Up to 1% of revenues could be lost each year by top UK retailers and their suppliers according to a study.
Research completed by LCP Consulting and Cranfield School of Management estimates that data inconsistency between the UK’s top grocery retailers and their suppliers is costing as much as 1 per cent of revenues or £1.4 billion (€ 1.6 billion) per year. This is significantly more than predicted in a recent report from GS1 UK and Cranfield School of Management, which estimated £200 million (€ 231 million) per year.
Professor Alan Braithwaite and co-author Professor Richard Wilding, both from Cranfield School of Management, compiled their research by applying Six Sigma statistics to the results from GS1’s study. They identified extraordinary levels of inaccuracy within retailer data published by GS1 - 29,000 times worse than six sigma –suggesting that one in every 10 data elements is incorrect to deliver the overall data record (GTIN) inconsistency of 80%.
Professor Braithwaite’s calculation identified in more detail the business performance levers that are connected to a retailer and showed how they can impact individual company performance. In his experience, data accuracy is poor with errors in physical dimensions, pricings and operational parameters such as shelf fill, replenishment quantities and order quantities. And behind this problem is a big opportunity cost. He advises companies to examine master data management processes alongside data identification and capture methods.
Professor Braithwaite: “The business cases from investing in both identification systems and processes may be bigger than expected, this backroom stuff is crucial,” says Professor Alan Braithwaite. “It’s not about having to invest operating costs to get it right; rather it is about focusing the organisation and putting in place good processes and KPIs – and experience has shown that when it is better it is also cheaper.”
Professor Richard Wilding commented: “The reported levels of inaccuracy and their associated costs are worrying. This is especially the case in context of the enormous investments that big retailers have made in product identification, data capture and supply chain integration, and the focus that many companies have put into lean and six sigma methods.”
From Zetes’ perspective this study further validates the importance of accurate, real time data capture across the supply chain. Visibility is the watchword within the retail community as businesses look to operate a just in time supply chain with real time inventory management. But whilst the technology exists to achieve six sigma data capture accuracy into an ERP system, this research highlights how poor data management processes will limit the potential benefits to be derived. Retailers should be aware of this at the outset of a project and undertake reviews both before making their investment and on an ongoing basis.
To summarise this issue, LCP recommends 8 key steps to raise the bar on data accuracy:
- Measure actual performance – continuously.
- On physical dimensions, use measuring equipment to capture missing data on goods receipt.
- Monitor and analyse data adjustments.
- Set up a perpetual audit process.
- Apply the framework to identify value potential and focus on the big opportunities.
- Systematically improve processes to manage input.
- Build six sigma accuracy into cross-functional KPIs and make data quality everyone’s responsibility.
- Automate data alignment where possible.