Data in Focus: Analysis, Collection and Implementation

The article "A Different Game" which was published in The Economist touches upon several instances where by introducing new methods of data collection and subsequent data analysis, companies have managed to improve both the top and bottom line of their returns. I would like to add to these by giving further examples of how both new data collection methods and corollary 'big data' analyses affected businesses that I was directly involved with.

As already mentioned in one of my previous blogs, several consumer goods giants have invested in the concept of creating a Perfect Store for their products. This concept deals with trying to find the best location of a product within the store while maximizing availability. Exact details of the concept can be understood by seeing this video. To achieve this end consumer goods companies such as Unilever and Kimberly-Clark used retina tracking software on consumers to see where their eyes traveled when they entered a store. They studied which shelves got the most attention, where did most consumers look the longest etc. Heat maps were generated and then recorded to try and find ideal possible locations for each product. In specialized cases even brain wave activity was monitored to look at what constitutes a "pleasurable" design. It is no surprise that accessing such information has drastically scaled the importance of store presence and "rights" to the best location in the store. Companies often try and leverage their share of business with retailers to try and score the best locations.

From a data analysis perspective there was a big improvement in profitability in Unilever Pakistan simply due to finding recurring trends from large sets of data. While I worked as a key account manager for Unilever my largest client was a large scale wholesaler, METRO Cash & Carry. METRO is a much larger presence in the developing world   due to the larger presence of Mom & Pop stores which have largely been driven out of business by large scale retailers in developed economies. As such METRO has much lower margins as smaller retailers only buy in bulk and will only do so when they are offered very low prices thus diluting margins for both Unilever and METRO. As a response, Unilever tried to increase profitability by targeting the end consumer. It looked at historic trends of its highest selling products with large margins and offered deals that could only be availed under a limited volume thus effectively preventing sales to smaller retailers. Products were segmented into three categories each with different profit margins and directives were given to market the most profitable products to end users. In the long run this would create return customers and allow both Unilever and METRO to sell more at higher margins to end users.

Besides data analysis, the other articles from MIT Sloan Management Review, Computer Weekly and the NY Times commented on the importance of transferring to one holistic ERP system instead of several systems for each aspect of the business. While I was at Unilever I worked on Ariba for processing vendor orders while working as an HR manager at the Unilever plant. This had been installed as part of the larger year long SAP implementation which occurred that same year. At the time these had been just acronyms and I thought nothing more of them . Now while researching I realized that SAP is the largest maker of enterprise applications software and bought Ariba Inc for $4.3 billion. The purchase by SAP and the subsequent application of SAP by global giants such as Unilever shows the importance companies are now attaching to cloud-based collaborative commerce applications. Not to mention the large monetary benefits as well.

My question for the week is: What is the scale of business that justifies an ERP investment? Is it something that can only be justified through economies of scale or is it something that can be used to improve businesses medium scale enterprise?

Links Used:
http://www.youtube.com/watch?v=89pQdvwSojM
http://online.wsj.com/news/articles/SB10001424052702303644004577520760230459438
http://www.businessandeconomy.org/15032012/storyd.asp?sid=6822&pageno=1
http://www.bloomberg.com/news/2012-05-22/sap-agrees-to-buy-ariba.html
http://logistics.about.com/b/2011/02/07/unilever-saves-1-billion-with-sap-implementation.htm