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Mining Insight From Online Orders

Multi-channel retailer uncovers millions in online revenue and cost reduction opportunities through advanced analytics


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Abstract

A major retailer wanted to determine if it should continue to outsource its online purchase process. The search for answers meant analyzing its current supply chain and how orders were made and filled, looking for ways the process could be made more efficient and profitable.

The Challenge

The company typically reports all sales as a whole, without breaking out in-store sales or online sales, as part of its integrated, multichannel approach to doing business. Considering the volume of sales (in the tens of billions), even small enhancements to the order and fulfillment process could potentially add up to significant savings. But first, the company needed to know more about online orders in particular. Were there regional demand patterns? Seasonal demand patterns? Were some items usually ordered together? Answering these questions required detailed analysis of millions of orders.

How We Helped

The Deloitte team helped the company apply analytic techniques to scrutinize more than 12 million online orders. Pareto analysis revealed regional demand concentrations of thousands of items. Further market basket analysis identified strong and highly relevant item-order associations, and also quantified seasonal items that had short life cycle demand.

Solution

The analyses revealed an opportunity for the retailer to increase revenue by $5 million annually by improving cross-sell and up-sell focus on orders. Another option was uncovered that could reduce annual costs by $3 to $6 million by reducing the number of purchase orders issued. The project also provided the insights necessary to improve supply chain performance by improving in-stock inventory levels. Overall, the supply chain analysis provided key supporting facts that led the retailer to end its relationship with its third-party provider and operate online independently.

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