Role of Business Intelligence in

FMCG and Retail Sector

Submitted by:
Team: Yottabytes
Sriramagiri Srikanth
09BM8049
Varun Wadhwani
09BM8060

1 |Page
Contents
Contents................................................................................................................ 2
Introduction........................................................................................................... 3
Advantages of BI....................................................................................................4
Challenges in implementing BI..............................................................................6
BI in FMCG............................................................................................................. 6
BI in Retail............................................................................................................ 8
Retail Solutions...................................................................................................8
BI at a US Food Distribution Major.........................................................................9
BI at Nestle ........................................................................................................ 9
BI Analytics (Past, Present and Future)................................................................10
Data Transformation using BI..............................................................................11
........................................................................................................................... 11
Complete picture of a BI system (Source: ITC Infotech).......................................12
Major BI players in India (Source: India Business Directory)................................13
Understanding of Key performance Measures.....................................................15
Identifying Indicators of Organization..................................................................17
Retail Sales Schema ...........................................................................................22
Balance Scorecard Report: Example....................................................................23
Retail................................................................................................................ 23
FMCG company:Raw Material Vendor Performance .........................................23
Recommendations...............................................................................................24
References:..........................................................................................................25
Websites:.......................................................................................................... 25
Reports:............................................................................................................ 25
Introduction

“Business intelligence (BI) refers to computer-based techniques

used in identifying, extracting and analyzing business data, such as
sales revenue by products and/or departments, or by associated
costs and incomes.” (Source: Wikipedia)

BI technologies provide past, current and future views of business

operations. Some of the common functions of BI tools are reporting,
online analytical processing (OLAP), analytics, data mining, business
performance management, benchmarking, and Text mining and
predictive analytics.

The basic aim of Business intelligence is to support better decision-

making. Thus a BI system can be called a decision support system.
The term business intelligence can be said to be a synonym for
competitive intelligence, because they both support decision
making. BI uses advanced technologies, applications and processes
to analyze to a greater extent internal, structured data and business
processes, while competitive intelligence gathers, analyzes and
disseminates information with a topical focus on company
competitors. Business intelligence in a larger context can be thought
as a subset of competitive intelligence.

In today’s highly competitive and challenging environment,

companies need to continually assess and redirect their actions in
order to stay on top of the markets they choose to serve. In order to
make the needed changes, many companies are asking questions
like:

• Who are our most profitable customers?

• Which products and services can be effectively cross-sold?

• Effectiveness of sales channels vis-a-vis products?

• How to boost marketing campaign results?

• How to improve customer loyalty?

• What are the costs involved in retaining a satisfied customer?

• How do we enhance the overall customer experience?

Business intelligence (BI) systems can help provide the answers to

questions such as these.

Advantages of BI

(1) Quicker, fact-based decision making

Business decisions are often delayed or changed due to frequent

data changes or sometimes also due to lack of information received
or in the way information is perceived. The data within an
organization should be in a manner so as to allow the person who
queries to get further and more useful information as per their
requirement instead of just returning the raw data. Business
intelligence enables an easier and quicker access to data in its
actual format, thus enabling faster and fact-based decision making.

(2) Simplified reporting

BI refers to a system that allows the collection of different types of

data and metrics for the purpose of efficient decision making. It thus
establishes a system wherein data is collected and distributed in an
effective manner. It provides accurate data at real-time and
ensuring the fact that all decisions are not only made quickly but
also based on factual data.
(3) Combination of multiple data sources put together,
resulting increase in efficiency.

Often the decisions made in a company impact more than a single

aspect of business. Business or marketing decisions are usually
based on the customers that an organization would like to
concentrate on. Financial decisions maybe based on the sales and
marketing prospects, HR decisions are based on employee
requirements, attrition rate, and gaining new business deals.
Therefore business decisions require data and metrics from different
departments and verticals of an organization. BI provides data from
various aspects in addition to ratios and formats that enable to
compare these metrics to enable effective and efficient decision-
making.

(4) Solutions are mapped as per user requirement

A BI framework helps in organizing data according to the user. It

could be based on departments, functions, verticals etc…This
enables the user to concentrate on the numbers related to his work
and this would give him an insight into where to look for the
problems affecting the efficiency and output.

(5) Helps align the organization towards its key objectives

Business intelligence helps align an organization towards its key

objectives. To this end, an organization has to first design its Key
Performance Indicators (KPI) keeping in mind it’s style and
strategies. The KPIs need to be designed for the different levels in
the organization starting from the highest and moving towards the
lowest. In order to be successful, these KPIs must be in sync with the
competitive edge of the organization, act as lead indicators that
predict outcomes in the future, focus on performance rather than
outcomes, and permit the combination of metrics. Again there
should be both process-related and outcome-related KPIs and it is
essential to maintain a healthy balance between these to ensure the
success of its design. Ultimately organizations are built on the
outcomes they deliver and not necessarily on its processes. The
processes only enable the outcomes. Thus, BI effectively uses the
KPIs and metrics to help the organization in achieving its key
objectives.

Challenges in implementing BI

However, organizations implementing a BI solution may face several

challenges:

• Integrating complex data from heterogeneous hardware platforms

and software environments.
• Management of distributed systems that lack a single point of
control and time-sensitive operations.
• Improving data access while reducing expenses.
• Performing frequent updates across already overtaxed networks
with rapidly increasing traffic.
• Backing up, recovering and archiving data within diminishing
availability windows
• Incorporating efficiencies of new technologies without requiring
massive downtime, costs or retraining.
• Provision of scalable servers in order to run multi-terabyte
applications.

BI in FMCG

As manufacturers deal with a complex array of daily issues, they can

apply predictive analytics from Business Intelligence tools to
enhance reporting capabilities, manage inventory, and improve the
quality of goods. By evaluating a combination of ordering patterns,
inventory levels, and replacement parts pricing using BI tools,
manufacturing organizations improve margins while maintaining a
high level of customer satisfaction. Business Intelligence with its
predictive analytics enables fast, optimal calculation and evaluation
of inventory replenishment policies that determine when certain
items should be reordered and in what quantity. These policies help
manufacturers achieve targeted customer service levels while
minimizing ordering costs and inventory holding costs. Drastically
reduce the time required to produce management reports, and to
provide ad hoc reporting and analysis capabilities for a range of
business applications. This can save up to 90% of previously manual
reporting time. Reporting in a BI environment helps reduce the time
required to produce management reports, and enables
organizations to develop preformatted reports on a daily, weekly,
and monthly basis. Manufacturers can use BI to monitor the quality
of goods produced. With multidimensional analysis, manufacturing
executives can drill down and quickly determine the causes of
quality issues, enabling them to correct problems before products
are shipped to customers. BI helps increase customer retention
through a better understanding of their demand behaviour and
feedback. Some other benefits are

 Increase the value of customer relationships:

Targeted campaigns can be launched for various customer

segments based on their buying patterns and their
recommendations and suggestions.

 Respond quickly to the changing markets and company

sensitivities:

Nowadays, with the reduction in launch times of products and

new products hitting the market in record times, the importance
of changing strategies has assumed a new importance.
Companies have to stop decisions midway or make drastic
changes and in order to this they need the latest data arranged in
a form which is easy to interpret and take actions.

 Launch new products sooner

 Reduce inventory investment

 Improve scheduling, planning and the procurement schedule

 Maintain high quality standards

Having BI also helps in easy implementation of standard quality

practices such as Total Quality Management (TQM), Total
Productivity Management (TPM) and Six Sigma etc.
BI in Retail
Business Intelligence provides solutions for retail industries. The
retail business is most competitive industry segment. Retailers must
satisfy their customers through multiple channels, and deal with the
industry consolidations, growing profit targets, and shrinking
margins. In this particular setting, the planning process must be
collaborative and extend beyond finance to all the stakeholders. It
must offer certain value to both managers and operational
management thus ensuring participation and buy-in across the
organization.

With the Business Intelligence solutions, retail organizations can

improve their ability to make timely, informed decisions in areas—
store operations, marketing, merchandising, IT, and finance.

BI solutions enable retailers and chains to:

• Align their store and corporate operations around critical

revenue and profitability targets; and also quickly adjust plans
and resource allocations to achieve profitable growth.

• Identify report on, and analyze trends to respond to consumer

buying needs and behavior.

• Gain visibility into key metrics across the chain: sales, labor,
inventory, and promotions.

• Monitor turnover and employee productivity.

• Working on cost savings by comparing and benchmarking

performance across stores, channels, regions, and divisions.

• Optimize the merchandise levels, minimize out-of-stocks, and

manage inventory costs.

Retail Solutions

• Customer Profiling and Campaign Management

• Enterprise Performance Management

• Store Assortment Optimization

• Vendor Performance Management

• Labor Management

• Loss Prevention and Fraud Reduction

• Planning, Budgeting, and Forecasting for Retail

• Enterprise Information Management

BI at a US Food Distribution Major

BI at Nestle
BI Analytics (Past, Present and Future)
Data Transformation using BI
The first stage in any BI Transformation is the source of the data.
There can be many sources such as Point of Sales data collected
through hand help scanners, cash registers, RFID’s etc. Few other
sources are through the Logistics and Distribution network, from the
suppliers and the manufacturers. These data are then fed to the
Operational systems from which it is stored in the central database.
The BI starts acting here to convert the raw data into processed
data using multi dimensional analytics and finally creating usable
business reports.

Complete picture of a BI system (Source: ITC Infotech)

Major BI players in India (Source: India Business
Directory)

(1) Teradata Corporation

The firm is world's biggest firm on increasing business intelligence

through data warehousing and project analytics. Situated in around
40 nations, the firms provides a single source of reliable and precise
data for professionals which help them in decision making and
enhancing customer relationships, productivity and analytic
competence to convert data into knowledge. Teradata has more
than 850 clients and around 1,900 sub divisions all across over 100
nations.

The firm has started its operations in India since 2001 and currently
it has a R&D expansion facility in Bangalore and Hyderabad besides
an international advisory centre in Mumbai. It aims to help in the
expansion of Indian Business Intelligence market as well as offer its
customers knowledge on BI policies. The company desire to bring
together the entire BI user group irrespective of the applications
they have installed to satisfy their business requirements.

(2) MAIA Intelligence

The firm is dedicated to expanding and incessantly enhancing

strong Business Intelligence reporting and assessment services to
satisfy the requirements of corporate executions and application
service suppliers. The firm stringently follows the administrative and
professional norms and has in-house network and methods to
provide their clients with BI tools and prospects to undertake the
right instrument.

The intelligence products are created keeping the client's existing

and future requirements in consideration, raising the productivity
and competence by converting data into actionable knowledge. The
firm releases new product characteristics and improvisations after
every three months to deal with commercial challenges that the
firms undergo at present.

(3) Binary Semantics Ltd

Customer centric international software development firm, Binary

Semantics Ltd offers software, research and development, website
development, IT services besides optimization and calculated
structuring solutions and advisory services. These services aim at
reducing the business issues that the firm faces in its day to day
operations across Europe, USA, Canada and India.

The firm has a powerful software manufacturing techniques and has

been authorized by American Quality Assessor (AQA) and ISO 9001
for software improvement and sustaining activities. The various
technologies offered by the firm are Open Source, J2EE, Oracle, NET
and PHP to wide range of sectors like fast moving consumer goods,
insurance, automobile, hospitality, engineering, retail and travel.

(4) IDC India Ltd

Leading international provider of business intelligence, consultation

services and IT, telecommunications and clients technology needs.
The firm assists IT experts, business professionals and investment
groups to make accurate decisions on equipment procurements and
business guidelines. It has its operations spread across 110 nations
for more than 45 years and is a subordinate of IDG, the primary
media, research, and Events Company.

IDC (India) Ltd., subordinate of CyberMedia, was established in the

year 1987 and is an ISO certified firm. It is considered as India's
most extensive, reliable and esteemed source for business
intelligence and advisor in the IT, telecommunications and client
technology sector.

(5) TechAxes

The self-motivated Indian based firms; Harbinger TechAxes is

aspiring to lead the Business intelligence market all across the
world. Analytics software and BI tools merchant, TechAxes offers
complete services to the firms who desire to satisfy their systematic
needs.

The chief services of TechAxes are Incorporated Analytics,

outsourced development, consumption & assistance services for
BPM platforms, customization and Business Performance
Assessment.

Understanding of Key performance Measures

Key performance measures (KPMs) are measures with the help of

which the performances of organisations, their division, departments
and employees are periodically assessed.

In a corporate, where the role of Balanced Scorecard (BSC)

methodology is to review and track performance, the KPMs are
defined as a part of a hierarchical decision-making process. This
process for this is briefly outlined below.

1. The strategy map of the firm is first formulated, and involves the
definition of business and operational strategies in each of the four
perspectives of the Balanced Scorecard, with due regard to the
vertical, horizontal and other inter-dependencies between them. The
four perspectives in this area are Financial, Customer, Internal
Processes and Learning & Growth.

2. Objectives need to be defined under each strategy. These

objectives should follow the SMART criteria - Systematic,
Measurable, Achievable, Realistic and Track-able.

3. KPMs are to be determined under each objective.

a. KPMs should be acceptable, understood, meaningful as well as

measurable. They should not be defined in a way that their
fulfilment would be hampered by factors seen as non-controllable by
the firms or individuals responsible. Such KPMs would not to be
accepted.

b. Sometimes, actual values of KPMs that are needed for comparison

with target values during periodic performance review in the BSC
process cannot be made, since there is no method in place to
measure and collect the actual figures. In such as case, the use of
these KPMs should be started after such a process is designed and
deployed. All efforts should be made to put a method/process in
place quickly.

c. KPMs need to be meaningful in that the fulfilment of their targets

actively contributes to organizational improvement. For example,
the measure “Training man-days” under the objective “Provide
adequate employee training” under the “Learning and Growth”
perspective is not very meaningful since the fulfilment of the target
in man-days alone does not indicate the usefulness of training itself.
Hence, in addition, a suitable objective would be “Maximise Training
Effectiveness”, and a measurable KPM may be defined under this
new objective. This new KPM might, for instance, be called
“Percentage of training programmes put to practical use within
three months after training”.

d. Typically, there will be certain variability in measures defined for

each strategic business unit (SBU) of a company. The diversity of
the KPMs would be due to differences in the product/service
segments, business environments, markets, technologies, regional
disparities, etc. in the business units. At the same time, however,
the definers of KPMs must identify those measures that would be
common irrespective of the nature, scope and location of the
diverse businesses, and ensure that such KPMs are defined for all
the SBUs.

4. The necessary inter-dependencies that exist between strategies

defined in the strategy map means that the strategies of the lower-
level perspectives of the Balanced Scorecard framework are aligned
with those of the higher-level perspectives. For example, the
strategies of the customer perspective are aligned with that of the
financial perspective, hence achievement of the objectives of the
customer perspective are important in itself, but also as a sort of
necessary condition for the achievement of objectives of the
financial perspectives. Thus the lower objectives need to be aligned
with the higher ones.

5. From the above, it follows that there should be similar alignment

of the measures selected for each objective with the measures of
the “higher” objectives, and this fact must be kept firmly in mind
while defining them.
6. Numerical targets are set for each KPM. These may be in terms
of:

a. A single value

b. An upper limit

c. A lower limit

d. A range of values

e. A percentage of a specific quantity/value

f. A scheduled date by which a given task is to be completed, etc.

Identifying Indicators of Organization

Performance indicators do differ from business drivers & aims (or

goals). Few schools may consider the failure rate of their students as
a Key Performance Indicator which may help the school understand
its position in the educational community, whereas a business may
consider the percentage of income from return customers as a
potential KPI.

But it is necessary for an organization to at least identify its Key

Performance Indicators. The key environments for identifying KPIs
are:

• Having a pre-defined business process (BP).

• Requirements for the business processes.
• Having a qualitative/quantitative measurement of the results
and comparison with set goals.
• Investigating variances and tweaking resources or processes to
achieve short-term goals.

A KPI should follow the SMART criteria. This means that the measure
has a Specific purpose for the business, it is Measurable to get a
value of the KPI, the defined norms have to be Achievable, the KPI
should be Relevant to measure (and thereby to manage) and it must
be Time phased, which means the value or outcomes are shown for
a predefined and relevant period.
The major Key performance Indicators in the area of Supply Chain
for an FMCG company like ITC, P&G can be divided into the following
four areas:

 Supplier Perspective:

The Business Intelligence reports and KPIs that we find in this

perspective help a company to evaluate the performance of its
suppliers.

Some of the questions that are answered in these reports are:

1. How efficient are the suppliers?

2. How strong the relationship is between the supplier and

the firm?

3. What is the strength of the supplier?

4. What has been the performance of the supplier in the

past few months with respect to the on time delivery,
percentage delay, responsiveness in case of urgency, and
the quality of raw materials supplied?

Some of the important key performance indicators identified in

this area are:

• Supply Lead time against inventory norms

• Reponse Delay

• Rejection rate

• Online Rejections

• OTIF
• Percentage delay

• Responsiveness to urgent deliveries

 Manufacturing Perspective:

The reports and data analyzed in this perspective help a firm

to answer the following questions:

1. How efficiently are the materials utilized in the factory?

2. How is the performance of different factories in terms of

the inventory management?

3. The trend of monetary loss due to write offs and stock

outs?

4. What is the capacity utilization in the last few quarters?

5. What is the volume contribution of the top few products

for the company?

6. Capacity Utilization and efficiency for each line for the

plant?

7. Material Categories with large amount of wastages?

8. Stocks in the danger zone?

Some of the important key performance indicators identified in

this area are:

• Rejection Rate

• Material utilization

• Capacity utilization

• efficiency
• Stockout loss

• Write offs

• Space utilization

• Volume contribution of top 20% SKUs

• Products with more than a specified number of days of

inventory
• OEE
• Equipment failures
• Production service level
• Inventory days of supply
• Cost per operation hour

• Power consumption per ton produced

• Wastage/scrap loss

 Shipment Perspective:

This perspective helps a firm to analyze the delivery of various

products from the factory to the wholesale distributors or the
warehouses.

Some of the important key performance indicators identified in

this area are:

• Forecasting error
• Fill rates
• Confirmed fill rate
• OTIF
• backorders
 Financial Perspective:

Following questions are answered in this area:

1. Finished goods inventory turns wrt. major competitors & ITC

norms
2. RM inventory turns and the month by month trend for the
last year.
3. Sales trend (brand wise)
4. Supply chain cost components

Some of the important key performance indicators identified in

this area are:

• Inventory Turns
• Sales
• Asset turns
• Cash Cycle time
• Total supply chain cycle time
• Purchase order cycle time
• Input Freight Costs
• Tax and Surcharges
• Conversion cost
• Manufacturing Cost
• Inventory Carrying cost
• K2 freight cost
Retail Sales Schema

The following diagram shows the retail sales schema with a set of
fact tables and dimension tables:
 Balance Scorecard Report: Example
Retail
KPI Plan Actual Variance

Loyalty 50% 40% -20.00%

Cost of Services 50$ 60$

per Customer 20.00%

Rate of service 20% 15%

charges / profits -25.00%

Cost per agent 100$ 95$

per month -5.00%

FMCG company:Raw Material Vendor Performance

RM
Vendor Shpm Cost/U Del.Shpmn Avg. OTIF Qty Rej
Catego
Name nts nit t% Del.Days % %
ry

Clariant
22 10 5% 0 86% 2%
Colors Chem.
&
Pigment B 2 20 50% 7 50% 1%
s
C 2 15 0% 0 100% 0%

Fatty Cognis 1 14 100% 43 0% 0%

Substan GmbH
 D 1 12 0% 0 0% 0%
ce
GODREJ
10 13 70% 10 10% 0%
IND.

Recommendations

• If an organization is big and complex, it is recommended that

one should opt for a well established and robust Business
Intelligence product like SAP BI or COGNOS.
• Designing and developing a fact table with too many
dimensions leads to significantly increased disk space
requirements. Hence one should take care while selecting the
dimensions.
• One should clearly state the grain associated with the
proposed dimensional schema
• It is vitally important to populate our dimension tables with
verbose, robust descriptive attributes.
References:
Websites:
(1) http://business.mapsofindia.com/business-intelligence/companies.html
(Accessed on 15th April, 2011)

(2) www.thorogood.com/Knowledge/BI+in+FMCG.htm (Accessed on 15th April,

2011)

(3) www.en.wikipedia.org/wiki/Business_intelligence (Accessed on 11th April,

2011)

(4) www.ibm.com/software/data/businessintelligence (Accessed on 12th April,

2011)

Reports:
(1) “Basics of business intelligence systems—an executive overview”, Published
by IBM in June, 2003.

(2) “IBM Retail Business Intelligence Solution”, Published by IBM in 2005.