In grocery retail, where many items have a short shelf-life, it’s vital to get products to stores as quickly as possible, while balancing each store’s stock levels to match customer demand.
Market6 helps retailers and suppliers co-ordinate operations more effectively, combining its expertise with IBM Analytics technology to help its clients lift sales, reduce stock outages and cut waste.
45%reduction in out-of-stocks for a bakery supplier
33%reduction in shrinkage for a fresh vegetable supplier
42%increase in sales of new-season items for a cosmetics supplier
Business challenge story
Solving retail challenges with lightning-fast forecasts
Every day, retailers and their suppliers face the constant challenge of getting products into the store, on aisles and into displays - at the right time and in the right quantities to meet customers’ needs.
In the fast-moving consumer goods sector, this is particularly challenging: shoppers typically visit grocery and convenience stores several times per week, so inventory turns over at a much faster pace than it does in sectors such as fashion or home retail. Moreover, the sale of perishable items such as fresh fruit and vegetables or baked goods creates an extra level of time pressure: if the product doesn’t get onto the shelves quickly, it may not be saleable at all.
Tony Agresta, Vice-President of Marketing at Market6, comments: “To help our clients optimize their operations, detail is key – we have developed sophisticated algorithms that help them forecast sales and inventory positions at every one of their stores, down to the SKU level. With around 40,000 SKUs, 2,600 stores, and a 30-day planning horizon, that means we need to calculate millions of forecast points every single night, adding up to more than 3 billion forecast points monthly. We also need to provide interactive access to those forecasts to thousands of users, not only within our large retail clients, but also for over 1,200 suppliers and thousands of users in their network.”
Michael Roney, Vice-President of Platform Products, adds: “That’s not the only challenge. Before we can process the data, we need to collect and prepare it – which means waiting for the stores to close, coast-to-coast, collecting the data from dozens of source systems, and transforming and loading it into our system. This leaves us with just a few hours of processing time to run our very complex forecasting algorithms and produce the results in time for our clients to use them in their daily meetings.”
Market6 works with some of America’s largest grocery retailers and their extended network of over 1,200 suppliers. It provides advanced analytics services that help retailers and consumer products manufacturers collaborate more effectively, and get smarter about solving operational problems. In particular, it delivers sophisticated daily demand forecasts to help its clients balance supply and demand, and ensure that they can execute on key sales and marketing strategies such as special offers and promotions.
He continues: “To get the job done, we need a technology platform that is capable of incredible processing performance. We also focus on keeping our organization lean, so we wanted a solution that wouldn’t require dozens of IT specialists to keep it in working order. In our experience, there is only one platform on the market that meets both of these requirements: IBM® PureData® System for Analytics.”
Leveraging a powerful platform
Over the past five years, Market6 has invested in new IBM PureData System for Analytics appliances three times, upgrading and extending its analytics environment to support ever-more-sophisticated forecasting algorithms.
Tony Agresta comments: “In modern terms, the volume of data we deal with isn’t enormous – it’s about 70 to 80 terabytes. But the complexity of the unique forecasting algorithms that we have developed is enormous, and that means the processing requirements are very high. PureData’s massively parallel processing [MPP] architecture is absolutely key.”
MPP enables Market6 to divide the workload between hundreds of individual processing units, run the algorithms simultaneously, and then aggregate the results – cutting execution time by orders of magnitude, compared to a traditional data warehouse architecture.
“It’s conceivable that we could get the same level of performance form a different architecture – but not at the same cost, and definitely not with the same level of maintenance and support,” comments Michael Roney. “We have nine PureData appliances which equates to 14 racks, comprising three different generations of the technology, and it only requires two employees to manage them. With a traditional server and storage architecture, it would easily need four times as many people to keep all the components working in sync.”
Market6 has also been impressed by the new at-rest encryption capabilities, introduced with the latest generation of PureData appliances.
Tony Agresta comments: “Our clients don’t send us confidential customer data, so there aren’t any data privacy issues, but in the world of retail it’s increasingly believed that data is the key to competitive advantage – so it’s highly commercially confidential. With at-rest encryption and other safeguards that Market6 has in place, our clients can rest easy, knowing that any information they share with us is safe from their competitors.”
The deal for the latest generation of PureData appliances was financed by IBM Global Financing, which offered Market6 the best rate for the solution. This helped Market6 avoid a large up-front capital outlay and gain the ability to pay for the solution with predictable payments.
Michael Roney adds: “We’re also pleased by the flexibility of IBM’s licensing model for PureData. Our clients’ requirements can change quickly, and we often need to enlarge our environment at short notice to take on data from a new supplier, a new store, or the release of new Market6 products. PureData’s Growth on Demand capability is ideal here: our license allows us to activate extra modules within our existing appliances at the flip of a switch, and scale up significantly.”
Transforming the way clients operate
Market6 can point to numerous real-world examples of how its algorithmic approach to operational optimization has helped retailers and their suppliers transform business performance.
Tony Agresta tells the story of one particularly successful promotion: “One of our suppliers and retailer offered an all-time low price on a specific product. This price point had not been offered before and as a result, they really did not know what to expect.
“After the first day of the promo, we were able to show the client instantly that they had a problem: there simply wasn’t enough stock on hand to supply the group of stores that were running the promo. This insight helped them react quickly and avoid disappointing customers by running out of product. They ended up buying up thousands of additional cases of the product to meet the demand. A co-ordinated effort across the country allowed them to re-route trucks and not scratch the product.”
For a supplier that specializes in baked goods, Market6 developed a weekly out-of-stock report that quickly became the centerpiece for their business review meetings, and is now distributed to all operations staff. By identifying the causes of stock shortages, the report has helped the supplier reduce out-of-stock events by 45 percent across all stores.
Similarly, insights from Market6’s analytics solution have helped a packed fresh vegetable company reduce shrinkage by 33 percent and out-of-stocks by 25 percent. Market6 provides a forecast that calculates recommended order quantities for each SKU at each store. Store managers can use these quantities as a baseline, and adjust their order accordingly, based on their local knowledge. As a result, the company has achieved approximately two days of additional shelf-life for its products – a key metric in the fruit and vegetables categories.
Meanwhile, a cosmetics company uses Market6 store-level inventory forecast to evaluate when to start shipping the next season’s items to stores, while also ensuring that it sells through the older products and minimizes the need for markdowns. This has enabled it to increase inventory levels by 82 percent at the start of a new season, enabling a 42 percent lift in sales of new items.
Finally, when an energy drink company had completed a pilot of a new on-shelf merchandising plan, Market6 was able to use its data to extrapolate the results of rolling out the new plan across all stores. When the rollout went ahead, the company saw sales increase by USD 4 million, 30 percent growth in number of new households buying energy drinks, and a 24 percent reduction in the frequency of out-of-stock events.
Tony Agresta concludes: “These examples are a testament to the intelligence that Market6 can bring to the retail sector, and to the power that IBM Analytics puts at our disposal. With PureData handling the heavy lifting, our own team is empowered to focus on work that really delivers value: developing ever-smarter and more sophisticated forecasts to help our clients outperform the competition.”
Market6 is a software company that provides a complete set of collaborative retail analytics to help retailers and their suppliers solve operational challenges around on-shelf availability, promotional effectiveness, inventory management, merchandising, planning and budgeting, and daily execution. Its clients include some of America’s largest retail chains and over 1,200 consumer products companies.
- IBM Global Financing
- IGF: IT Financing - IBM Software
- PureData System for Analytics (powered by Netezza technology)
- Retail: Smarter Merchandising and Supply Networks
- Retail: Smarter Operations
Take the next step
Market6 retail solutions help CPG companies and retailers solve problems in retail merchandising, category management, inventory management and collaborative planning. Market6 solutions use demand forecasts and predictive analytics to improve retail operations. For more information about how to increase on shelf availability and promotional effectiveness while reducing out of stocks with Market6, please visit www.market6.com. IBM Analytics offers one of the world's deepest and broadest analytics platform, domain and industry solutions that deliver new value to businesses, governments and individuals. For more information about how IBM Analytics helps to transform industries and professions with data, visit ibm.com/analytics. Follow us on Twitter at @IBMAnalytics, on our blog at ibmbigdatahub.com and join the conversation #IBMAnalytics.