A new white paper by LCP Consulting estimates that data inconsistency between the UKs top five retailers and their suppliers is costing as much as 1 per cent of revenue or 1.4billion per year. This is significantly more than a recent report from GS1 UK and Cranfield School of Management, which placed a cautious estimate for a narrower scope at 200million per year. By applying Six Sigma statistics to the results from GS1, LCP found that the retailer data published by GS1 showed an extraordinary level of inaccuracy 29,000 times worse than six sigma and suggesting that one in every 10 data elements being incorrect.
The scale of any errors as well as their frequency is a major driver of their cost. LCPs calculation of the true cost of data inaccuracy identified in more detail the business performance levers that are connected to a retailer and showed how they can impact individual company performance.
The paper has been prepared by LCP Consulting for joint publication with Zetes. Two leading supply chain experts co-authored the paper Professor Alan Braithwaite, Chairman of LCP Consulting and Visiting Professor at Cranfield School of Management; and Professor Richard Wilding from the Centre for Logistics and Supply Chain Management at Cranfield School of Management.
Alan Braithwaite, Chairman of LCP Consulting and Visiting Professor at Cranfield commented: From our experience of working with many companies, data accuracy is poor with errors in physical dimensions, pricings and operational parameters such as shelf fill, replenishment quantities and order quantities. As this report shows there is a big opportunity cost hidden behind this problem. Companies need to take a fresh look at their master data management processes alongside their data identification and capture methods; the business cases from investing in both identification and processes may be bigger than they expect. This backroom stuff is crucial.
Professor Richard Wilding from Cranfield School of Management commented: The reported levels of inaccuracy and their associated costs are worrying. This is especially the case in the context of the enormous investments that all the big retailers have made in product identification, data capture and supply chain integration, and the focus that many companies have put into lean and six sigma methods.
James Hannay, Senior VP for Zetes Northern Region commented:
Visibility is the watchword within the retail community as businesses look to operate a just in time supply chain with real time inventory management. But whilst the technology exists to achieve six sigma data capture accuracy into an ERP system, this research highlights how poor data management processes will limit the potential benefits to be derived. Retailers should be aware of this at the outset of a project and undertake reviews both before making their investment and on an ongoing basis.
The LCP paper says that for any CEO, CFO or Trading Director, the suggestion that there is 1 per cent of margin to be won makes this an interesting prize and worth addressing. The paper sets out eight key steps to secure the benefits of high levels of accuracy.
The eight key steps in raising the bar on accuracy are as follows.
1. Measure actual performance continuously.
2. On physical dimensions, use equipment like CubiScan to capture missing data on goods receipt.
3. Monitor and analyse data adjustments.
4. Set up a perpetual audit process.
5. Apply the framework to identify value potential and focus on the big opportunities.
6. Systematically improve Processes to manage input.
7. Build six sigma accuracy into cross-functional KPIs and make data quality everyones responsibility.
8. Automate data alignment where possible.
Professor Alan Braithwaite concluded: This is not about having to invest operating costs to get it right; rather it is about focusing the organisation and putting in place good processes and KPIs. The experience from a wide range of industries is that when it is better it is also cheaper.
About LCP Consulting
LCP Consulting provides supply chain strategy, design and planning advice and development to deliver excellent supply chain performance. Working with retailers, manufacturers and service providers across the world, LCP brings its clients a combination of industry best practices and a structured methodology to drive value based change.
About Cranfield School of Management
Cranfield School of Management is one of Europes leading university management schools renowned for its strong links with industry and business. It is committed to providing practical management solutions through a range of activities including postgraduate degree programmes, management development, research and consultancy. The Cranfield Centre for Logistics and Supply Chain Management is Europes largest grouping of faculty specialising in the management of logistics and transportation. The Centre offers a number of programmes, short courses and research opportunities in logistics, distribution and transportation. Programmes include a one year full-time MSc in Logistics and Supply Chain Management and a two year part-time modular Executive MSc in Logistics and Supply Chain Management.
About ZETES INDUSTRIES
ZETES INDUSTRIES is a pan-European company in the value-added solutions and services industry for Automatic Identification of Goods and People Zetes solutions are implemented in various industries: manufacturing, transportation, logistics, retail, utilities, healthcare, banking & insurance, government and public services.