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Developing
an Executive Information System
First Published in Operations & Fulfillment
Many years ago, Benjamin Franklin
advised executives to “Drive thy business, or it will drive thee.”
This is especially true for executives of small catalogs. Building a
small catalog to a medium or large scale company requires knowledge,
creativity and persistence. Resources are limited and must be
managed zealously. The information that drives the business is not
found in the income statement; it is found in marketing and operational
analysis. In fact, the income statement is the postmortem analysis
of the company’s success or failure.
Developing an executive information system (EIS) will provide
the vital information needed to identify opportunities and potential
problems before they have an adverse effect on the income statement. This
begins with analysis of current departmental and organizational
information. An effective EIS identifies, compiles, and distributes
information critical to the company’s success in a timely manner and user
friendly format. It includes both tangible and intangible items. The
initial analysis will probably discover that information is distributed in
multiple formats with conflicting results. For example, shipped daily
sales may be in net dollars (without replacement and editorials) or gross
dollars. Review all current information for accuracy and utilization,
then solicit additional information requests from all departments and
senior management.
Next, compile a detailed list of current and requested
information that includes: User or requester; information requested;
source of information; and timing of data and distribution. This list
must be reviewed and prioritized carefully, eliminating all duplication
and validating the application of the information. It must be critical to
the success of the business to become part of the EIS.
Once the key information list is compiled and reviewed,
categorize information by service, product, employee, or investment
performance. This will help define who needs access to the information. In
some cases, the information will be requested by someone other than the
primary user. For example, marketing will need service levels and
operations will need response rates.
Although each company has individual needs that must be
defined internally, some information requirements are universal.
The ten critical points marketing must communicate to operations are:
1. Incoming order flow - Volume projections and variations are needed so
operations can schedule the staff, space and supplies to meet the demand
of the upcoming months.
2. Major
product changes - Order entry, customer service and distribution center
staff must be trained to sell and handle the new products and resources
must be allocated or reallocated to accommodate the new products.
3. Size
and mix of orders - The order profile is required to plan staffing and
packaging needs and distribution center product positions.
4. Catalog misprints - Service representatives need the correct information
for customers.
5. Catalog concepts - A strong understanding of the original concept helps
telephone representatives and distribution center staff perform their job
functions better. Telephone reps can communicate the concepts to the
customers and distribution center staff can identify quality issues
quickly. For example, there is a definite difference between a fashion
“grunge” look and poor quality. Without the conceptual training,
receivers, pickers and packers could not distinguish the difference.
6. Media
information - This would include key codes, a complete understanding of
the coding process and purpose, advertising objectives and circulation
planning. Of course, proprietary information should not be distributed in
all levels of the organization, but the effectiveness of an employee is
directly related to knowledge and resources provided.
7. Special promotions - Discounts on products, special bouncebacks, free
shipping, etc so telephone representatives will have advance promotion
training and distribution staff will include special gifts in the
package. Advanced software can reduce the need for this information, but
less sophisticated systems requires manual entry or overrides.
8. Customer profile - If the telephone representatives have an understanding
of customers' background and expectations, they are better equipped to
respond to those customers.
9. Upsell products - This would include information on specific upsell
products, sell along products, and quantity discounts. If there is an
award program involved, this needs to be included in this section.
10.
Product training - Overall product training needs to be conducted with
every new catalog. This should include even the items that have been in
the book since the origination of the book. While long term employees know
those products extremely well, new staff members need the training. One
effective method of training new staff on existing product lines, is to
partner them with experienced staff. It renews the experienced staff’s
knowledge while training new employees.
The ten critical points operations must communicate to marketing are:
-
Product quality - The
receiving department should be the primary whistle blowers for poor
quality product. The chain of events should be: Poor quality product
arrives; Receivers notify inventory management or merchandising; product
is kept out of the process flow; vendor is notified; product is returned
to vendor; new high quality product is received. If this chain is
disrupted and the product is processed, count on buying a round trip
ticket for it. The customer will become a quality manager and return the
product immediately. Or worse, keep the product and never order again.
-
Service levels - Initial
and final fill ratios, telephone response levels, average days to fill
stock and drop orders, all of the service levels that operations lives and
dies by, have a direct effect on orders, reorders and the general success
of the business.
-
Vendor performance -
Merchandising knows the original agreement that is placed on the
specification sheets, but without feedback from operations, they will not
know if all of the specifications are met.
-
Returns analysis -
Returns analysis is critical to merchandising and marketing, as well as
operations. It should include volume, return reasons, and processing
costs.
-
Customer feedback - If
marketing gets out of touch with the customers needs and wants, the
strength of the book will be diminished. Customers service/telephone
representatives and the returns' staff are marketing's lifeline to the
customer. The feedback must be specific, timely and applicable, but it can
make the difference in the success or failure of the company.
-
Deliverability
challenges - If operations cannot economically deliver the product without
damage there are either unsatisfied customers or a direct hit on bottom
line. If representatives from marketing and operations review new product
sample prior to selection, deliverablity issues should be eliminated.
-
Transportation issues -
Are rates increasing, strikes pending or companies closing? Marketing
needs to know all of these issues to plan for shipping costs and adjust
sales projections. The recent UPS strike demonstrated the
significant impact transportation issues have on sales.
-
Efficiency bandits -
Simple changes in pricing strategies or packaging can create bottlenecks
if systems are not in place to support the changes.
-
Operational limitations
- There is only so much space, staff, and resources available in
operations. If marketing is advised of the limitations and the time
required for expanding them, they can plan accordingly.
-
Optimal scheduling -
Invariably, operational peaks occur during marketing's lulls. Marketing
takes this time for special projects, often involving operations. Develop
schedules in advance to minimize the impact of special projects on
operational efficiency.
Timing
of the information distribution depends on the application. Some
guidelines for information distribution are:
Daily:
Shipped sales: projected vs actual
Written sales: projected vs actual; response rate breakdowns
Average order in units and dollars
Open
order by status in $ and orders
Service levels: actual vs historical
Order
mix: fax, mail, phone
Receiving volume
Average orders
Returns and damages: overall volume actual vs historical
Backorder rates
Weekly:
Summary of Daily Statistics
Monthly:
Summary of Weekly Statistics
Inventory levels, turns and overstocks
Fulfillment costs
Customer service index
Returns and damages analysis by item
Pending Promotions - anticipated impact and timing
By
Promotion:
Product Mix - by class and size
Average Go In Retail and Anticipated Average Order - in dollars and units
New
Product Lines - including special handling requirements
Catalog concepts and issues
Customer profile and feedback
Volume
statistics are required to project staff, space, supplies and inventory
requirements. Quick reaction to unplanned events minimizes the
ultimate impact on profitability. If the numbers are maintained and
understood, they will provide an early warning system so potential
problems are immediately apparent. Issues and limitations should be
addressed by occurrence.
The development of an executive
information system is an evolutionary process. Coordinate a team of
key personnel to begin with the basics and expand the information as
necessary. The objective is to develop an information system to
communicate and provide inter-departmental access to critical information.
The success of the system is dependent upon all departments participating
and partnering with each other to understand and utilize the information
that drives the business.
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