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Few companies can boast a finance department that functions in perfect harmony with its operations. But at UK catalogue retailer Littlewoods, the disconnect was once so acute that operational staff simply did not believe the sales figures finance were using to plan their budgets.

Financiers would consistently produce optimistic sales forecasts; this led to stock ordering way beyond the capacity of Littlewoods’ warehouses.

This would be problem enough for any retailer, but Littlewoods, the UK largest catalogue company with annual turnover of £2.1 billion, processes 400,000 parcels a day with a return rate of 50%. Warehouse space is a precious resource.

Under competitive pressure from online retailers and reeling from an abortive attempt to launch as a high street retailer, the company could no longer tolerate the inaccurate budgeting caused by the cross-purposes of finance and operations. This was the principle trigger for the company’s corporate performance management (CPM) initiative, explains Mark Bodger, formerly business information controller at Littlewoods and now professional services director of business intelligence consultancy ICit.

At the root of the dual view of the business held by operations and finance was variation in the way key data was defined. There were, for example, different definitions of what constituted a sale.

Adding to that problem was the less-than-transparent system for warehouse performance management: one worker updating 250 Excel spreadsheets by hand.

With the TM1 product from CPM vendor Applix, Bodger introduced a system that could tolerate multiple data definitions, update in real time and scale across the whole business. “This allowed the finance department, the warehouse and the call centres to operate in their own ways, but with the same data,” he says.

This provided Littlewoods with a ‘single version of the truth’ and boosted operational performance through insight.

Following the implementation, the budgeting process has not only improved in its accuracy, but also its frequency. The budgeting cycle used to last three to four months; now it can be as short as a week.

Analyses enabled by TM1, such as product mix simulation and seasonal demand tracking, have helped to ensure that every square inch of warehouse floor is used as profitably as possible.