Extending BPM beyond finance. As a new CFO in the supermarket business, I quickly realized that a common industry practice to improve profits was to ship items from the warehouse to the store location since that was the point of revenue recognition. Most retailers, even with scanning at check-out, did not have the ability to record the exact profit at the point of sale since profit depended on the inventory value remaining in the store.

With more than 30,000 SKUs (stock keeping units) in a store, it was common to use a proxy of the inventory movement based on what came into the back of the house.

To develop a more exact system based on what was sold to the consumer at the front of the house, we created a seven-person task force from different functions to spearhead what became a significant and pioneering BPM initiative, something we dubbed the strategic information project (SIP).

At first, it seemed like an impossible task. In some meetings in which we discussed the type of cultural shift and the 9 gigabytes of storage space the SIP would require, the idea seemed to be all smoke and no fire. The project was complicated by the fact that if it worked, we would have to take a charge to the P&L for any phantom profit that did not exist in the store inventory, but which had always been assumed. On the other hand, by shifting our reporting to the more accurate profit from actual products sold, we would have a better idea of which products needed to be merchandised and at what price.

We held biweekly meetings. We planned how we could create and roll out the model in a few test stores to make sure the integrity of data existed. We identified the software vendors that could help build a model with such a granular level of detail. We decided which costs were allocated and which costs were direct. We began to assemble a picture of profitability by product and by category.

Once the system rolled out, the impact was significant. The extension of the disciplines -- and lessons -- learned in our earlier BPM initiatives to the SIP brought immediate and tangible benefits.

For example, many store managers never wanted to offer the more exotic and profitable vegetables because they argued they never sold. After the SIP was operable, it became evident that customers bought the higher-profit vegetables, but store managers needed to reduce the inventory of the slower moving, less-profitable items to improve their financial results. No one could argue with the information because it was clear what sold and at what profit. No longer would it be assumed that if high-profit items were sitting on the shelf, eventually they would be sold and the profit would be recognized. The SIP analysis changed the way the store managers ordered inventory and how they did business.

Moreover, the initial fear of having to take a significant hit to the P&L as a result of having to adjust for phantom profits never materialized since the rollout schedule of a group of stores over an 18-month period moderated any big-bang effect. The transformation was completed in an orderly fashion.