You can’t optimise 270 million SKUs based on “gut feel”

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In the poll that kicked off the Premier Business Leadership Series Executive Viewpoint discussion, a majority of the audience disagreed with the proposition that most CEOs appreciate the importance of analytics in managing their organisations and rely on them far more than instinct or gut feel.

Well, if that is the case it will need to change soon. CEO of SAS Dr Jim Goodnight gave an example that illustrated this point in very stark terms. He remarked that analytics has been conquering one industry after another: pharmaceuticals, financial services, telecommunications. One of the latest to move away from gut instinct is retail.

“We are working with Macy’s which has three million stock-keeping units (SKUs) throughout 90 stores. That’s 270 million items. They use SAS to find the ideal price point to move these out of the store at the right speed – especially with so many seasonal items that need to be sold quickly or they are worth nothing.”

What’s more, thanks to high performance computing Macy’s can do this “mark-down optimisation” in a couple of hours.

Jim estimated that there is currently a 50-50 split on the analytics versus gut feel divide but predicted this will change to 30-70 very soon. It's not hard to see why.

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