A New Level of Assortment Management: From BI to Automation in Category Management

The popularity of using software for assortment management automation is on the rise. According to the Global Retail Analytics Market Research Report, the current market value of over $3 billion is projected to grow to $6 billion by 2032. Specialized software allows category managers to efficiently evaluate various assortments, pricing strategies, and promotions to determine the best approach for increasing sales and profitability in their categories. However, many professionals still rely on Business Intelligence (BI) systems, limiting their analysis to just category insights. In contrast, modern software (such as ABM Assortment from ABM Cloud) is less dependent on data quality, adapts to business needs, and even offers suggestions. It enables not just analysis but also category formation, store clustering, SKU status changes, and more. This explains the relevance of the evolutionary shift from Business Intelligence to automated systems.

Features of BI Systems in Category Management

Business Intelligence (BI) systems can be valuable for category managers responsible for analyzing sales and distribution of products within a specific category. However, alongside their advantages, they also come with notable drawbacks.

Pros:

– BI allows category managers to access vast amounts of data from various sources for more objective and comprehensive analysis.

– The system provides analysis of sales data, distribution, and other key performance indicators, updated approximately once a day. This enables quick and informed decisions regarding category development.

– With BI, category managers can receive data in a clear and accessible format, facilitating understanding and analysis of complex information.

Cons:

– Implementing BI is relatively complex and requires significant financial and technical resources. Additionally, data must be prepared and verified for quality before being displayed in the system.

– Some systems are limited in scope; they may only work with a specific volume of data or variables for analysis.

– Even if the system has access to a wealth of data, the quality of that data determines the outcome. Otherwise, BI conclusions can be erroneous.

– Category managers may need additional training to understand and effectively use the system.

– For BI to be effective, it needs to be integrated with other systems (such as warehouse or production management). In some cases, this integration can be quite challenging.

Let’s delve deeper into the specifics of using BI for category managers.

Working with Numerous Reports

Professionals have access to various reports that help track sales and distribution of products within their category. However, managing a large number of reports can be challenging, as effective category management requires not just data collection but also a thorough investigation of causal relationships.

Category managers must spend significant time and effort identifying metrics that may indicate problem areas within the category. If a manager notices a decline in sales at a particular store, they must conduct an independent analysis to determine the influencing factors: price, product quality, competition, marketing efforts, or other elements.

Lack of Flexibility

Not all BI products can adapt to the needs of every user; in most cases, retail has only a limited number of configured reports available. Consequently, category managers often export existing reports to Excel to view metrics in a format that suits them and utilize preferred functions (such as VLOOKUP). However, this practice can turn performance analysis into a routine and cumbersome task, especially if reports must be manually entered into Excel on an ongoing basis.

As a result, performance analytics becomes a complex and unproductive process. An additional risk is the potential errors made by professionals when transferring data from reports to Excel.

The Need for Clear Parameters

BI systems use parameters for data analysis and provide recommendations. If these parameters are inaccurate or fail to account for all aspects, the analysis results may be incomplete or even incorrect.

For instance, if a BI system uses only sales volume as a parameter to determine product performance, the results will be misleading because they do not consider marketing spend or promotional activities. Therefore, it is crucial to define all metrics for analysis in advance and periodically review them to ensure they remain relevant.

Dependence on Data Quality

The quality and accuracy of data are crucial for the effective functioning of BI systems in category management. Irrelevant or erroneous information leads to incorrect conclusions and recommendations regarding product assortments, which negatively impact performance metrics. Therefore, it is essential that the data used in the BI system is validated. The system should also be regularly updated to ensure its relevance.

Lack of Context

BI systems typically rely on numerical data and statistics, which limits their conclusions. For instance, they may not account for competitive pressure, shifts in consumer attitudes towards brands, various consumption trends, or other factors affecting category management.

This can result in decisions that lack context, potentially leading to incorrect or ineffective outcomes. For example, if a BI system indicates an increase in sales for a specific product without considering whether this is due to a temporary promotion or a competitor’s price change, the manager may mistakenly decide to increase inventory of that product.

It is important to recognize that BI systems provide only a limited perspective, and professionals must independently determine a comprehensive course of action while considering the complete context.

It’s Just Analytics

Assortment management is a complex process that encompasses multiple stages: assortment planning, sales analysis, strategy and tactic formulation, and performance monitoring, among others. While a BI system can assist in planning these stages, it is important to understand that it does not replace the expertise and experience of category managers; rather, it serves as a tool to support and facilitate their work.

Are there market solutions that genuinely enhance efficiency and forecast accuracy for category managers? This will be discussed in the next chapter.

Category Management with Assortment Automation Software (AA)

Assortment automation software enables category managers to conduct various experiments with assortments and strategies to identify the best approaches for increasing sales and profitability. For example, they can evaluate different pricing and promotional strategies to find the optimal approach for each product category.

Furthermore, the software provides access to sales, inventory, and other relevant data, allowing for more precise analytics and informed decision-making in assortment management.

Several powerful software solutions exist in the AA category on the market. For instance, ABM Assortment from ABM Cloud helps category managers effectively manage assortments and enhance sales and profitability.

Let’s explore the features of using AA systems in category management, using ABM Assortment as an example.

Managing All Aspects of Assortment in One System

Digitalizing assortment management aspects within a single system can be beneficial for category managers, as it allows them to work with all levels of the category in one place. This means that professionals can:

• Plan and monitor category performance
• Track inventory status and have access to sales data
• Maintain crucial information about the performance of each individual SKU in one system.

Such a system enables convenient and rapid operations, ranging from global category representation planning to detailed information about each SKU. For instance, professionals can view sales data for a specific category across different stores and markets, explore consumer behavior, analyze market trends, and much more.

This system allows for better category control and tracking of dynamics, which can aid in making effective decisions. However, it is essential to remember that automation cannot replace human experience and intuition. Therefore, the manager must remain an active user of the system to understand and analyze the data received.

Flexibility of the System

Assortment automation software (AA) enables category managers to effectively test various strategies and approaches to assortment management. This allows for quick responses to changes in market conditions and adjustments to strategies for optimal outcomes.

For example, ABM Assortment helps specialists evaluate product assortments, pricing strategies, and promotions to determine the best approach for increasing sales and profitability in categories.

This solution is not limited to large businesses. Modern AA products also target the small and medium enterprise segment, which accounted for over 60% of the market in 2022. Such companies can now utilize inventory management software to optimize storage and distribution operations and gain a competitive advantage.

System Suggestions

One of the key advantages of AA software is the ability to receive suggestions and recommendations for optimizing product categories. The system can analyze data related to sales, expenses, prices, and other factors, recommending changes that could enhance the financial performance of the category. This enables specialists to focus on strategic aspects of assortment management instead of being tied up in constant data analysis and developing their own recommendations.

Suggestions can pertain to the following aspects of assortment management:

– Inventory optimization

– Pricing strategies

– Promotions

– Formation of assortment clusters, etc.

As a result, categories can implement changes more quickly and efficiently, creating a favorable environment for increased sales and profitability. Notably, among specialized AA software, only ABM Assortment can provide recommendations on what changes should be made to improve financial performance, thus making the work of category managers more effective.

Better Adaptation to Business Needs

AA solutions are designed with business needs in mind and can provide insights tailored to specific situations. For example, the system may recommend restocking popular fast-moving items or increasing inventory levels during promotions. 

Additionally, category management automation solutions can be more flexible compared to BI systems. BI is typically suited for general analytics and reporting but may not always consider the specificities of individual businesses and product categories.

AA can be customized to meet specific business needs and product categories, ensuring better alignment with company requirements. For instance, ABM Assortment is developed with various business specifics in mind, allowing it to propose solutions suitable for particular scenarios.

Reduced Dependence on Data Quality

The actions of category managers significantly influence the financial performance of a company. Therefore, the accuracy and reliability of the data on which decisions are based are critically important. AA software operates on algorithms that enable data correction and cleansing before use, thereby minimizing the impact of errors and inaccuracies.

As mentioned earlier, in BI, data quality is crucial; otherwise, the results may be overly general or incorrect. Thus, the implementation of AA systems reduces reliance on data quality and allows category managers to implement more accurate and reliable decisions. In particular, ABM Assortment can adjust and process data before use, reducing the likelihood of erroneous analysis.

High Efficiency

Automation of category management using specialized AA solutions helps category managers achieve high efficiency. This may include:

• Automating sales and inventory monitoring processes
• Demand forecasting, assortment optimization, and pricing strategies
• Decision support

This creates conditions for increased sales and profits through a better understanding of consumer needs. For example, businesses that invested in demand forecasting technologies achieved 90% accuracy compared to only 60% accuracy with manual forecasting.

Conclusions

BI systems can be useful for data analysis, but they do not provide complete automation of category management. This means that category managers often rely on complex and frequently inaccurate manual processes that can consume significant time and effort. 

Category management automation represents a new level of assortment management, enabling companies to utilize their assortments more effectively, ensure high data quality, and respond to customer needs.

BI can assist category managers in data analysis and provide insights into which decisions may be beneficial for the business. AA software can offer complete automation of category management, directly impacting sales and revenue growth. Furthermore, AA systems are less dependent on data quality, as they are trained to correct and process information before use.

Both approaches have their advantages, and the best option depends on the specific needs of the business. In some cases, it may be more beneficial to use both systems together to gain a more comprehensive view and ensure maximum efficiency.