How to Understand Sales Pattern in Retail Business?

It is difficult to make predictions, especially about the future. – NEILS BOHR, Danish physicist

What is Sales Pattern?

The sales pattern is a collection of data about the sale of a particular product or group of products in the business for a given period and displaying it graphically to understand it’s behavior. These sales patterns are used in retail businesses to identify whether the business goals are being met, the effect of price changes of a particular product impacts sales, sales response to advertising, etc.

Understanding the sales pattern in retail business always helps to correlate the sales variations with respect to the various events happening in and around the business every day. The continuous monitoring of the sales pattern would certainly help the retail business to foresee the upcoming risks and take precautions.

Underlying Issues

By just looking at the numbers one cannot decide whether the low sale caused by a natural event or special event. Natural events are inherited in business as these causes cannot be removed. It is always going to be. For example, every day sales will have some variation, which cannot be controlled. But, some events would externally impact the sale. For example, the absence of employees, sudden power supply failure, holidays, etc.

Special events need attention and the actions to be taken immediately for these events to avoid recurrence. When these variations are studied using a statistical tool called ‘control chart’, we can differentiate special and natural events clearly.

Understanding Sales Pattern

Let us take an example of a fruit seller. The seller wants to identify whether his sales pattern in retail business follows normal special events. He has a sales record for the last 3 months for our analysis. The below-mentioned data provides the sales summary for 15 days which is taken as a sample from the whole set of data for representation purposes.

There are many types of control charts available. The most relevant control chart for this analysis is the Individual Moving Range (I-MR) Chart. To understand the selection guide, calculation, and interpretation of the control chart, I would recommend you reading further by clicking here.

The above figure shows how the control chart would look like for the given sales data.

The top line graph is an individual chart that represents the sales trend for individual value. Its centerline indicates the mean value of sales (Rs. 7749) which means the complete sales value for the 15 days lies around this mean value with the variations. These variations are from maximum value Rs. 10,415 to a minimum up Rs. 5,083.

These values are drawn as an upper control and lower control lines.

Any values lying between these lines indicate that the sale value has normal variations around the mean.

Now, let us look at the second graph which is a moving range (MR) chart. This chart is plotted with the difference in the sales value of the previous day and current day. The upper and lower lines give the control limits of the values which are calculated using formulae.

Conclusion

By looking at the chart, you can understand that the sales value between 10 Nov and 11 Nov has a huge difference and it almost reaching to the lower control limit. Though the limits outside the control line call for an action, it is advisable to understand why the sales variation is more during the above-mentioned days.

The fruit seller should be advised to identify the reasons for this variation and prepare himself for the future.

MR-chart is useful to understand the process variability with smaller samples and individual data. The understanding of this statistical tool would help a retailer in knowing the external impacts of a business and help him to take correct decisions.

‘5 Whys Analysis’ a Step-by-Step Guide for Beginners

5Whys Analysis is one of the simple and best tools to identify the root causes of a problem.In this article, we will explore the detailed structure of 5 Whys Analysis, Pre-requisites, Correct usages and its Limitations.

‘5 Whys Analysis’ a Step-by-Step Guide for Beginners

 What is the purpose of 5 Whys Analysis?

Any problems can be addressed with corrections and corrective actions. While corrections deal with mainly on the affected parts, the corrective action focuses on the root cause of the problem. The purpose of asking 5 Whys is to understand the cause of a problem. Causes are required to prevent the occurrences or failures.

For example, a TV manufacturer’s packing team finds a visible scratch on a TV panel in its automatic packing line. Immediately, the scratch is removed by using appropriate surface finishing processes. The actions taken to remove the scratch is called as correction. But the issues not resolved yet.  The reasons for the scratches yet to be identified and to be removed from the process. This will ensure that the same mistake will not repeat. Now, the TV manufacturer’s operation team finds that the scratch happened due to some vibration issues occurred in one of its material handling devices in the automated packing line. Necessary actions taken to minimize the vibration in the device. The actions taken against the cause of the issue is called as corrective action. In this case, the cause is excessive vibration of material handling device. The purpose of 5 Whys analysis is to find out the cause of the problems.

 What is 5 Whys?

5 Whys Analysis is a simple way to ask ‘Why’ 5 times specific to a problem statement, for identification of root cause. For example,

1.   Why the scratch occurred at the TV panel ?

Because, of improper handling by the robotic devices.

2.   Why the improper handling occurred?

Because, the robotic arm was not holding the panel properly, due to vibration.

3.   Why the vibrations occurred?

 Because, the arm bolts were not tightened enough.

4.   Why the bolts were not tightened enough?

 Because the operators were not aware of the tightening torque.

5.   Why the operators were not aware?

Because, maintenance check list not mentioned the required tightening torque of the bolts

By simply asking 5 whys, in this case we could find that the  missing information related to torque requirement in the maintenance checklist has caused the scratches in the TV panel. Hence the corrective action would be revising the maintenance checklist by including torque tightening limits.

 How to use 5 Whys?

There are chances to use the 5 Whys incorrectly. The answers to the preceding questions decide the questions for the succeeding one. Hence, a small misunderstanding, misinterpretation and lack of process knowledge would lead to hide the real causes from our eyes. Following example is one form of incorrect way. For simplification, the example used in the above paragraphs are considered here; 

Sl.	Correct Way of asking 5 Whys	Incorrect Way of asking 5 Whys
1.	Why the scratch occurred at the TV panel ?     Because, of improper handling by the robotic devices.	Why the scratch occurred at the TV panel ? a.       Because, of improper handling by the robotic devices.
2.	Why the improper handling occurred? a.       Because, the robotic arm was not holding the panel properly, due to vibration.	Why the improper handling occurred? a.       Because, the robotic arm was not maintained properly.
3.	Why the vibrations occurred? a.       Because, the arm bolts were not tightened enough.	Why the robotic arm not maintained properly? a.       Because, the maintenance operators were not done their work effectively.
4.	Why the bolts were not tightened enough? a.       Because the operators were not aware of the tightening torque.	Why the operators were not done their work effectively? a.       Because of lack of supervision
5.	Why the operators were not aware?         Because, maintenance check list not mentioned the required tightening torque of the bolts	Why lack of supervision and training observed??        Because, they have not adequately trained.

The table shows that how an analysis changes when the focus shifts from vibration to operators work. It indicates, lack of knowledge and information on the subject can lead us to execute an incorrect 5 Why Analysis. Therefore, while doing the analysis one must take proper care in identifying the questions and to ensure that all the concerned people relevant to the issues are present during the analysis, including the subject matter experts.

Limitations of 5 Whys Analysis

The analysis requires more practical knowledge and experience on the subject. It mainly depends on the person’s skill.

1. There is no assurance that, within 5 Whys one could obtain the root cause of the issue. (Sometimes, it requires less than 5 Whys or some time it would be more)
2. In case of more than one root cause, this 5 Whys Analysis does not always address those causes. It is up to the person who chooses based on his knowledge.
3. The root causes not derived through statistical analysis hence there would be always some subjectivity attached to it.