Family Dollar – A Collaborative Data Sharing Trailblazer

Family Dollar – A Collaborative Data Sharing Trailblazer

From Data Sharing to Collaborative Business Processes, Family Dollar is on the Cutting-Edge of the Retailer/Supplier Relationship. Experts from Family Dollar and Retail Solutions Inc. (RSi) Answer Audience Questions on Data Sharing Best Practices and Discuss the Results of the 2014 Retailer/Supplier Shared Data Study

In the midst of all the big data hype, leveraging downstream data has become a priority for many companies throughout the consumer goods value chain, with early adopters realizing significant benefits. Each year Consumer Goods Technology (CGT) and RIS News conduct a one-of-a-kind research report that analyzes the past and present state of data sharing efforts between retailers and their consumer goods suppliers. This study is designed to measure the status of and satisfaction with data sharing, downstream data and big data initiatives. The findings from the fifth annual Retailer/Supplier Shared Data Study prove that the data sharing gap is widening in both industries. While the biggest companies enjoy the lion’s share of benefits, smaller players continue to fight for a place at the table and appear to be falling even further behind.

In November 2014, CGT hosted a unique web seminar entitled, “The Data Sharing Gulf Expands,” to discuss data sharing initiatives for any sized company, true collaboration at work, and the enlightening results from this year’s research study. With more than 300 registrants, the well-attended event included representatives from many of the world’s leading consumer goods companies as well as top retailers. Jay Becker, Supply Chain Executive for Family Dollar, delighted and informed the audience with his first-hand knowledge, lessons learned and unique perspectives on data sharing and collaboration among trading partners. He walked attendees through the history of Family Dollar’s data sharing and collaboration efforts, the challenges that were overcome with help from RSi, and where the program is today. Jay Becker was then joined by Jonathan Golovin, CEO of Retail Solutions Inc. during the audience Q&A. Attendee response and interest was overwhelming with an influx of questions during the Q&A portion of the event leaving some questions unanswered due to time constraints.

As a result, CGT caught up with Jonathan Golovin and Jay Becker after the event to get their insights around those remaining questions. This document consolidates the live Q&A session with the post-event interview to present more insights into modern data sharing and collaboration within the value chain. Whether you have been working with downstream data for a while or are new to the effort, this discussion will provide you valuable insights on how best-in-class retailers and their trading partners are leveraging insights for mutual benefit.

WEBINAR RECAPOur presenting executives

Jon Golovin is the Chairman, CEO and co-founder of Retail Solutions. Mr. Golovin plays a key role in the development and implementation of RSi’s strategy and direction. He leads the executive team - reporting to and soliciting advice and guidance from the Board of Directors. He oversees RSi’s day-to-day operations in accordance with the company’s mission and strategic plan. Previously, he was founder and chairman of Consilium Inc., (now Applied Materials), the world’s largest independent Manufacturing Execution Systems (MES) company. He is also the founder and former CEO of Vigilance, a leading event management system. Considered “the father of MES,” Jon received the 2000 SEMI Award for his contributions. Mr. Golovin holds a B.S. from Cornell University and a Ph.D. from Massachusetts Institute of Technology.

Jay Becker is the Director of Supplier Management for Family Dollar Stores. Mr. Becker’s philosophy is “Everything that we do must benefit the customer in a meaningful way or we stop working on it.” With this focus, he oversees the integration of suppliers with multiple departments throughout the organization. His previous roles in Merchandising, Supply Chain, Replenishment, Product Allocation, and Store Operations has provided him with a global view of the Retailer-Supplier relationship. This perspective has allowed him to develop a strong partnership with Retail Solutions, Inc. (RSI) and best-in-class data sharing at Family Dollar Stores. Providing factual insights to Merchants, Supply Chain, and Store Operators to drive sales and efficiencies that lower end costs to the customers. Mr. Becker holds a B.A. from University of Massachusetts – Lowell.

JON GOLOVINJAY BECKER

FAMILY DOLLAR | www.retailsolutions.com2 FAMILY DOLLAR | www.retailsolutions.com 3

FamilyDollar A Collaborative Data Sharing Trailblazer

The Results are In:The 5th Annual Retailer/Supplier Shared Data Study

The findings from the fifth

annual Retailer/Supplier

Shared Data Study prove that

the sharing of downstream

data — and even big data

— is well worth pursuing

within your organization (no

matter your size). Sharing

data facilitates collaboration

and provides mutual benefits

for you and your trading

partners.

By gathering the perspectives of both retailer and supplier audiences and asking identical questions each year, the report is able to offer apples-to-apples comparisons and observations on year-over-year trending for the past five years.

A deep dive into this year’s results reveals that the largest

consumer goods companies and the billion-dollar retail behemoths continue to lead the way as smaller companies attempt to play catch-up. These leaders continue to drive return on investment through benefits, including controlling out of stocks, managing inventory, and forecasting and replenishment, among many other processes.

Seventy-five percent of respondents cited significant improvement of the quality of collaboration and dialogue as a major benefit. While a resounding 88 percent of suppliers and unanimous 100 percent of retailers view downstream data as a strategic initiative. When asked if their downstream data initiatives were now being rolled under a larger big data strategy, 63 percent of data sharing leaders have already begun the process or plan to do so.

Data sharing continues to evolve. Those already deeply engaged in the process are driving

development and progress. However, many mid-sized and smaller suppliers and retailers remain stagnant in data sharing efforts. The gulf continues to widen between the two groups, with significant implications for this highly competitive marketplace. There are indications that smaller suppliers are beginning to adopt the infrastructure and processes they need to start reaping value from downstream data. It all adds up to slow, but steady, progress toward widespread data sharing, with the leaders drawing first-mover advantage.

of respondents cited significant im-provement of the quality of collabora-tion and dialogue as a major benefit.

of suppliers and unanimous 100 percent of retailers view downstream data as a strategic initiative.

percent of data sharing leaders have al-ready begun the process or plan a larger big data strategy.

75%

88%

63%

SHARING OF DOWNSTREAM DATA IS WELL WORTH PURSUING

...a resounding 88 percent of suppliers and unanimous 100 percent of retailers view downstream data as a strategic initiative.

RETAILER/SUPPLIER SHARED DATA STUDY

RETAILER/SUPPLIER SHARED DATA STUDY


“Armed with retailer data, suppliers will have a competitive advantage in taking the very best care of the Family Dollar shopper…”

Mike Mannion, VP Household Products & Pet at Family Dollar

Family Dollar Stores, Inc. (NYSE: FDO) is the neighborhood discount dollar store and a Fortune 300 company. The retail chain operates more than 8,100 stores in 46 states. In 2003, the company began sharing data with its leading consumer packaged goods (CPG) suppliers in an effort to drive value and uncover new opportunities within their initial Vendor Managed Inventory (VMI) program. Through the years, and with much trial and error, the program has evolved and expanded into what it is today supporting over 60 suppliers and covering more than just VMI. At the core of this enriched program is collaboration. Collaborative Business Processes (CBPs) engage suppliers, and use one version of the truth to create the foundation for success. With this collaborative program, Family Dollar looked to leverage its supplier resources as true partners. To do this, they took a no-holds-barred approach sharing everything – not just sales data.

“We wanted the data we’re sharing to be extremely rich, enabling our suppliers to rise to the occasion by not holding anything back. It’s through their insights and analytics that the program can grow, and new, mutually beneficial opportunities can be discovered. By sharing myriad data with our suppliers, we were able to accomplish one version of the truth where supplier and Family Dollar internal resources had the same data and could speak the same language. We’re not only sharing POS data, but also planogram information so that suppliers know exactly where products are placed, how they are performing, how much space is allocated, as well as inventory and cost information.” said Becker.

With intention, Family Dollar did not want to overwhelm participants or create a program that was too robust that it discouraged suppliers from participating. Family Dollar evaluated its top, strategic priorities and business drivers, settling on six use cases that offered the most meaningful

results. These included: micro-assortment optimization; promotion forecasting and allocation; promotion analysis; new product introductions; inventory optimization; and distribution voids. By working with a focused set of use cases, Family Dollar created action steps that both suppliers and merchants would understand and guidelines for collaboration with each other.

At Family Dollar, the collaborative data sharing program has become a team effort with key players from RSi, suppliers, and multiple departments within Family Dollar, along with a joint advisory board made up of a comprehensive retailer team and supplier partners like P&G, Unilever and Kimberly-Clark. Family Dollar recognized early on that in order to create a solid, longstanding program, they needed buy-in from the executive management team. To set the parameters, institute best practices and gather feedback on the use cases, Family Dollar partnered specific

suppliers with internal members or business owners and asked the suppliers to identify the single use case that mattered to them most.

Each use case has specific data requirements that need to be shared. For example, reducing out-of-stocks require different data elements than improving promotion allocation or reducing unsaleables. To streamline efficiencies and avoid conflict, Family Dollar worked with its suppliers, RSi and advisory board to define the roles in each specific use case – who will take what action to bring the use case to life. If an out-of-stock condition is predicted early on in a promotion, what is the supplier supposed to do – and what does the retailer do? Does the supplier suggest an order quantity and the retailer send that order for immediate replenishment? Or does the supplier have permission to send a distribution center order directly? Forward-looking data sharing takes the friction out of the sharing process by automating next steps, ensuring action is taken quickly, effectively and efficiently.

“We allowed suppliers to pick the use case that was most important to them so that they could then be placed in a subcommittee with like-minded internal stakeholders. Each sub-committee worked together to outline how each use case was defined, who the participants were, how they would engage and communicate with one another, what actions would be taken, and the rules to measure ROI and program success,” continued Becker. “We refer to this practice as Collaborative Business Processes – the adoption of end-to-end collaborative processes between retailer and supplier based on a single version of the truth.”

Family Dollar’s joint advisory committee ensured that the Collaborative Business Processes can be implemented and scaled by both sides. The group conducted pilot programs first – to both hone the processes and demonstrate ROI – then continued to test, learn and repeat. With the competitive advantage proven, the program was then rolled out to the next group of suppliers to find and fix any issues at scale. RSi is there to address concerns from the supplier community and to resolve discrepancies that may come up between internal systems and different interpretations of data.

The spirit of the program is thriving, as evidenced by Family Dollar’s weekly on-site collaboration hour. During these meetings, suppliers share wins and learn best practices. It also attracts new suppliers to join and provides those who are part of the program a supportive community of peers.

“It’s all about learning, coaching and working together so that as a team, we can agree on best practices and suppliers can share wins with merchants. Collaboration never stops. Conversations grow, new questions are asked, and new processes are tested and refined as new issues bubble up. I tell Family Dollar team members and RSi, they aren’t in the data sharing business. They’re in the supplier collaboration business – it goes way beyond just data sharing. It’s about embracing end-to-end processes and use cases that enable both parties to unlock significantly more value and reach business goals more quickly.” shared Becker.

Educate Executives and Create Advocates

Identify the Top Business Problems to be Solved

Understand the Data Needed for Each Use Case and the Role of Each Party

Bring Suppliers on in a Phased Approach

Replace Feeds/Portals with Advanced Data Sharing that Scales

STEP 1

STEP 2

STEP 3

STEP 4

STEP 5

COLLABORATIVE DATA SHARING PROGRAM CHECKLIST


Data Sharing Questions Answered

RSi and Family Dollar provide answers to audience questions about best practices for next-generation data sharing and collaboration between retailers and suppliers

Q: Why did Family Dollar decided to share daily data for the first time and collaborate with its suppliers? What corporate hurdles did you have to overcome?

Q: What does Family Dollar see as the best way to collaborate with suppliers?

Q: What role does RSi play in the ongoing collaboration program at Family Dollar?

Q: For companies that are just starting to share data, what use cases would you recommend?

Becker: We first started sharing data with a select group of suppliers through a program called Vendor Managed Inventory. Back in 2003, we recognized the suppliers have more dedicated resources to better manage their items than we did. We decided to team with one of our top suppliers, P&G to create this first program. I was working in the replenishment area for the company and had a team of nearly 15 buyers doing the replenishment for several distribution centers and up to 4,000 items. When you do the math and you look how much time each replenishment buyer had to spend with each item on a supplier-by-supplier basis, it didn’t make much business sense. Alternatively, when you give those opportunities and tasks to a single supplier, allowing them to write the purchase orders and keep the distribution centers in stock, that’s how we learned to trust our suppliers. That program was extremely successful. It reduced our inventories by as much as $60 million. In addition to the reduction in inventories, we also saw our service levels go up. We attribute these successes to having more dedicated resources looking at items and doing a better job of managing the flow of inventory. Reporting allowed us to monitor supplier activity, and occasionally we had to bring a supplier back in line, but with certain guardrails in place we quickly learned that we had valuable resources that we hadn’t taken advantage of previously. The program and supplier relationship has grown from those early days into where we are today.Becker: Through the exchange of supplier insights. By encouraging suppliers to share their insights and analysis with us, and to provide recommendations on how we can work together to improve business is the best way to collaborate. Also, leveraging use cases helps create a focused starting point that can then grow and evolve over time as priorities shift for Family Dollar.Golovin: Family Dollar is one of the most collaborative programs we’ve seen and we’re delighted to be a part of it. It’s rare for the entire organization to support and recognize the value a collaboration program brings to the business. Traditionally it’s the supply chain group that gets it, but with Family Dollar they have support across the enterprise – store operations, merchandising, and supply chain – making Family Dollar a genuine, best practices case study. Enterprise buy-in makes all the difference in the world in terms of what role RSi can play. At Family Dollar we’re fortunate enough to be part of their long-term vision and daily execution. Family Dollar has taken data sharing to a new level, embracing Collaborative Business Processes and working hand-in-hand with their suppliers on varying operational issues. These are not once a year get-togethers with suppliers, or six-month check-ins. Collaborative Business Processes happen daily and they impact the heart of the business. Things like promotional forecasting and in-store allocation – critical processes in terms of satisfying the shopper, but also making sure that Family Dollar is not stuck with excess inventory. In terms of the RSi relationship, we have worked closely with Family Dollar to determine the Collaborative Business Processes and supporting uses cases that will meet their business needs and move the needle immediately. Family Dollar has then taken this spirit of collaboration and made it active and palpable, hosting a weekly collaborative best practices meeting on-site with suppliers. There are a lot of retailers that have good programs, but the concept of getting together with suppliers on-site with the retailer to look every week and ask, “What have we learned? What can we do better?” is very unusual. Through our training, use cases and reporting we help Family Dollar ensure their personnel understand the value of the program and offer full transparency into what their suppliers are doing. We provide support for the chosen use cases, ensure suppliers are trained properly, and best practices are shared. We help turn data sharing into active collaboration making Collaborative Business Processes both a reality and a success. Golovin: For companies just starting out, solving out-of-stock issues through data shared usually pays for itself. Another area for quick return is with new product introductions. Daily data sharing can help properly forecast promotion volumes store-by-store and ensure pricing compliance. More advanced data sharing use cases involve corporate applications. If a CPG has enough retailers sharing data they can forecast orders based on the rate that product is actually selling vs. based on previous shipments. This approach eliminates the 3-15 day latency period typical of shipment forecasts, allowing manufacturers to react faster, and more accurately, to changing business conditions. By forecasting based on what’s selling, the supplier can put less inventory in the distribution center and allocate the right amount of product to the right stores based on demand. For the most sophisticated companies, data sharing and a new set of Collaborative Business Processes looks at localizing assortments to meet the level of personalization expected by today’s shopper. It enables suppliers to customize plan-o-grams by neighborhood for what buyers in that market, at that store, want. This hyper-local focus is also opening the door to new opportunities that leverage daily data to optimize digital advertising – to analyze the response, effectiveness and returns of digital advertising on a store-by-store basis. Companies are also beginning to experiment with intelligent crowdsourcing to help solve in-store problems in near real-time. The advice we give to retailers is to pick the most strategic areas in your business to focus on – that’s what Family Dollar did.

Q: What does top management expect from the Family Dollar collaboration program?

Q: Any other advice to offer suppliers who are interested in working with Family Dollar?

Q: What is the cost to participate in the Family Dollar program?

Q: The findings in this year’s research showed a large discrepancy in data sharing by company size, with small companies not receiving nor using nearly as much data as their larger counterparts. Why do you think this is, and how can smaller companies get involved?

Q: How has data sharing between retailers and suppliers evolved over the last year? Do you think the gap between the haves and have-nots (large vs. small) will continue to expand?

Q: What parting advice would you give other retailers?

Becker: Management wants to see increased levels of collaboration, because we know when collaboration is working on all cylinders, good things happen. My best advice to suppliers that want to collaborate with Family Dollar is to look at the data down to the store level and understand what motivates our customer. It’s too competitive out there to not understand the needs of the customer – by neighborhood and by store. Suppliers should determine what stores are performing optimally and why, and bring those insights back to us so that we are able to do a better job at servicing our customer.

Becker: We’re willing to share our data with anyone that wants to collaborate with us. We will work with any supplier, whether they’re small, medium, or very large. Interested suppliers just have to show us that they are willing to make the investment on their end to process that data into meaningful information that will result in benefit for both of us. Without that commitment on the supplier side, they may not get accepted into the program. Participation in the program is a very easy process and there are lots of affordable options. For small suppliers that don’t have adequate internal resources, they can use ready-made solutions from RSi. From weekly data sharing captured in a simple Excel format, all the way up to robust dashboards featuring graphs, charts and forecasts – our program has it all.

Becker: I would ask the question in reverse: what is the cost not to participate that may result in lost sales. I’m certain this number far outweighs the program costs.

Golovin: Family Dollar is a mid-sized retailer, yet their program is very robust with nearly 60 suppliers participating. This is the fastest-growing program we have ever been involved with. They have created solutions for suppliers of any size, making Family Dollar a true industry trailblazer. Typically, smaller manufacturers will have fewer resources to assign to retailers – maybe only one or two people on the team compared to teams of 15-20 at larger companies. In these instances, the team member often doesn’t have the time to analyze and act on the data that is being shared. To overcome this discrepancy, small teams need an alert and reporting system that is fully automated, dependable and easy-to-use. That’s where RSi can help. The RSi data platform gathers the retailer data, formats it, conducts analysis and makes it easy to understand and actionable. The second issue plaguing smaller organizations is store coverage or merchandising. If suppliers don’t have Collaborative Business Processes in place there’s not much they can act on to correct out-of-stocks or other issues that arise. Small companies can move the needle, and gain competitive edge and quick ROI by automating as much as possible and establishing Collaborative Business Processes with retailers to make actionable insights that maximize product availability, uncover new opportunities and drive sales.

Golovin: While data sharing is on the rise, retailers and suppliers are still struggling with out-of-stocks, forecasting, excess inventory, maximizing promotional opportunities, product assortment and pricing. This is because for many suppliers, it’s unclear how to act on the data that is being shared. Retailers are failing to ensure their close supplier partners are working to improve key areas that will help them meet their goals and derive the greatest value from their data sharing initiatives. If a supplier looks at the data and finds its product is out of stock in 148 of 1,700 stores because the inventory counts were incorrect, then a common phantom inventory scenario has arisen with the system never sending an order because it thought it had inventory that wasn’t there. What should a supplier do to resolve the issue? What’s the next step? They can send a merchandiser store by store to argue its case, send a list to buyers, and so on. In many instances, suppliers are not sure how they can take action. From a retailer’s perspective, it’s not an effective use of time or money to have a large number of different suppliers all following different processes. As a result, we’re seeing the rise of Collaborative Business Processes – where retailers and suppliers work together to problem solve, make the best use of the data being shared and decide how to make it actionable. I think the real growth opportunity exists in the mid-market. We’re seeing mid-sized retailers like Family Dollar looking at enterprise solutions. We have 10-15 midsized companies in pilot stages right now, trying to better understand how they can create value from automating collaboration. As this group of retailers continues to roll out new programs, I think we’re going to see the midsized supplier say, “I now have 10 different retailers who all want collaboration, I’d like to have one tool, one system to manage these efforts.”

Becker: For retailers in the consumer goods business, I would recommend that they start by asking their suppliers. Once I started talking to suppliers, they pointed me in the right direction and recommended that I speak to RSi. There’s no other service provider out there that has the depth of experience, knowledge or endorsement from the supplier community than RSi.


FamilyDollar A Collaborative Data Sharing Trailblazer

FAMILY DOLLAR | www.retailsolutions.com

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Family Dollar – A Collaborative Data Sharing Trailblazer