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Written by Liz Morrell
21/09/2010

Multi-channel/internationalisation has transformed retail and nowhere has this revolution been more keenly felt than in the supply chain. Planning at this level enables retailers to assess and satisfy demand across all channels but it also throws up a series of challenges, notes Liz Morrell

Retailers’ expansion plans have long been ambitious but with most now focusing on making their businesses truly multi-channel - as well as expanding overseas - their supply chains are under more pressure than ever. Today it is vital that IT systems are as closely integrated as possible as retailers move from a product centric to a customer centric model.

“The fact is that retailers are now working in a hyper competitive market and moving into new markets and channels where they are having the customer come and experience their brand any and everywhere so they are looking at making the customer experience a key differentiator,” says Sarah Taylor senior director of retail at Oracle. “Currently most retailers that have a bricks and mortar heritage operate in silos from a function standpoint and a technology focus and although this approach formerly was adequate because it focused on getting the product in-store now that’s not what they need.”

Paul Petts, head of group logistics at fashion retailer Reiss, says a retailer’s IT capability has to grow in line with the business to enable the logistics side to keep pace. “As we expand our number of stores, on the web or in other countries it does pose problems and as such IT support is absolutely critical,” he says.

As a result the retailer brought its IT department in house three years ago. “That has made us much more able to move quickly,” says Petts. Systems need to be supporting, rather than hindering retailers’ expansion plans both on and offline. “What we can’t do is not do things because we are a bit concerned about the implications - we don’t want to be held back,” says Petts.

Reiss, which has nine stores in the US, has a distribution centre (DC) in New Jersey which replicates its main DC in the UK but otherwise the rest of the business is served out of the UK DC. Petts says that ensuring accurate stock records is the toughest task for the retailer. “Stock control and inventory is the number one challenge - it’s making sure we have the right iinventory for sale,” he says.

Last August the retailer brought its internet fulfilment inhouse to improve its visibility over stock in the whole of the supply chain. “We have now moved it into the DC so the internet can now view our whole DC inventory,” he says.

“Visibility of the inventory is absolutely key,” says Martin Lockwood, senior director of customer services at Manhattan Associates whose Extended Enterprise Management product allows retailers to keep track of where their inventory is and is being used by the likes of Build a Bear Workshop.

The Holy Grail

Many retailers are attempting to further improve visibility of their supply chains to allow the internet to view store stock too - giving a single stock pool for the whole of the business to access no matter which channel the customer is buying through.

However, getting both strands together is the Holy Grail. “By being able to bring those together you have control over how to fulfill your inventory and where it is. If you can get them working together then that’s even better,” says Lockwood. Such a thing is an aim for Reiss. “That’s the next thing although we are not quite there yet. It’s having an absolute seamless environment wherever you are looking,” says Petts.

Retailers are also moving to a single view of their customers - which has its own implications on systems and the supply chain. By collating all the information on their customers in one place, the retailer can better target their customers and reduce markdowns as well as allow Click and Collect and return to store services. These require that retailers have a system that can allocate the stock, alert staff to pick it, have a method of confirming and verifying what was picked as well as a process for taking any balance of payment if goods were not paid with order. “These all form part of the initiatives that Torex are delivering through its store, Customer Order Management and EPoS platforms all of which have to operate harmoniously with retailers’
e-commerce sites, WMS, ERP and MMS,” says Tony Hammond, product manager at Torex.

For this to happen, however, integration of supply chain systems is vital. “Joining up the PoS and the website is the icing on the cake but without the cake underneath it doesn’t work. That’s the problem that retailers are beginning to see, because having got the front end integration right they are now recognising that they are not going to get the full value until they go through to the backend and so are looking at how to go back through
merchandising, warehouse systems etc to make sure that data is integrated right back through the supply chain,” says Sam Jackson, managing director at Prologic.

Integration of systems is a big challenge for retailers looking to move to this single view of customer and inventory. “There are so many different systems that retailers have installed and in their own right they are very good but when you are trying to get the information to flow together then that’s the hardest part,” says Russell Dorset, sales and marketing director at Maginus. “Now everything is faster and consumers are
demanding a better focus on all the channels and want a consistent view so they expect you to know when and where they have bought things.”

Over the last 18 months, Maginus has developed and installed in retailers such as Hawkins Bazaar the multi-channel communicator - a plug in device that enables systems to speak to each other using web services architecture. “It allows two way communications in real-time and has provided the glue between all these systems because retailers in the mid market can’t really afford to link all these systems together themselves so are looking for package solutions,” says Dorset.

Many larger retailers are either doing the integration themselves or making more wide scale changes, such as Boots which is currently undertaking a core systems replacement project with SAP. But as well as integrating existing systems, retailers have to future proof against newer channels such as kiosks and mobile to ensure they are also integrated into the supply chain.

Prologic’s Jackson believes the market will see a wave of system replacements over the next couple of years. “The cost and disruption of replacing systems is not insignificant but it gives you accuracy and more efficient warehouse management. If you look at the costs of availability and the costs of ringfencing stock and so on then you can do an effective ROI argument for it,” he says.

“The picking, replenishment and put away algorithms are all being treated separately which is resulting in a lot of cost. You need to be able to send the picker to the bin and allocate them to the right retail channel. Once that is in place the full fruits of
multichannel will kick in including the cost savings and the ability to get the right stock in the right place to avoid markdowns,” says Jackson. And it is then, he says, that the retailer rather than just the customer will benefit from multi-channel.

International

International is providing the same challenges but Jackson suggests that retailers treat it simply as if it is another sales channel. “It has the same basic complexities - you want to be able to allocate and ship to the store,” he says. Richard Willis, retail solutions director at Torex, agrees: “It brings you back to planning - ensuring you have the visibility of stock in those regions. We are working on an intelligent stock fulfillment element of our customer order management system that will look to satisfy a customer’s order through the most effective route possible,” he says.

Having poor stock visibility is inexcusable to customers today and the retailer that ignores that risks much. “Particularly with online you have to be absolutely certain of your stock holding. It’s critical to successful multi-channel to have that inventory control,” says Lockwood. Hammond says real-time visibility of stock is key. “No retailer wants to take an order only then to have to call a customer back and explain that it was not available or worse still, let them turn up at a shop only then to be informed,” he says.

In today’s cross channel world retailers are going truly open plan with their systems knocking down the barriers between channels and allowing systems to communicate harmoniously. ”You can’t have any walls in the way stopping you from selling,” says Petts. “We are conscious we keep the supply chain as simple as possible. Simplicity is the name of the game.”


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