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STORES Magazine, June 2007 Demand signal management helps CVS track store-level POS data in real time By Liz Parks Summer is in full swing along the New Jersey shore, and newly-launched sun protection lotion is flying off the shelves of the local CVS/pharmacy stores. On Cape Cod, however, that same new SKU is languishing. In the past, lack of visibility into CVS' store-level POS data meant the retailer and the supplier might not recognize the problem early enough to reallocate the product. But thanks to a web-based platform for consumer demand management that CVS/pharmacy and many of its suppliers are now using, category managers and the manufacturer's brand management analysts can immediately see what is happening. Rather than risk having to take markdowns in stores with low demand, they now can quickly transfer product to areas with high demand. "Just being able to see where the product is selling provides value because we may choose to relocate less-productive inventory and not lose selling opportunities," says Kevin Smith, senior vice president of supply chain and logistics for CVS. To gain visibility and other collaborative supply chain advantages, CVS uses services from Alexandria, Va.-based Agentrics. Formed through the November 2005 merger of WorldWide Retail Exchange and GlobalNetXchange, Agentrics provides collaborative solutions for retail sourcing, trading partner/supply chain collaboration, global data synchronization, POS data sharing and private-label product development and lifecycle management. One of the founding members of WWRE and an investor in Agentrics, CVS is using the company's demand signal management (DSM) solution for POS data sharing, as well as services for product sourcing and for maximizing purchasing opportunities through online and reverse auctions. Agentrics DSM "makes it possible for retailers and suppliers to share cleansed operational point-of-sale data in near real time, creating a common language that all parties can use, along with analytical tools to maximize SKU and store-level performance," says Pete Plotas, vice president of demand signal management for Agentrics. Agentrics DSM offers retailers and their suppliers the ability to know almost immediately when item-level SKUs are underperforming or selling far above predictions in individual stores or regions, making it possible to pro-actively solve problems. This timely visibility is due to the "real-world operational data" that comes directly from a retailer's POS, as opposed to syndicated data and estimates. Additionally, retailers can use that data to more accurately analyze consumer demand for specific SKUs based on demographics or seasonality for stores or store clusters. "The more sophisticated we get at tracking and using this information, the better we are at managing the stores that demographically or geographically have different kinds of customers," Smith says. "It's important for us to be able to provide the assortment that really fits the needs of those customers." Through Agentrics, more than 50 of the world's largest retailers are standardizing data to create supply chain visibility for their suppliers. Both ends of supply chain More than 200 suppliers, accounting for over 70 percent of CVS's total sales volume, are on the Agentrics DSM platform, and more than half of the volume that accounts for total POS sales is being sourced through various electronic collaborative processes, says Smith. "Every supplier we are dealing with has indicated that their return on DSM has been phenomenal." Some of the savings result from the ability to track the store-level performance of new items as they launch, a measurement that is particularly important to CVS, which strives to be first-to-market with new item launches. "That gets us a nice sales share early and helps us hold on to that share longer," Smith says. If a product is not scanning, it "sets off alarms and we and our supplier have to go find out why the product isn't selling," Smith says. "Is it still in the back rooms? Did it not reach the stores? Having virtually immediate access to that information is a very important piece of ROI for us and our suppliers." In some instances, users can see POS activity within two hours of a sale. It might seem counter-intuitive that CVS and its suppliers would want to put POS data on a network that included competitors, but Smith says that the collaborative and secure sharing of supply chain information benefits everyone. "If we create a system that works for everyone's supply chain, it lifts the ability of us all to be more efficient operators," he says. "I am dead set against establishing a network that is a one-off for CVS because, from a supply chain standpoint, it creates too much work and too many inefficiencies for our suppliers." Home run gets the win According to AMR analyst Kara Romanow, manufacturers with timely demand visibility and forecast accuracy have a 17 percent better perfect-order performance, carry 11 fewer days of inventory and have cash-to-cash cycles that are 29 days shorter. By leveraging DSM data insights, she says, retailers can reduce inventory by an average of 15 percent, strengthen order fulfillment by 17 percent and lower stock-outs by 90 percent. While Smith won't comment on the specific benefits CVS has received from its use of the Agentrics DSM solution, "we have no issue with the AMR figures. They are pretty much on target for the industry." The 17 percent boost in order fulfillment "translates into fewer lost sales for us," Smith says. "Preventing 1 or 2 percent of lost sales across 6,200 stores translates into significant revenue opportunities." Agentrics is a trademark of Agentrics LLC. All other trademarks are the property of their respective owners.
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