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SaaS POS boosts data analytics for small manufacturers

Learn how software as a service (SaaS) point of sale (POS) services can be an alternative to complex demand signal repositories (DSRs). Understand how on-demand and SaaS POS data and business intelligence can improve demand planning and inventory optimization.

Small manufacturers, typically unable to afford the cost and manage the scale of a demand signal repository (DSR), are finding new options.

Store point of sale (POS) systems are usually the best source of the demand data manufacturers need to optimize inventory and boost sales. But unless they build their own giant DSR to normalize and store terabytes of daily or weekly sales data -- a multi-million-dollar project usually undertaken only by the biggest consumer-goods vendors -- small manufacturers will be challenged to acquire, let alone make sense of, the data.

Several software as a service (SaaS) POS alternatives have emerged to fill the gap. By providing prebuilt POS integration, data feeds, and business intelligence (BI) tools on demand, such services can save manufacturers the significant costs and labor of setting up their own POS connections, according to industry experts.

Selecting SaaS POS systems

SaaS POS data comes in two main varieties. Several vendors that provide behind-the-firewall DSRs -- including Relational Solutions, RetailSignal and Vision Chain -- offer hosted versions of their DSRs and analytical tools. A second group includes vendors that gather multiple retailers' POS and other demand signals into an online community of trading partners, then analyze the data with proprietary BI tools, though they generally don't call their products DSRs. Examples include DemandTec, OneNetwork, Rainmaker Group, SPS Commerce, and ToolsGroup.

"A lot of retailers are offering up data to manufacturers," said Amy Drevna, senior vice president of marketing at OneNetwork, which provides planning, execution and business-intelligence services on a federated cloud-computing platform. "We try to turn that data into actionable information."

OneNetwork takes the retailer's POS data, master data, forecasts and ordering policies (such as order frequency, and whether partial pallets are allowed) and tries to predict orders.

"What that allows us to do is mimic a retailer's replenishment system," Drevna said.

OneNetwork has four major grocery chains in its system -- Drevna said she can't identify them -- and claims to be able to predict their orders with an accuracy approaching 90%.

Though OneNetwork sounds a lot like a generic DSR, Drevna said it isn't.

"We are not going to try to replace or go head-to-head with some enterprise-wide DSR," she said. "They oftentimes contain a lot more information than we need for our purposes." Instead, OneNetwork can complement and work with a DSR, or be an alternative to one, according to Drevna.

On-demand POS data and business intelligence

In addition to providing new visibility into store sales and inventory, on-demand POS services can save time.

That was the experience at Pandigital, a 47-employee manufacturer of digital photo frames and small scanners and printers whose retail partners include Best Buy and JC Penney. Since the fall of 2009, the company has used SPS Commerce's Trading Partner Intelligence to arm its sales-support team with weekly sales information and analysis from 10 retailers.

In the past, Pandigital sales support endured a time-consuming process of visiting retailer portals or combing through emails to gather that sort of data. The information arrived in different formats and didn't map to Pandigital's stock-keeping units (SKUs).

"It was taking a ream of paper to print -- and that was by store," said J.C. Young, Pandigital's vice president of operations. "We've shaved an hour, maybe two, a week per person by using the service."

Young said Pandigital originally signed up for SPS Commerce's electronic data interchange (EDI) service two and a half years ago. One type of EDI document, called a Product Activity Report, or 852, contains the POS data that Trading Partner Intelligence analyzes. Young decided to add the new service after he was won over by the volume and flexibility of the information it provided. He said he had no concerns about security and privacy -- a common worry about SaaS applications -- because he believed SPS Commerce had mastered those issues. Most of Pandigital's major retail partners were already in the system, and most of them provide their POS data free of charge.

Now, armed with timely alerts to pending inventory shortages and sales opportunities, Pandigital reps can proactively recommend strategies to retailers, such as inventory replenishment and price markdowns.

"It helps with many more aspects of the business, not just inventory," Young said. For example, the company might use the business intelligence gleaned from a retailer's POS data to initiate or renegotiate a returns program.

"It just helps grow the relationship with retailers," said Colleen Carrion, Pandigital's national sales support manager. Carrion said she visits retailers weekly and typically interacts with their buyers, demand planners, and inventory analysts. The data itself comes in weekly -- the retailers' typical time frame -- and the service provides key metrics, such as weekly and year-to-date sales, inventory on hand, percentage changes, and product rankings.

Pandigital's planning team prefers to transfer the SPS-provided data into Excel spreadsheets for analysis, which Carrion said is easy to do. But the company is considering buying demand-planning software that could remove that step. It does not plan to give the data to its factories, which it does not own, Young said.

Pandigital implemented Trading Partner Intelligence at the beginning of its busy period, the holiday gift-buying season, and will be able to use that historical data to predict 2010 demand at the store level, he said.

"Most of our retailers have pretty good perpetual inventory systems," he said, but some take inventory only once or twice a year, and shrinkage and incorrect product placement can affect accuracy. To compensate, Pandigital builds an additional factor into its calculations. Young said the company plans to use the service with new products to be launched later this year.

Next Steps

Create a POS business case

Manage POS data in a demand signal repository

Understand SaaS benefits for manufacturers

Learn about perpetual inventory and its importance


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