Andrii Hlushko, “Svii Market”: “Now Is the Right Time to Take Advantage of Lower-Cost Business Process Automation”
PROJECT PARTNER
Andrii Hlushko, IT Director of “Svii Market”, collage by RetailersUA
The full-scale war is not a reason to postpone the implementation of important projects. In 2022, the grocery store chain “Svii Market” completed the integration project of the automated MySales system. This made it possible to eliminate 99% of manual labor in generating automated product orders and improve the efficiency of promotional campaigns.
The war introduced many unknown factors into the forecasting process, such as extreme demand surges, disruptions in supply rhythms, assortment changes, and write-offs caused by power outages. All of this complicates the operation of the system. However, in the long-term perspective, automation will help reduce write-offs and increase sales. This was discussed in an interview with RetailersUA by Andrii Hlushko, IT Director of “Svii Market.”
— Please tell us about “Svii Market.” What format does the chain operate in?
— “Svii Market” is a convenience store chain. The area of our standard-format store is 100 sq. m, and the assortment includes approximately 2,500 SKUs of food and non-food products. Some stores offer fresh meat sold by weight, while others sell packaged meat products.
We also have our own production facility — a separate workshop from which we deliver products to retail outlets. Most markets have pizza, hot dog, and coffee preparation areas. The smallest store occupies 50 sq. m, while the largest is 400 sq. m, although we are no longer opening stores of that size.
— Overall, how many stores are currently operating?
— As of March 2023, 49 retail locations operate under the “Svii Market” brand, 10 of which are franchised. Last year, we closed two stores because we decided not to keep unprofitable locations within the chain that were dragging us down. We closed two stores but opened only one, and we are currently searching for a location to relocate the equipment.
Our chain operates in Lviv and the Lviv region and is serviced by its own distribution center.
— Who is your target audience?
— We have retail outlets located near educational institutions, student dormitories, and in residential districts. We aim to attract a younger audience because it has greater purchasing power.
— Does the assortment differ depending on the location?
— We have assortment clusters, but it is unlikely that you would find two stores with completely identical assortments.
— Why did you decide to turn to MySales?
— Our goal was to fully automate the product auto-ordering process through the central ordering office. How does our logistics work? There are suppliers who deliver products directly to stores without going through the distribution warehouse. In most cases, these are products from the “fresh” category: milk, bread, sausages.
The remaining goods pass through the distribution center. Before integrating MySales, around 90% of SKUs were managed by the central ordering office. Now this figure has reached 99%. In other words, almost the entire assortment for all stores is now ordered by the MySales system.
With some exceptions, we do not allow stores to manually adjust orders. The orders calculated by MySales are exactly what we send to suppliers. We are currently at the final stage of integrating MySales for regular product orders and are working together to transition our own production facility to MySales auto-ordering.
The system has aligned its calculation algorithms, and we can see that it works effectively.
— Why did you need to change the auto-ordering system in the first place?
— Right now is a moment when software providers understand that demand for implementation projects has decreased, so they are more willing to make concessions. Therefore, businesses can take advantage of this opportunity to automate processes at a lower cost.
At the moment, we are also implementing a CRM system.
— What share of sales in your chain comes from promotions?
— We publish a promotional leaflet with various offers and weekend promotions that lasts for two weeks. Before the war, promotional sales generated 15–17% of revenue.
Then the war began, and until approximately August, we did not conduct any promotions at all because suppliers were not ready to offer promotional deals. Before the war, our leaflet included 250 offers, while the first leaflet we released in the summer contained only 50 items.
Currently, promotions account for approximately 10% of sales.
— Why did you decide to install the MySales promo module?
— Before that, we calculated promotional sales forecasts in Excel, and manual work carries a high probability of errors. We needed an automated solution.
We uploaded the entire two-year history of promotional activity data into MySales. Now we can see that the MySales promo module smooths out statistical anomalies and better accounts for demand elasticity and possible cannibalization.
— 2022 was probably the most difficult time to integrate new systems related to automated forecasting because everything was changing and many external factors appeared that do not follow the standard rules of seasonality, holidays, or weather changes. Completely different factors emerged that are difficult for any IT system to calculate. How would you evaluate how closely MySales forecasts match actual sales?
— I’m not ready to provide exact figures, and I’ll explain why. First of all, there were dramatic demand changes. A vivid example is February 2022. On February 24, our sales tripled. We had never achieved such turnover even during New Year holidays.
Accordingly, we asked MySales to completely exclude February sales from calculations because it was obvious that this data was not relevant for future forecasting.
Starting in October, the entire country experienced electricity supply problems, and we did not always have up-to-date sales data, which affected calculations. Supply rhythms also changed. There were many write-offs caused by power outages, so this was not an issue related to the MySales system.
It should also be noted that MySales requires a larger sales history to forecast new products accurately. The system begins forecasting effectively from the third week onward. The analog functionality does not always work because it is sometimes difficult to find a suitable equivalent product.
And over the past year, half of our assortment has changed.
— What caused this?
— For a long time, some suppliers were unable to ship products because their production facilities had been destroyed. Later, negotiations began because they did not want to accept worsening conditions.
Until we reached acceptable agreements with suppliers, this also affected the available assortment. We decided to import some products independently.
There are also ongoing changes in the supplier and distribution market, with distributors becoming larger and more consolidated. A great deal of the assortment has changed, which negatively affects ordering processes.
— What are the most important results of implementing MySales that you could highlight?
— We have come close to 100% order centralization, which would have been difficult to achieve with the old system.
The second major achievement is the effective promo module. The main advantage is that these processes are now handled within an automated system that is quite easy to manage, and we no longer need to spend extensive resources maintaining it.
In the future, we also plan to use competitor price parsing from MySales.
— Right now, it is difficult to fully analyze the results of the MySales implementation because of the factors you mentioned earlier. What long-term goals have you set for this automation?
— Our long-term goals for implementing MySales are to increase turnover by 5% and reduce write-offs by 15–20%. This can be achieved by reducing inventory levels.
Automated forecasting and auto-ordering can increase sales while maintaining the current inventory turnover rate. In the long-term perspective, these goals are entirely achievable.
Text: Yuliia Bielinska
Photos: Svii Market
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