Minding the Gap
"Data rich and information poor” may be an old story for retailers, but it remains a fairly common one. It was no different for The Brick, Canada’s largest volume home furnishings, appliance and electronics chain.
Based in Edmonton, Alberta, The Brick operates 235 stores coast-to-coast with annual sales of $1.4 billion. About a quarter of its stores are franchised and the company anticipates more in the future, according to executives. Growth in both corporate and franchise stores will be supported by six distribution centers in British Columbia, Alberta, Manitoba, Ontario and Quebec.
“After operating for 40 years we had a large amount of customer, transaction, inventory and delivery data,” says Richard Hannah, senior vice president, information services and CIO. “We had every kind of data you could imagine. But it was very difficult to get the right information quickly in order to make good business decisions.”
One common problem was the standard practice of people within the company writing their own database queries. They would then move the data into Access or Excel and massage it to get management information that was specific to their area of the business, Hannah says.
“At one point we had about 800,000 database queries. It was very inefficient and, in fact, became uncontrollable,” he says. “Queries were being run during the day and sometimes this had a significant impact on the stores’ operational systems. There was also a lot of inconsistency in the data because it was really left up to everybody’s individual interpretations ... [as well as] a lot of manual work that went along with all this.”
Additionally, the company had a set number of reports that are run regularly; under the existing system, however, any time questions came up about a report, another had to be generated. “Then it took another week or two to get that information,” Hannah says. “By the time the report got back to the person who requested it, they’d moved on to the next issue.”
The Brick’s supply chain and reporting model is more complex than the average retailer’s because merchandise is delivered directly to customers’ homes. One of the biggest problems was the impact the data management system was having on revenue recognition. “We couldn’t identify the difference between a ‘written’ and ‘delivered’ sale,” Hannah says. “This gap went unanswered for years. We knew it had to be minimized in order for the company to hit its goals.”
For example, The Brick might book $20 million in sales “but would only recognize $10 million weeks later and no one could figure out why,” he says.
Because 95 percent of all written sales are delivery at some point in time, “we can’t recognize the revenue until it’s delivered to the customer’s house,” Hannah explains. “So there was a large discrepancy and no information that would really tell us what that gap was.”
The chain first attempted to fix the problem in-house. “We wrote some data stores, but it wasn’t data warehousing because it wasn’t optimized for the analytical process,” he says. “We didn’t want to get involved with a big two- or three-year data warehouse project and hope we hit the mark once we’re done.”
In effect, this was the straw that broke the camel’s back — and the first project the company undertook with information management software provider Kalido. “We needed to identify where that money went, from the time a sale was written to the time it was delivered,” Hannah says. Sometimes it was uncontrollable, like “customer remorse” such as cancelling an order before delivery. But a large part of it was traced to out-of-stocks or inventory that was discontinued.
The Brick challenged Kalido and its “data warehouse in a box” approach to replicate the company’s daily sales reports. In the past, these took the company’s legacy system weeks to deliver, but Kalido built a financial analytics engine to deliver the information in less than two days.
Kalido “allowed us to build an agile data warehouse that would answer specific questions, and then build on that to answer the next question that came up,” Hannah says. “So we were building our enterprise data warehouse and realizing value from what we’re building at the same time.”
The company first installed the Kalido system in October 2011, and by December was getting good data. It took a little while longer to make it consumable, according to Hannah, but the company was getting actionable information before Christmas. “It was a big benefit having it at that time because we could start looking at the difference between what we wrote on Boxing Day [December 26] or for the Christmas season, and how quickly we could get things delivered in order to recognize that revenue.”
An ongoing evolution
Although the number of queries was once the problem, the company didn’t want to limit access to the new system. “We’re actually duplicating our operational data into ROSA — Replicated Operational Storage Area. There’s no way we can shut all those down,” Hannah says. “But at the same time we wanted to alleviate the issues we were having on the operational system. We use IBM’s Infopath to duplicate the data in an operational storage area and then move that into the data warehouse. That’s how we got around the large amount of queries that we were having.”
Overall, the system gave The Brick numerous advantages in terms of analytics — one of the most important being its ability to answer questions quickly and build a foundational data warehouse. “It’s definitely made us a more centralized and orderly operation and given us some governance around information,” Hannah says. “It’s also allowed us to evangelize the fact that information is an asset and should be treated like any important asset.”
The company experienced a $10 million return on investment in the first three months, accelerated revenue recognition by 25 percent and increased overall revenue recognition by 3 percent.
Although the Kalido system has accomplished its goals for The Brick, evolution is ongoing. “We keep adding to it one priority at a time,” Hannah says. “We have a steering committee that includes most of our senior executives and our CEO. This group identifies ... the information we’d like to have in the data warehouse.”
The other important piece of the Kalido solution for The Brick has been its master data management (MDM) component. “Rather than have a separate MDM strategy and technology, we are looking at ways to use Kalido so we can have a single view of the customer,” Hannah says.