It's been three months since Northern Group Retail spoke with Apparel about its ambitious IT revamp, which includes systems implementations from ProfitLogic, Lawson Software, NSB, Triversity and Store Tech (see "Northern Group Overhauls IT Infrastructure," May 2004).
In the interim, the Toronto-based company, whose divisions include Northern Reflections and Northern Getaway, has made much progress, realizing significant wins from its implementations while also plunging into its wealth of new data to determine which pieces of information are critical and how to best use them. Meanwhile, the company is in the middle of a store traffic-tracking pilot, and evaluating enterprise-wide reporting solutions. Here's the update.
A nightshirt for all seasons (or maybe not)
This is a reflection (no pun intended) of the value of the ProfitLogic P4P markdown optimization implementation to Northern Group Retail: Bill Booth, vice president of inventory management, says that when he told members of the merchant team that they would not be able to use the P4P tool for the retailer's U.S.-based Northern Reflections stores opening this month GÇö there's no data yet to feed into the system GÇö he was not-so-warmly greeted with "ashenly white faces" and demands of "What the heck are we going to do?" That is how positively the tool has performed for markdown forecasting and ensuring gross margin optimization, says Booth.
Northern Group also reports it is realizing benefits from the implementation of ProfitLogic's Portfolio Optimization solution, which assesses historical sales patterns from a risk-and-reward perspective to determine the optimal assortment for profitability. The system not only assesses the risk of individual categories, but also makes determinations about overall business shifts, suggesting ways to most efficiently format open-to-buy dollars, for example, instead of increasing the pool, says Booth.
This spring Northern Group put the tool to the test, with "impressive" results, he says. The system's fall 2003 recommendation jived very closely with actual results, and the company has implemented ProfitLogic's recommendation for Q4. This includes keeping sleepwear as part of the Christmas sales lineup. The company had considered 86-ing the category after it did not meet expectations in a trial run this spring, including a Mother's Day promotion. The poor sales raised doubts about how well sleepwear would perform during the critical Christmas selling period, but analysis done through ProfitLogic "not only reinforced the [fact that it was] profitable, it also reinforced the merchants' viewpoint that we needed to increase our sleepwear in Q4," says Booth.
Putting the data to work
Having transitioned from PeopleSoft to its new financial package from Lawson Software, the company remains in phase two of the Lawson implementation: Rebuilding and stabilizing the links between the financial system and its new merchandising system, NSB's Connected Retailer-«, while evaluating opportunities within the new system for using additional modules and improving process flow.
The big payback from the Lawson system thus far has been greater ownership of processes and the ability to customize reports, says Ron Stinson, vice president of finance.
Still, there is a huge opportunity to refine and further integrate its reports through an enterprise reporting package, which would extract and combine information from the company's separate IT packages, says Carolyn Vaccari, IT project manager.
"As an organization, when you go into an implementation, it's a huge learning curve just to understand what level our data will be at, and what's available to us," says Vaccari. "We're getting to the point where we understand what data we have. Now, we have to look at bringing it all together within one report."
This type of reporting will be particularly valuable after the opening of its U.S. stores, when the company will receive sales reports in both U.S. and Canadian currencies. The company is searching for an enterprise-wide reporting system GÇö for implementation next year GÇö to coalesce that information into a format that can be used cross-company to analyze anything from individual retail store profitability to gross profitability, says Stinson.
Know thy customer
Northern Group's loyalty program presents one of its most challenging implementations, straddling its Triversity POS and NSB systems
Since last speaking with Apparel, the company has completed a seven-store pilot of the Triversity solution, which captures consumer information at the point of sale. It is rolling out the system to all stores, replacing legacy software and hardware.
The "true realization" of the program will come from a second phase of the POS rollout, says Mark Stevenson, director of IT. Already underway, this phase includes migrating data from a standalone IBM 4680-based loyalty system into the Triversity system, enabling the company to move beyond high-level transactional data to "capture the granularity" GÇö exactly what style/color/size was purchased, when, in which store, etc. GÇö necessary to get the full benefit of Triversity's technology, he says.
The ultimate goal is to feed POS data from Triversity into the NSB analytical tool. Merging data from the two systems will "feed the back end much richer data," enabling deeper analysis, says Stevenson. By ascertaining information such as how frequently a customer shops in its stores, or a customer's propensity to buy merchandise on sale, for example, Northern Group will be able to offer customized promotions, as well as use that data for future assortment and allocation decisions, he adds.
Drilling down to the store level
CRM is just one of many modules GÇö others were installed for sales auditing, merchandising, PO creation, planning and allocation and replenishment GÇö that were part of Northern Group's NSB implementation, and Booth reports that the company has cut the apron strings completely to its legacy system.
Booth says the analytical capabilities of the new system are "light years ahead" of the legacy system. For example, the company can drill down to determine the profitability of an individual store, or of a specific style and its performance at the individual store level. With the legacy system, "we could not assess individual stores, individual groups of stores, [or] individual styles within those stores, any further back than 90 days," he explains. Now, two years' worth of detailed history is available.
Another big win from the NSB system is that it enables the company to calculate profitability down to the category level, says Booth. Previously, Northern could only measure profits to the department level.
The next step is to take advantage of NSB's store-planning functionality, merging the merchandising side of the business with the store side, Booth notes. Now, Northern Group only uses the NSB merchandising system for planning across the chain.
In other software implementation progress, a six-store pilot test of the Store Tech store traffic application is underway. The system uses thermal cameras placed throughout the store to measure customer traffic patterns, relaying that information to the POS system. Data from traffic patterns can be used to determine key performance indicators such as average sale per customer, units per transaction and closing rate, says Stevenson.
Analysis from the system will fuel the creation of more sales-friendly floor plans, and eventually, better labor schedules to match traffic patterns. Northern Group also will be training store associates to use Store Tech data to increase sales.
What form the data will take and how it will be used to train associates are still unknowns, and expected to be challenges, says Stevenson.
Additionally, the system has "significant cultural implications to operations," says Stevenson, stressing the importance of running the pilot for an extended period, to "really shake out" the necessary operational changes at the store level.
No more "he said, she said"
From the perspective of overall efficiency, Northern Group's IT implementations are providing greater visibility into operations and more consistent, real-time data between its merchandising, financial and store operating systems, instead of "three different numbers," says Stinson. This one version of the truth is a "huge plus just in labor savings and time," as well as accuracy, he says.
But, it has presented an interesting learning curve, in terms of understanding report "cut-off times." In the past, data was polled on a daily, batch-driven basis. Now, because reports can be generated at any time and information is constantly changing, it's important to ensure that data is compared on an apples-to-apples basis. "It's a culture change," says Booth. "This is what the data means exactly right now."
Now that the company has access to much more data, the challenge will come from understanding it all, says Stevenson, who chalks this up as just the "normal learning curve for our business. It's a boatload [of information], but [you have to determine] what is important to you today. It will take us time to cherry-pick what's critical to know right away, and what can wait a little longer. It's just a lot more to analyze," he concludes.