A resurgence of retail IT spending is emerging in North America. After an economic slowdown and during the transition and growth period, there are opportunities to prepare for that will address structural components to provide process and financial efficiencies in the supply chain process.
The decision to return to budgeting and investing in select components of the retail enterprise is often dependent on both financial and process return as well as the length of time it takes to see bottom line benefits. It’s a time to maximize staff to improve systems and processes. Strategic retailers of all sizes must now consider both a short- and long-term business strategy by increasing IT spending in essential areas of the business that will reap near-term, measurable results, while still staying focused on the long-term strategy. Priority is being given to initiatives providing considerable financial return.
Bottom Line Focus
A major Canadian drug company RPE worked with is a prime example. The company historically operated the retail stores very successfully without perpetual inventories and made the investment to change this. The focus was on achieving a fast ROI with the add-on capabilities for auto replenishment, assortment optimization, improved in stock position and lower inventory levels.
In the area of merchandising planning, attainment of assortment and key item planning provide specific and tangible financial return. Having the appropriate assortment, down to the SKU level, provide a retail operation the ability to ensure maximum product selection, at the most appropriate price, in the accurate geography for an optimal demographic.
Retailers in all verticals are focusing heavily on merchandise inventory controls, merchandise planning and better localized assortments. Enterprise merchandise planning, location planning, allocation and assortment planning are being integrated together in the process flow to achieve increased sales and margin with decreased inventory.
When the initial assortments are constructed, the goal is to understand and plan the product lifecycle from the initial assortment phase all the way to the supplier. As assortment plans are built, the PLM (Product Lifecycle Management) as well as the Supply Chain are all impacted with the shared information. A number of retailers are investing in Enterprise Planning systems to the SKU size and color level creating well-focused merchandise and assortment plans.
Similarly, inventory optimization, at both the warehouse and store levels, demonstrates a tangible and measurable financial return on investment. Important components of safety stock, service levels, demand and supply constraints, inventory targets, minimizing out of stocks, connectivity and visibility to core host systems are all integral in improving bottom line results.
Consultation and collaboration have become effective initiatives for all retail tiers as IT departments commit to supporting these priority initiatives. Sequencing already deployed solutions for enhanced results has helped numerous retailers across the enterprise. Retailers that have debated whether to purchase additional applications from independent software vendors often opt to work side-by-side with process driven consultants who bring deep domain knowledge and proven methodology in key areas such as merchandising, replenishment, lifecycle management and POS solutions.
Retail IT departments are also engaging consulting organizations to integrate stand-alone systems into more productive environments, enabling broader efficiencies within retail operations. The payback for retailers is often within months, fully substantiating the investment to optimally deploy already owned solutions. Additionally many of these retail organizations have identified business intelligence, reporting insights and market analytics as important assets in the decision process.
More and more retailers are laying out strategic initiative road maps that will, over time, deliver the IT and process infrastructure to connect the supply chain with product lifecycle and the business processes. Doing this more effectively, will maximize the knowledge sharing throughout the processes and will shorten delivery times, lower costs, while increasing ROI.
Emphasis on the Cloud
Among retailers large and small, there is a better understand that licensing necessary ERP supply chain solutions is not the only option, especially when there may not be the internal infrastructure to best support these purchases. There are many retailers today effectively collaborating with business partners in cloud hosting and Software as a Service (SaaS) environments enabling lower upfront costs, leaving the hardware and server purchases to highly established and effective organizations that have deployed these solutions for multiple retailers.
Many installed ERP solutions have not been maintained over time and do not have the features and capabilities to meet current business needs. Since the turn of the century when many ERP systems were put in place, business conditions, practices and priorities have changed and cloud-based options are a feasible and economical solution.
Maximize the Opportunity
As the competitive retail climate continues to expand and retail margins continue to subside, it will take an innovative, committed, dedicated and collaborative approach to assist retailers in achieving business objectives. Retail IT departments have shown strong signs of reinvesting in core processes. There are organizations, tools, methodologies and personnel with extensive domain expertise, prepared to assist in addressing many of these ERP supply chain challenges. Leading and progressive retailers of all sizes and verticals must carefully and prudently consider these opportunities as part of the company’s responsibility to employers and stakeholders.