payments - Retail Systems

Unpredictable weather patterns are not the only challenge to
maintain well-stocked shelves. Way back in the 90s, Delia Smith’s
TV cookery series sparked sudden demand for items ranging
from cranberries to omelette pans. This trend has accelerated
in recent years thanks to the rise of celebrity culture and also
social networks such as Facebook.
As NCR’s retail industry director, Stuart Henderson, observes a
High Street dress worn by one of the Middleton sisters will be an
immediate sell-out. Consumers also increasingly have the option
of “shopping ahead of the curve” and pre-ordering items before
they hit the stores.
“Getting the seasonal phasing of stock right and predicting
which products will be the “hot sellers” is a key challenge in retail,”
he says. “Retailers can look at long-range weather forecasts,
how bloggers and journalist are responding to product previews,
and work to ensure their supply chains are more responsive to
constantly shifting levels of consumer demand.
“But there is no silver bullet, as many factors are beyond
retailers’ control.”
Being out of stock of in-demand products means that a
retailer is out of pocket. The damage is even greater when
frustrated customers transfer their custom to a competitor
because they cannot find an item. Conversely, being overstocked
erodes profit margins; end-of-season markdowns
are needed to shift items that haven’t sold well and more
time-sensitive goods, such as perishable items, will either be
given away or disposed of.
“This means retailers need to take an integrated, multichannel
approach to analysing, responding to and influencing demand to
boost sales and profit levels,” says Henderson.
Gary Lynch, chief executive of GS1 UK agrees. “The explosion
of data within retail – driven both by consumer demand for
a seamless multi-channel retail experience and more product
information – is having a major impact on inventory control,” he
reports. “It’s clear that poor inventory control and inaccurate
data can have a hugely negative impact on retailers, particularly
in today’s tough climate.
“Accurate inventory control is crucial to the business bottom
line. By standardising data throughout the supply chain, retailers
can control their inventory more efficiently, cut costs and
create a consistent and trustworthy experience for consumers.”
Cost versus flexibility
Lee Gill, vice president of retail strategy at JDA Software, says
that M&S’s recent stock shortages are typical of a problem
shared by many other big names and admires the company for
being more candid than some of its rivals. Until the Eighties M&S
stores proclaimed that at least 90 per cent of all goods sold
were British-made, but that policy was steadily abandoned as it
moved to overseas suppliers.
“There was a wholesale exodus of procurement to China, India
and Eastern Europe; a change that generated improved margins
merchandise planning feature
but meant a less responsive supply chain – lead times got longer
and grew to between six and eight weeks.”
Gill observes that lead times have become a major issue, with
retailers obliged to assess the trade-off between the lower
costs that come from having an overseas supplier and the
greater flexibility in responding to demand in sourcing from
closer to home.
“Resources should therefore be devoted to more unpredictable
products – as opposed to “flow products”; items for which
demand is more predictable as it remains relatively consistent
over the year,” he suggests. “Fashion ‘plagiarists’ who quickly
knock off copies of a new fashion have the raw materials close
to hand and a nearby supplier.
More time-sensitive goods, such as fresh produce with a
limited shelf life, also requires active management in terms
of allocation and replenishment planning for the supply chain to
ensure they are sold in time says Nishant Thusoo, sales manager-
Europe for retail, consumer packaged goods and logistics at
Infosys. Technology can assist by optimising which items to
stock and the amount of shelf space to be allocated to each.
“By feeding in merchandising rules and optimisation
algorithms, technology can create store-specific planograms
(POGs), which can maximise sales or margins, depending on the
retailer’s priorities.”
Multi-channel challenge
There is general consensus that merchandise planning is even
more of a challenge for multi-channel retailers who provide
Click & Collect services or home delivery of items. In North
America, Nordstrom and JC Penney are regarded as among
the names that have become most adept, while closer to
home Boots, B&Q and John Lewis are well-regarded for their
multi-channel strategy.
“Multi-channel planning is important as many retailers claim to
offer cross-channel integration,” says Thusoo. “But this planning
has often been rather disjointed – even though online offers
huge potential for carrying more lines.
“Much better integration is required in the planning process,
which needs to consider cross-channel customers’ shopping
behaviour to take the right merchandising decisions.”
Cloud-based supply chain systems can assist the process by
providing retailers with the latest information on stock held
together with stock that is on the way, where it is and where it
needs to be to achieve maximum levels of sales and customer
satisfaction, says Clay.
“Using this kind of information the retailer may decide to
“fast-track” certain items and delay others to maximise sales and
minimise costs.
“Some retailers also utilise it to give online customers precise
shipping times when an item is out of stock. By keeping them
informed they are more likely to maintain brand loyalty – even in
short stock situations.”
RS
June - July 2012 RS 45