Articles

Written by: Vince Rouleau, Industry Principal, SAP Retail

When building a house, most consumers will look for a single contractor to manage and carry out the construction. Occasionally, that contractor may utilize an expert for a small component of the overall project. But the consumer can be confident that the contractor will build the majority of the house, ensuring that everything will work together as designed to minimize on-going maintenance and repair costs.

Retailers have traditionally followed the opposite approach when building their 'IT House,' because they rely on multiple solutions from multiple vendors to enable individual business processes. The overall impact has created a higher IT cost infrastructure with IT resources focused within in their functional silos often producing suboptimal results across the organization as a whole. Challenges with this model include data harmonization, inventory visibility and latency, and most importantly, the negative impact this approach has on a retailer's ability to innovate.

The biggest challenge confronting retailers today is the ability to manage, understand, and put actionable use to the vast amounts of data they possess. A best-of-breed approach further acerbates this problem by creating multiple data sets across the organization. For example, many retail organizations maintain multiple item master files. This duplication of data can impact purchasing, pricing, inventory management, and supply chain management. Inconsistency of data across any of these processes can create customer service problems by causing confusion within the organization and potentially disrupting product delivery to the consumer. However, a platform-based solution approach provides a common data source, which can be leveraged across business functions while providing a single version of the truth across the company.

Reduce Inventory Latency
The Customer-Centric Store Benchmark Report: 2008 indicates retailers continue to face challenges in inventory visibility. The study lists out-of-stocks as a greater challenge than the overall economy. As retailers continue to manage a tighter supply chain, they must remove excess inventory and reduce lead times. The need to have more accurate and timely information in order to match inventory levels with demand to reduce out-of-stocks has become critical. Buffer inventory that was historically present throughout the supply chain no longer exists as retailers are managing their margins with a keen eye on the bottom line. Having a central repository for inventory data, which is leveraged by all solution components, can increase the speed and quality of decisions, ensuring an optimal flow of merchandise through the supply chain.

Perhaps the most gating factor to a retailer's growth strategy is the inability to innovate and respond to a changing consumer because of a dated IT infrastructure. As more retailers look beyond their national boundaries and traditional channels to grow the business, the need to add new processes and enabling solutions increases. In the AMR Research—NRF Retail IT Budget Benchmarking Study, 2006-2007, nearly half of surveyed retailers indicated they are not currently using consumer-centric merchandising capabilities (i.e. price optimization, space planning, and advertising, marketing, and promotions planning and execution). In addition to the ongoing maintenance associated with each integration point, point solutions add additional risk to future upgrades. A point solution approach creates a static and inflexible environment that may have short-term benefits. However, a business process platform built across a single infrastructure can reduce the initial and ongoing effort required to add new business capabilities and functions to support an innovative model that is responsive to the changing business environment.

Today's best retailers are adopting a single platform approach and plugging in best-of-breed solutions to meet specific requirements only when necessary. As technology and processes have evolved to scale and support the needs of today's global business model, retailers are able to leverage an IT infrastructure from a single vendor that is based on a common data model. This integrated, versus interfaced, approach seamlessly links multiple retail functions reducing long-term risk and dramatically improving the ability to react and respond to today's consumer.

Free Retail Solutions Online Newsletter