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Keith Dunn: Chapter 8.1.2: Performance Analysis (Continued)
Posted On: 11-05-2009 08:08:06 AM

8.1.2 MORE GUIDELINES

8.1.2.1 FOCUS ON LIKE FOR LIKE PERFORMANCE

Outlet openings, closures or refurbishments will cause a step change in performance which, although planned, will still need to be taken into consideration when comparing performance to last year. Like for Like performance should be used wherever available to avoid the distortions caused by outlet activity.

8.1.2.2 DONíT GET INTO THE DETAIL TOO QUICKLY

Itís always worthwhile to look at the bigger picture first and establish your priorities before getting in to the detail. You may not be able to do everything and often have to concentrate on the areas which are likely to have the biggest immediate or potential effect on performance.

EXAMPLE

You would use the weekly trading report, a section of an example of which is shown below, to prioritise the departmental analysis for your area, Soft Furnishings. On the basis of the information available which area(s) would you want to concentrate on and why?

  SALES VALUE ACTUAL SALES V-PLAN % SALES V-LY % MARGIN VALUE ACT MARGIN V-PLAN % MARGIN V-LY%
COMPANY 1,712,440 2.2% 7.3% 750,559 1.8% 8.4%
SOFT FURNISHINGS 292,167 (2.3%) (5.0%) 135,378 1.3% 0.2%
BEDDING 130,158 7.6% (3.6%) 58,156 9.7% 0.2%
TOWELS 49,635 1.6% 6.2% 21,797 0.8% 7.9%
CURTAINS 85,921 (9.8%) (9.8%) 39,121 (10.3%) (9.8%)
CUSHIONS 17,577 10.2% 22.4% 8,377 13.2% 26.9%
TABLE LINEN 17,876 (0.6%) 10.0% 7,926 (0.4%) 15.8%



8.1.2.3 ESTABLISH THE ďWHY?Ē

If you can establish why the performance was as it was, and it isnít always straightforward to do this, you can replicate what worked and eradicate what didnít. To do this, once you have decided on your initial priorities, drill down from the top line numbers though and across the product hierarchy from department to SKU, and to outlet and attribute and try to identify any patterns, commonalities or exceptions.



Bear in mind that the performance of a hierarchy parent is the composite of the performances of itsí children. A department that is performing well overall can still contain both good and bad sub-departments and as you drill down new insights will be revealed.



8.1.2.4 BE OBJECTIVE

Avoid emotional interpretations of the facts at all costs. Donít distort analysis to support your prejudices, donít get emotionally attached to particular products and donít let a desire to tell your boss what they expect to hear to blind you to the truth. Avoiding the truth now will only cause you greater pain later.

8.1.2.5 FOLLOW THE MONEY ...

You should always apply the Ď80/20í rule and focus on the areas that will make the biggest contribution to performance. Itís no use concentrating on something that contributes 5% of sales if the area that contributes 50% is being neglected. This doesnít mean that you ignore the smaller areas Ė after all they could represent big opportunities Ė only that you look after the most important areas first.

8.1.2.6 Ö BUT DONíT IGNORE THE SMALLER OPPORTUNITIES

Not all opportunities are immediately going to deliver huge returns and sometimes you have to search out the smaller opportunities which wonít make much difference on their own which will make an impact overall. Improving the performance of only the worst performing outlets or buying a relatively small additional quantity of a best selling option , for example, will still have an impact on the top line.

This principle is especially pertinent in mature businesses where there may be limited room for improvement and an improvement in performance of only half a percentage point can be the difference between success and failure.

8.1.2.7 REFERENCE YOUR ORIGINAL ASSUMPTIONS

Todayís performance is partly a result of the actions you took yesterday and as a result should always be analysed with reference to your original assumptions. While these will be reflected in the current plans it is more an understanding of why you followed a particular course that you need. Why, for example, did you buy such a small quantity of the product that is now performing so well and running short of stock? Contextualising performance in this way will help to improve your decision making.

8.1.2.8 DONíT NEGLECT THE PRODUCT

Sometimes the reason why a product has or hasnít worked canít be established by looking at a set of numbers but becomes very apparent if you look at the product itself. Using the description alone will never give you the full picture and it is always good practice to have samples of the range handy when you are analysing product performance, together with full sets of material or colour swatches if appropriate.

8.1.2.9 WORK WITHIN YOUR ZONE OF CONTROL

A lot of effort can be wasted if you focus your analysis on solutions that are outside of your control and you should always concentrate of finding solutions that you can take responsibility for delivering. If a range is performing badly because it is too highly priced for example then as a merchandiser or buyer you will generally be able to see to it that the price is reduced. If, on the other hand, the solution involves improving visual merchandising then as there is no guarantee that the team responsible will be able to deliver the required improvements any performance improvements that you have assumed will result may not be achievable.

 
 
 

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