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New research estimates the top five retailers alone could be losing out on billions due to data inaccuracies with their suppliers

New research estimates the top five retailers alone could be losing out on billions due to data inaccuracies with their suppliers

 

A white paper released this week by LCP Consulting estimates that data inconsistency between the UK’s 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 £200 million 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.

 

Scale of problem goes undetected

 

The scale of any errors as well as their frequency is a major driver of their cost. LCP’s 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, entitled “Understanding the true costs and benefits of data accuracy,” 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, said: “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.”

 

Clear call to arms for retailers

 

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 vice president for Zetes Northern Region, added: “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 [enterprise resource planning] 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 said that, for any chief executive, chief financial officer (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.

 

Professor 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 [key performance indicators]. The experience from a wide range of industries is that when it is better it is also cheaper.”