S-Group creates 40,000 individual store planograms for its more than 900 grocery stores each year. The number of hours it would take to complete those planograms manually is incomprehensible, but with Space Optimization from SAS, the company is able to complete all the documents with only 10 space managers, according to Ilkka Alarotu, Director of Consumer Oriented Assortment and Pricing Solutions for SOK Grocery Trade Management, the services entity charged with providing all corporate services to the Finland-based S-Group’s 22 cooperatives and “customer-owners.”
To date, SOK has implemented a number of SAS solutions, including Retail Forecasting for Replenishment, Analytics, Workforce Optimization and most recently Price Optimization. With 44% of the total grocery market share in Finland, SOK operates hypermarkets, supermarkets, neighborhood stores and convenience stores that report approximately $10 billion in annual revenue.
Retail Forecasting is key for SOK, because in Finland supply chain production begins six months in advance, Alarotu reported. Four to eight months prior to assortment selection Finnish retailers hold a procurement “auction,” during which time vendors are able to submit price bids to determine if they will become the supplier of certain items.
Two months before shipment, retailers determine the assortments for each store; then they are required to provide work schedules to all employees three weeks ahead of time. “That’s the law,” said Alarotu. “Vendors must do the same.”
Also in Finland, retailers and vendors share information freely and work closely together, Alarotu stated. “We share all information with vendors,” he noted. “It improves our total effectiveness.” Prior to implementing the SAS solutions, SOK polled its vendors. “We asked the vendors what kind of information they needed and when,” Alarotu said.
Price Optimization Pilot
To continue to improve efficiencies, SOK is piloting SAS Price Optimization in 2011. The goal for price optimization, according to Alarotu, is to maintain its Every Day Low Price (EDLP) strategy while balancing the margin on promotional items. “Some use it to increase prices,” said Alarotu. “We use it to decrease prices.”
Alarotu expects to complete chain-wide implementation of Price Optimization within the year.
SOK and SAS Host International Grocery Symposiums
SOK recently initiated a series of international grocery symposiums, inviting non-competitive market leaders to sessions to share ideas about forecasting, space and price management. In attendance at the first meeting in Helsinki were Sobeys (Canada), REWE (Germany), Colruyt (Belgium) and Conad (Italy).
During the meeting the retailers discussed private label, promotional pricing, social media, mobility and the future of loyalty cards.
Alarotu also recently attended SAS’ Global Forum in Las Vegas and spoke on a panel along with executives from U.S. retailers Family Dollar and Winn-Dixie to share insights about Driving Performance Through Retail Analytics. During the session the retail executives discussed the challenges with today’s loyalty programs, the ability to localize assortments with analytics, the advantages of SKU-level assortment planning, retailer/supplier collaboration, and the need for business and IT to work together to promote the analytics process.