08 February 2012

Time to invest in technology

Published:: 05 May 2009
Byline:: Penelope Ody

Few companies want to indulge in expensive IT projects in the current climate but quick fixes delivering real benefit are top of the shopping list.

With profits warnings and news of high street chains sliding into administration dominating the retail headlines, it is surprising to discover some IT vendors reporting booming sales and increased interest in their products.

A common factor amongmany of thesemusthave applications is that they are aimed at cutting costs, improving efficiency and increasing customer service levels.Most are low-risk, niche products likely to deliver a return on investment within sixmonths, and verymany are directly related to the supply chain.

At RedPrairie, for example, workforce management is suddenly on a greatmanymore shopping lists: “There is a lot of interest in integrating newer workforcemanagement tools with warehousemanagement systems,” says executive director Andrew Kirkwood.

While improved warehouse staff scheduling can cut costs, RedPrairie is seeing the same tactics applied in store with retailers far keener than they were a year or two back tomatch their staffing levels to customer traffic patterns to ensure that assistants really are on hand when needed to complete those vital sales.

For consultants Kurt Salmon Associates, RFID is surprisingly back on the agenda as well. “RFID has been very quiet over the past few years,” says vice president Richard Traish, “but we’re now involved in a number of pilotsmainly in the fashion sector. The technology is now robust and RFID can significantly improve the accuracy of stock takes and thatmeans better on-shelf availability and increased sales.”

Whilemost retailers like to claimstock availability figures of around 92 per cent, in reality it can bemuch lower –more like 75-80 per cent for many products. A problemis that no-one can ever be sure precisely where the products are; theymay have been delivered to the store, but did they make it onto a shelf or garment rail? Or perhaps they stayed on the van bymistake and are heading back to the RDC? Or that vital sizemight still be on the fitting roomrail waiting to be put back?

RFID – as various experimental projects over the years have demonstrated – can keep track of the merchandise and significantly improve on-shelf availability. In the boomtimes, perhaps, the lost sales due to out-of-stocks didn’t cause toomuch concern as themoney still flowed in. Today it is different and KSA suggests that retailers could be losing asmuch as 30 per cent of their potential sales due tomissing lines – that adds up to significant turnover when times are tough.

For e-TXT Solutions – which specialises in demand management tools – it has been a “record year”, says sales and consulting director Richard Nicholas. Retailers who had showed scant interest in such technologies are now eagerly calling e-TXT for more information. “We went to a particular conference on demand forecasting a year ago,” says Nicholas, “and there were around 30 delegates. This year there were more than 130 and most of them were from financial departments rather than supply chain.

Companies have become very focused on cutting costs and making sales and they are looking for tools that can help and help quickly.”

Tools which can deliver a 20 per cent ormore reduction in inventory, as well as a significant increase in on-shelf availability, are,maintains Nicholas, currently being implemented in three to fivemonths leading to an increase in sales of one to two per cent so, once again, rapid payback.

At JDA Software – which reported a 26 per cent increase in annual software sales in January – new supply chain planning and execution optimisation products are top of the retail shopping list. As supply chains becomemore complex and retailers juggle the needs of stores, at home and abroad, online sales and catalogue, even themost diehard Excel enthusiast is having to accept that spreadsheets are not always the best solution.

JDA consultant Simon Barker believes that some of this planning tools investment is driven by the need to create store-specific assortments, rather than accepting the old“one-size-fits-all”maxim. “The need to planmoremarket-specific product assortments is leadingmany retailers to improve or add assortment planning technology,”he says. “This can only be achieved by having the right tools to help understand selling and shifts in demand, to predict selling cycles and take steps to have the right goods in the store.”

During the“boom”years highmargins and a steady streamof eager shoppers kept sales and profits high; today retailers have to work harder for theirmoney, and so too do their IT systems.

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