Software Product Groupings for Retail
One of this note described the distinct software requirements of retail enterprises,
retail stores, and suppliers to the retail industry. Aspiring software vendors
offer some or most of the following groupings of products:
As the modern retail enterprise is required to rapidly collect, organize, distribute,
analyze, and optimize information throughout its organization, retail
enterprise systems include corporate level merchandise management systems
that enable retailers to manage their inventory, product mix, pricing, and promotional
execution, and enhance the productivity and accuracy of warehouse processes.
In addition, retail enterprise systems should include a comprehensive set of
tools for planning inventory and in-store space decisions throughout the demand
chain, analyzing business results and trends, automating demand forecasting
and replenishment, tracking customer shopping patterns, optimizing revenues
through trade allowances, and promotional program management.
These products should thereby enable vast amounts of consumer, sales, and inventory data to be rapidly collected, organized, distributed, and analyzed, so that retailers and their suppliers can explore "what if" merchandising plans; track and analyze performance; examine business results and trends; and monitor strategic plans. They can also quickly implement operational strategies based upon sophisticated fact-based optimization techniques and adjust to changes in consumer purchasing patterns. These solutions should also allow customers to reduce their inventory exposure while offering the consumer a more compelling assortment at optimized prices.
Then, since store-level personnel require systems that enhance and facilitate
the retailer's direct interaction with the customer, and integrate the store-level
operations into the overall business processes of the organization, in-store
systems include point of sales (POS), labor scheduling, and
back-office applications that enable retailers to capture, analyze, and transmit
certain sales, store inventory, and other operational information to corporate
level merchandise management and payroll systems using hand-held, radio
frequency (RF) devices, POS workstations or via the Internet.
In-store systems nowadays may also include a workforce management solution to optimize the scheduling of in-store labor, which typically represents the next largest operational cost for a retailer after inventory. Thus, these solutions should enable customers to continuously monitor and reduce inventory levels, achieve higher gross margins, improve their inventory turnover rates, and more effectively manage their order and distribution processes. It provides retail customers with tools for vendor analysis, stock status monitoring, sales capture and analysis, merchandise allocation and replenishment, purchase order management, DC management, and so on.
Last but not least, as consumer packaged goods (CPG) manufacturers
and distributors are increasingly required, by industry practices developed
by retailers such as Wal-Mart, to collaborate with other participants
in the demand chain, and, although these companies have historically focused
on technology to support their ability to manufacture and supply products, this
new era of collaboration with retailers has created a requirement for new technology
solutions that are designed to optimize the sales of products to end consumers
through the retail channel. To that end, collaborative solutions
provide applications that enable business to business (B2B) collaborative
activities such as central planning, forecasting, and replenishment
(CPFR), collaborative category management including collaborative space and
assortment planning, and collaborative revenue management through trade funds
management programs. These solutions should ideally leverage existing solutions
deployed to retailers within the above retail enterprise systems solutions.
As consumer markets become more competitive, retail enterprises realize they must do more than simply achieve increased efficiencies in their own organizations. In other words, a retailer's competitive advantage is now being defined by the efficiencies of their entire supply chain. In addition to enabling trading partners to collaborate in planning, forecasting, replenishment, and space planning decisions, some vendors are also developing additional functionality that should enable retailers and their suppliers to make collaborative decisions for marketing, assortment, and promotion activities.
Collaborative Systems Require Standards
as the retail industry supply chain process includes hundreds of collaborative
steps among thousands of retailers, vendors, suppliers, brand manufacturers,
and other intermediaries to create, manufacture, and move products from source
to store, the industry is also characterized by multiple steps. This includes
multiple product sourcing options, a wide array of products, and multi-channel
shopping venues that include retail stores, outlet malls, mail-order catalogues
and Internet sites. Given the competition for retail customers and wholesale
orders is intense, industry participants must be able to meet consumer demand
quickly, accurately, and at the most competitive price. To that end, even back
in the mid-1980s, a cooperative industry effort to improve the electronic processing
of data led to the creation of certain data format standards, including the
adoption of electronic data interchange (EDI), uniform product
code (UPC) and, in Europe and other international markets, the European
Article Number (EAN) standards. More recently, the global trade item
number (GTIN) has been established.
is a standard data format for electronic data communication between businesses
such as retailers and suppliers, whereby documents in EDI-standard format can
be sent over a proprietary value added network (VAN) or over the Internet.
A sort of an irony here might be that, since EDI has earned the reputation as
a complex, rigid, and expensive means of business document and data exchange
among trading partners, one would expect it to be relegated to a relic of a
bygone era. Yet, while at the surface there are be few economic or strategic
reasons for organizations to persist with EDI, many seem reluctant to adopt
an alternative at this stage. For the time being, wealth of businesses that
have invested significant resources in EDI still use technology for B2B communications,
and many see EDI as the best choice for secure, reliable transactions, given
it is a mature, standardized, and trusted medium.
high initial set-up and value added service costs, EDI implementations can actually
be cost-effective. The advent of web-based EDI connectivity standards, software,
and services have lowered barriers to entry for many companies that, initially,
would not have considered it an option. Thus, many former VANs are taking advantage
of emerging standards like AS2, RosettaNet, and UCCnet, while the emphasis has
been moving from mere connectivity to becoming more flexible and better-rounded
service providers. For more detail, see EDI
versus XML—Working in Tandem Rather than Competing.
The GTIN, UPC, and EAN data formats allow for the consistent identification of merchandise throughout the supply chain process, from product design to the point of sale. The use of GTIN, UPC, and EAN data promises to greatly increase the efficiency with which retailers and manufacturers can mark, track, and exchange detailed product information. As a result of these standards and technologies, many retailers, vendors, suppliers, and brand manufacturers have been able to reduce the cost of financial operations, mismatches between purchase orders and invoices, inaccurate product shipments, and stock-outs.
The still current manual, paper-based item authorization procedures at some sites continue to create unnecessary shipment lag times and also impede future growth. This is particularly true when, on average, a grocery retailer may be required to collect and enter of hundreds pieces of data to introduce one new product from one supplier into the network of thousands of trading partners.
some software vendors targeting the retail sector, such as QRS
or General Exchange Services (GXS) (see GXS
Acquires HAHT Commerce for More Synchronized Retail B2B Data) remain
focused on enabling retail industry participants to connect with each other
and transact business through the use of these automated communications and
product identification standards.
What Retail Companies Also Look For
In recent years, retail companies have sought to differentiate themselves through innovative brand strategies and improved brand execution, which involves every business process associated with delivering products to market, from initial design through the delivery of a product to the consumer. Successful brand execution requires collaboration with partners and automation of mission-critical business processes and transactions across the supply chain.
more and more software applications have been used by the retail industry to
improve brand execution. Such software applications are generally focused on
enabling real time data sharing and collaboration across various supply chain
activities, including product design, sourcing, demand forecasting, collaborative
assortment planning, purchasing, logistics, distribution, promotions, pricing,
sales analysis, and replenishment. Indeed, the real potential benefit from Internet
exchanges and trading communities only comes at the level where they provide
collaborative facilities to help suppliers and buyers work closely to improve
key supply chain processes (e.g., inventory management, CPFR, manufacturing
capacity planning, transportation planning, etc.) or aspects of a product
lifecycle management (PLM), such as design, creation, servicing, retirement,
and so on. All the above require close relationships along the supply chain,
and far from only electronic connectivity.
hand-in-hand with the trend to conduct business transactions electronically
via the Internet is an effort to clean up those transactions and reduce the
occurrence of errors. Often enough, the trouble with product attributes is that
they do not match from one database to the next in the value chain. For every
product under its brand umbrella, there are several product attributes, including
definitions, specifications (product weights, measurements, calorie counts,
etc.), images, marketing messages, and prices. As a result, something as bland
as a can of food comes with arrays of data relating to pricing, description,
promotion, and so on. To make things worse, companies may have hundreds or thousands
of products and a number of individuals may maintain each bit of product information,
so the task of organizing and maintaining all this information is critical to
the company, since bad data costs companies billions of dollars in incorrect
purchase orders, subsequent returns, and the manual effort required to fix them
Billion Is Being Wasted by Companies without Product Information Management
Strategies—How Is Yours Coming Along?).
data synchronization applications automate the process by which suppliers, manufacturers,
and retailers share information relevant to issues like inventory status and
product specifications. This technology might also be an important underpinning
for emerging plans around the radio frequency identification (RFID)
technology, which is also high on these retailer giants' agenda.
But, as mentioned previously, data synchronization would be a relatively simple task if the data was normalized, complete, and error-free. Unfortunately, this is rarely the case, given that product information is not created by a single department within the company and is usually not overseen by any single group. It is this lack of process within a manufacturer's business and around managing product information that facilitates errors. Yet, related systems such as logistics, invoice reconciliation, and POS also need the same product information. The retail sector, particularly food and grocery industry, would hence greatly benefit from some on-line industry coordination when it comes to managing catalogs and B2B trading communities.
ERP Vendors Enter the Retail Market
vendors are making their way into the retail market by bundling, acquiring point
solutions or partnering strategically to embed retail-specific functions within
their suites. Like in all other enterprise applications markets, eventually,
albeit not any time soon, the retail market too will come to a showdown between
the pure retail vendors and the enterprise application vendors (e.g., Oracle,
SAP, Lawson Software, PeopleSoft,
SSA Global, Geac, Intentia,
etc.), which have been striving to natively embed more retail-specific capabilities
into their products.
usual, the enterprise vendors will bet on leveraging existing customers who
will have deeply invested in them, and have even reorganized operations around
their ERP systems. The promise of retail products from ERP vendors is the link
to financial and manufacturing systems (albeit mostly the vendors' own, which
is logical at this stage) and include collaborative supplier relationship
management (SRM) and PLM capabilities and links to customer data in customer
relationship management (CRM) systems. A single-vendor approach by ERP
providers could produce other benefits too, like integrated and consistent processes
throughout the supply chain, consistent data-model for the entire enterprise,
and easier estimation of overall project cost and implementation management
through primary relationship (i.e., "one throat to choke"). The business opportunity
is to move from supply- to demand-driven retailing, via merchandizing, replenishment,
pricing, promotions, consumer loyalty schemes and multi-channel management systems,
all working off the single ERP platform.
the retail vendors' "holy grail" has become working with information from heterogeneous
sources, an order "du jour" within many large organizations, which
often have more than one ERP system, various retail point solutions and legacy
systems, or both. This is analogous to the enterprise applications integration
(EAI) market, since in larger corporations, customers still may prefer integration
vendors with renowned product strength, vertical expertise, financial viability
and savvy in extensible markup language-based(XML) B2B integration,
multiplatform integration and workflow management. The best-of-breed approach
could still often provide a selection of a functionally richer system for each
business area from a more specialized vendor, elasticity or exit strategy against
a particular vendor's failure or demise, and greater flexibility in terms of
the substitution of individual elements to accommodate any adaptation needs.
current retail leaders' superiority, like in the case of the supply chain
management (SCM) and CRM markets, will eventually diminish as the ERP vendors
continue to improve their retail-specific functionality, collaborative capabilities,
and accessibility and add universal interfaces, including the new Web service
standards to facilitate access and integration of data outside their own environment.
Thus, the retail vendors need to establish as strong a hold on the market as
possible before enterprise and platform vendors catch up. This is especially
true for the remaining tier two and tier three retail point solution vendors.
If they cannot gain significant traction and distinctive differentiation, they
could find themselves in a position of needing to either being acquired or joining
forces with a complementary functional or platform technology vendor via alliance
Retailers will have to find a fine balance between investments in emerging technologies and their ability to tactically stake out effective competitive differentiation in what seems to be challenging times for all. The winners will be those who can align their investments with the ever-changing preferences of their customers, who may prefer in-store or off-store channels, or both. On one hand, technology investments that facilitate speed of checkout, self-service, multiple sales channels, inventory availability, and personalized content are what will engage customers and make them feel close to being the only customer. On the other hand, strategic technology investments in historical data analysis, demand-based forecasting and replenishment (store- and DC-level), seasonal profiling, allocation, and space planning, measuring shelf space performance, will be the pedestals on which growing revenue and improving margins will be built.
Whether considering new enterprise applications based on a single-vendor offering or constructing a
best-of-breed portfolio of retail applications, prospective users should espouse a consistent technology infrastructure to avoid the pitfalls of too many supported platforms, while ensuring open and broad integration functionality that focuses on common product and pricing data sources and the necessary, ubiquitous connections to trading partners. In retail companies where employees have more autonomy and initiative,
best-of-breed approach will typically let employees work with the best tools for their peculiar needs and talents. On the other hand, the sweeping changes imposed by usually more rigid single-vendor solutions (particularly from unified ERP offerings) may work better in more autocratic companies.
concludes Part Two of a two-part note.
one detailed software requirements for retailers.
Two presented retailer progress.