to track and monitor action and performance over time to make sure you’re achieving expected results.

After completing the ranking, Teradata Contribution for DCM associates each combination of Classification/SKU/ Location information with a specific contribution code. You can quickly and easily identify strong performers (A and B contribution codes) and your poorer performers (C, D and E codes). Just as important, you can accurately identify inventory imbalances and opportunities to reduce or discontinue merchandise lines that aren’t contributing to profitability.

Teradata Contribution for DCM allows you to assign different service level targets to each contribution code and, therefore, associate varying degrees of risk stock to support each target. With this capability, you can automatically adjust the level of risk stock throughout the product life cycle. Combining contribution results with the replenishment process allows you to link service levels and safety stock investment to the dynamic performance of the product. That’s the first step in moving from a "sell what you buy" strategy to "buy what you sell."

You can manage service level targets at any echelon of the merchandise/location hierarchy. Even more, when you combine Contribution with our Automated Replenishment module, you can manage service level targets while supporting your current safety stock calculations.

Many locations offer the same product assortment, yet perform quite differently. Why? Because consumer buying patterns differ in each store. Again, Teradata Contribution for DCM can help. You can isolate differences or problems, then address them by tailoring product assortments. You control your inventory – and improve customer service.

With Teradata Contribution for DCM you can address an array of key analytics, including:

• Dynamic ranking of 3 dimensions: sales units, sales dollars, and gross margin dollars
• 28 key business performance indicators addressing sales, inventory, and profitability analysis
• Gross margin performance and opportunities for adjustment
• Groups of products requiring promotion or clearance early in the life cycle or season
• Lost sales opportunities
• Service level problems

To find out more about how the Teradata Demand Chain Management solution and its Contribution module can help you grow a better, more productive business, contact your Teradata representative.