Published on 06-Feb-2012
"Metrics are about dynamics, reactions and agility. With Cognos, we’ve gained an effective means to deploy the insights our managers need to rapidly effect positive changes throughout the organisation." - Sveinn Arnason, Director of IT, ÁTVR
Business Analytics, Business Intelligence, Information Integration, Optimizing IT
IBM Business Partner:
Áfengis- og tóbaksverslun ríkisins (ÁTVR) is a government-controlled retailer of alcohol in Iceland, formed in 1922. The company has around 350 employees, of whom 200 work full-time. The company has 47 stores across the country, and is the only licensed distributor of products with an alcohol content greater than 2.25 percent by volume. Despite being a government-controlled company, ÁTVR is run like a normal business.
Icelandic alcohol and tobacco monopoly Áfengis- og tóbaksverslun ríkisins (ÁTVR) recognised the potential of using metrics to streamline its business, but needed to implement a professional business intelligence solution to enable managers to monitor key performance indicators more easily.
After experimenting with various metrics in spreadsheets for some time, ÁTVR implemented IBM® Cognos® Business Intelligence software, and uses Cognos Metrics Studio to manage and track a wide range of performance metrics in the company’s stores, warehouses and head office. The solution provides a ‘single version of the truth’ as a reliable basis for decision-making.
Reduced warehouse personnel costs by 29 percent through more accurate workload planning. Cut store personnel costs by 10 percent by calculating staffing requirements based on litres of alcohol sold per hour.
Enables ÁTVR to create a weighted rating system for each store, incentivising store managers to meet corporate objectives. Enables store managers to see individually tailored reports that help them to identify the the root causes of underperforming metrics, and take corrective action.
Áfengis- og tóbaksverslun ríkisins (ÁTVR) is a government-controlled retailer of alcohol in Iceland, formed in 1922. The company has around 350 employees, of whom 200 work full-time. The company has 47 stores across the country, and is the only licensed distributor of products with an alcohol content greater than 2.25 percent by volume.
Despite being a government-controlled company, ÁTVR is run like a normal business. As Sveinn Arnason, Director of IT at ÁTVR, explains, “We naturally have a business strategy like any other company. For that reason, metrics are very important to us – by getting accurate measurements from across our stores, we can adapt our strategy to ensure that all parts of the business are performing well.”
The need for a business analytics platform
ÁTVR was previously reliant on spreadsheets to manage data on key metrics such as litres of alcohol sold per hour, product loss through breakages and shrinkage, and ‘mystery shopper’ success rates – monthly tests to see whether store personnel are conducting proper ID checks to prevent customers under the age of 20 from buying alcohol. Such metrics helped the company to identify where improvements were needed, but the maintenance of the spreadsheets became a significant pain point as the range and complexity of metrics began to intensify.
“In the past, we only used spreadsheets to manage data on several key metrics, but that platform simply wasn’t designed for our workload requirements,” comments Kristján Guðjónsson, Project manager, responsible for scorecard activities and planning at ÁTVR. “Some of the workbooks were standalone and offline, so we couldn’t be sure we were using the most current version of all our data. Performing analyses in this way was also taking up a lot of work hours. We recognised the potential of metrics to streamline our business, but we knew we couldn’t move forward without addressing the shortcomings of our metrics management and reporting process.”
ÁTVR wanted to reduce the cost and complexity of its metrics analysis process, and obtain deeper business insights that would improve both profitability and service quality. In order to achieve this, the company needed to implement a professional business intelligence solution.
Implementing a solution
ÁTVR engaged IBM Business Partner Advania to implement a solution. “We chose Advania for their high level of expertise in business intelligence software,” says Sveinn Arnason. “We wanted a strong partner who could help us improve the effectiveness of our reporting, as well as setting up the new platform. We were confident that the Advania team could help us to achieve this.”
Advania initially implemented version 8 of IBM Cognos Business Intelligence, and performed the upgrade to version 10 soon after it became available. “We have a service agreement with Advania, so upgrading to Cognos 10 proved cost-effective,” says Sveinn Arnason. “The Advania team handled the Cognos 10 installation, and are now working with us to build new metrics.”
ÁTVR now develops metrics in-house with spreadsheets before using Cognos Metrics Manager to create monthly scorecards that collect and monitor a wide range of key metrics, including mystery shoppers, work hours, product loss rate and sales performance. For example, by combining data on litres sold per store with total work hours per store, ÁTVR can see how many litres are sold at each store per work hour, which can be used to compare different stores fairly, irrespective of size.
“Working with our Business Partner, we created a company scorecard, a retail scorecard, a warehouse distribution scorecard, and we’re currently developing an office administration scorecard,” says Kristján Guðjónsson. “We felt it was very important to be fully involved throughout the development. Business intelligence means staying connected to all the different parts of your company, and by developing our metrics from the ground up, we gained a greater understanding of how our business works than we would have if we’d outsourced the process.”
These monthly scores are sent first from ÁTVR’s head office to the company’s four area managers, who then go through the scorecards with their store managers, discussing trends and changes. The store managers then relay this information to their staff, and create a plan to improve the scores.
Getting the most out of metrics
Since implementing the Cognos solution, ÁTVR has gained deeper insights into many of its processes, which has made it possible to streamline a number of areas of its business. The company no longer has to use many independent workbooks to access its data, as all information is accessible via Cognos and automatically updated from a central database. This helps to minimise the risk of calculation errors and ensures a single, up-to-date version of data that everyone in the company can trust.
“The IBM solution has helped us to make significant improvements throughout the organisation,” says Sveinn Arnason. “Each month we give each of our stores a rating of zero to ten, based on six or nine individual metrics, depending on the size of the store. At the end of the year, we award a bonus to the staff of the best large and small stores, which are the ones with the highest average monthly rating. By doing this, we’ve helped to inspire friendly competition between our stores, which has helped drive up service quality.
“With Cognos, we have the ability to drill down to individual metrics in each store, so we can instantly see a store’s weak and strong points. If, for example, we see that the store’s product loss rate is too high relative to its size, we can weight that metric to account for a higher proportion of their annual rating. This shows the store managers where our main emphasis lies, and it works as a real incentive for the staff to improve that metric and get themselves back in the running for the end-of-year bonus.”
Similarly, mystery shopper success rates that used to be at about 30 percent have been boosted to 90 percent by increasing the weighing of this metric in the overall store scores.
“Because we’re in regular contact with all our shops, we get a 360-degree view of our business and can make improvements whenever we see the opportunity,” says Sveinn Arnason. “By drilling down into the data, we can see when a shop is over- or under-staffed, and take action accordingly. We now set a new standard for staff levels every four months, which has cut our personnel costs by 10 percent.”
By effectively utilising its business intelligence tools in this way, ÁTVR has also improved its control of staffing costs. Warehouse volumes have fallen 10 percent since 2009, but the company has been able to decrease its personnel count by an impressive 29 percent over the same period. Likewise, total working hours in ÁTVR’s larger stores were decreased by 19 percent between 2008 and 2011 in response to a seven percent drop in sales, but, despite this, increases in efficiency meant litres of alcohol sold per hour actually increased by 13 percent.
“Cognos is a sophisticated tool, but the tool in itself isn’t enough – you have to have the motivation within your company to harness it properly and gain the real benefits,” concludes Sveinn Arnason. “We are fortunate to have the full support of our management as project sponsor, which is absolutely vital to drive the business to make the improvements indicated by the business intelligence data. Metrics are about dynamics, reactions and agility. With Cognos, we’ve gained an effective means to deploy the insights our managers need to rapidly effect positive changes throughout the organisation.”
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Products and services used
IBM products and services that were used in this case study.
Cognos Business Intelligence, Cognos Metrics
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