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Eating the competition

A single data repository enables Lund Food Holdings to level the playing field.

by Patricia Keefe

The retail game in general is not for the weak-kneed—grocery retail, even less so. Consider that the average independent grocer in 2007 reported a 1.94% net profit (before taxes), according to the National Grocers Association, and it becomes clear that if you are going to play, you had better come prepared. For Lund Food Holdings Inc., that means looking to "big company" solutions while emphasizing strategic expertise when it comes to technology partners.

Lunds
"It was important to create a [data] warehouse that had a single source for all information and knowledge areas. We wanted to have analysts instead of report writers," says Kevin Baartman, vice president of information services for Lund Food Holdings.

The small Minnesota-based, high-end grocery chain needed to modernize its time-consuming process of financial analytics in order to level the competitive playing field and give its analysts better visibility into the company's business and financial operations. It also needed a foundation capable of supporting plans for business intelligence (BI)-driven profit-building programs.

The 21-store enterprise bucked conventional wisdom when it decided to tap into a "big enterprise" data warehouse and BI platform to make better use of its small IT and financial labor pools. The basic plan was to simplify, update and speed up the process of data collection, integration and distribution, as well as report creation and analysis.

"There's much excitement about this right now on the business side, especially in cases where they had to wait for month-end reports before," says Kevin Baartman, vice president of information services. At issue were the missed opportunities that those late data deliveries represented, according to Curtis Funk, director of the grocery area. "It's seldom too late to react; it was just the time-wasting when you could have reacted sooner," Funk explains.

Too little data, too late
Lund's channeling of information into five separate data silos had led to a cumbersome extraction and reconciliation process that delivered results in spreadsheets. This format forced the analysts to spend as much time preparing and reconciling reports from different operational systems as they did analyzing them. The system inhibited their ability to react in a timely manner to the resulting data points and diverted resources from more strategic tasks. "It was important to create a [data] warehouse that had a single source for all information and knowledge areas. We wanted to have analysts instead of report writers," says Baartman, who also sought to reduce the reporting burden on his staff. Analytics efforts were further handicapped by the inability to drill down deeper into the data to get to the level needed to make smart decisions.

This lack of data granularity was particularly frustrating for Funk, because it compromised his ability to look at any particular store and determine how to correct problems. "We could get to a category level, like frozen food or pizza, but not go deeper, for example, to the brand level," he explains. This left the company guessing which brands were over- or under-performing, why that might be and what should be done about it.

Baartman knew he needed to move Lund Food Holdings to a single, integrated data repository intertwined with BI. After networking with some peers in the industry, he quickly narrowed in on one solution. "They told me I really needed to take a look at Teradata, that it was becoming much more attractive to mid-tier companies," he says. He also found that the technology today takes less time to deploy and costs much less in the development process.

"I never thought we'd be able to afford Teradata," says Baartman. But he soon discovered that the technology was competitively priced. Also attractive was the Teradata mantra of "simple and capable." According to Baartman, "That [concept] pretty much hits the nail on the head in terms of the ease of use for the staff, and the capability of getting the information to the people who need it. So far, the solution we've put into place does exactly that." Adds Funk, "We're now able to download information from the operations system on a daily basis, instead of waiting for a monthly report."

Lund Food Holdings Inc. at a glance

> Headquarters: Edina, Minn.
> Operation: Chain of upscale grocery markets featuring gourmet, high-quality foods, wines and spirits shops, floral and catering services, a culinary school, cooking demos, pharmacies and online shopping with home delivery
> Founded: The privately held company took its present form in 1997 with the merger of the Lunds and Byerly's chains
> Locations: 21—10 Lunds and 11 Byerly's stores in Minnesota
> CEO: Russell "Tres" T. Lund III
> Web site: www.lundsandbyerlys.com

Baartman looked briefly at doing some system consolidation with structured query language (SQL) and deployment via a spreadsheet program, but he soon determined that was not something he wanted to get into. He also looked "real quick" at IBM and Oracle, but the technical knowledge needed for those systems did not fit with the core competency of Lund's IT staff. Baartman did not want to have to create "specialists" with his limited resources. Teradata was not only "really good at solving those enterprise-wide problems," he says, but also offered impressive performance.

While technical features certainly weighed heavily on the vendor selection, the deciding factor had more to do with strategic partnering, which is where Teradata's more than 25 years of market expertise came to bear. Retail expertise was critical for the company. "I wanted a strategic partner versus a technical partner," says Baartman, adding that in his view, "the value lies in the expertise; the tech-nology is becoming a commodity." After a business opportunity assessment was completed, Baartman says, it became evident that Teradata offered more than technical expertise: "Teradata had a lot of retail experience, which was very important to me. I needed professional services to help me deploy this [solution] in a timely manner."

Quick turnaround
After three weeks of pilot testing, the Teradata solution was deployed in March 2008, just five months after the company signed a contract. "The system was easy to work with, quick to implement and, so far, has performed as advertised. There have been no unpleasant surprises," Baartman says. "From the time we turned on the system to the time we interfaced and put data in the warehouse—it was days. It was relatively painless getting data out of the operational system and putting it into the repository."

Lund Food Holdings is looking for an 18- to 24-month return on investment (ROI) in the form of increased gross margins and sales, driven by gains in efficiencies, consistency and speed that are expected to make business users' decision making more agile and accurate. A more immediate impact has been timely access to information. "I'd say we're moving from, in many cases, weekly reports to daily reports," says Baartman. He was also looking for the analysts to do a lot of the drill-down and analyses on their desktops, an expectation already being met via MicroStrategy. "Of course, with that comes more issues; the more we give them, the more they want," he adds with a laugh.

Looking to the future
Having launched the first "basic" phase of its data warehouse strategy, Lund Food Holdings is gearing up to tackle more problem-specific issues by expanding its BI applications and leveraging MicroStrategy's information dashboards.

Phase II, a two- to four-month effort, will focus on better understanding the buying behavior of customers (market basket analysis), as well as supporting the online customer service staff. A key focus will be on inventory optimization, says Baartman. This involves examining how to refine the assortment of products in the store, the amount of product on the shelves and the effectiveness of various promotions. Phase III, slated to happen by year's end, will cover the development of a customer loyalty program and shopping pattern data, while also extracting cross-merchandising data.

At some point during the year, Baartman says, IT will build a bridge to pull data from its financial applications into Teradata and MicroStrategy. Several years down the road, during Phase IV, Baartman plans to deploy MicroStrategy Mobile to provide BI reports to mobile users.

While Baartman does not foresee a direct impact on third-party business partners for some time, he does expect that better data—and more timely access to it—will better equip category managers to track the performance of suppliers and show those suppliers factual data regarding their performance in stores.

Even as Lund Food Holdings looks ahead to launching new initiatives, such as a customer loyalty program and better-positioned market promotions, the future is now. Just months into its deployment of a data warehouse and BI platform, the company is already ringing up the payoff from data integration, information consistency and drill-down capabilities in the form of improved decision making and deployment of staff resources. In a highly competitive market populated by large-scale enterprises, this grocery chain is building a strong foundation on analytics to not only play but win. Its early ROI goes to show that small companies willing to take on big technologies can create a recipe for success. T

MicroStrategy offers better decision making

Strong expertise in retail business intelligence (BI), coupled with a strong competence in category management, helped to sell MicroStrategy's BI platform to Vice President of Information Systems Kevin Baartman's business peers at Lund Food Holdings Inc. IT chose the data warehouse, but Baartman pulled together a committee of about 10 people from relevant function areas and IT to settle on a BI platform. He wanted to make sure that business needs were met and that users were comfortable with the tool. Over a two-month period, the committee helped create the requirements and request for proposals, and it was involved in the testing phase. "The BI tool is the layer between the business and the technology—it was important that [users] choose it," Baartman explains.

The business side desperately needed to free up and better deploy its financial staff. It needed to gain more valuable views into store operations, product sales, inventory management and financial performance. Under the old system, the analysts were spending their time assembling reports instead of providing strategic insights. The business side also wanted to get better data faster to its analysts, says Curtis Funk, director of the grocery area. One way of doing this was empowering them to create customized reports at their desktops instead of having to run to IT every time they needed something. "We're already seeing reduced dependency between the business users and IT when it comes to reports," says Baartman.

"MicroStrategy allows us to ask more questions across a broader spectrum of the business," says Funk. "We can simply go further, really identify what the issues are and come up with more solutions." He also praised the BI platform for its ability to add new metrics to existing data: "No matter how we scope out a report, once you see it, you will run back to IT looking for three more data variables. MicroStrategy is much more adaptable in how it manages data."

Baartman notes that even when analysts make the same decisions they would have made before, they can now do so with much more confidence. The committee looked at two packages. MicroStrategy easily gained the upper hand for a number of reasons, including its level of integration with Teradata technology, its platform capabilities, ease of use on the desktop, functionality and scalability. "We did not want to hit the limits of the tool six or eight months down the road," says Baartman.

—P.K.

Behind the solution: Lund Food Holdings Inc.
Database: Teradata Database V2R6.2
Server: Single-node Teradata 5450 Server
DBAs: One
Data model: Teradata Retail Logical Data Model (RLDM)
Operating system: UNIX MP-RAS
Storage: 2.8TB
Teradata Utilities: Teradata Tools and Utilities 8.2
Tools/applications: Retail Decisions, Teradata Warehouse Miner and products from MicroStrategy

Patricia Keefe is a freelance writer and editor specializing in business and technology.

Photography by Travis Anderson

Teradata Magazine-September 2008

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