Innovative Retail Technologies

NOV-DEC 2016

Innovative Retail Technologies (formerly Integrated Solutions For Retailers) is the premier source for innovative yet pragmatic technology solutions in the retail industry.

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analytics as the key technology focus for achieving their top 2016 business priority, 21% compared to 16%. SMR companies are headed in the right direction, but they have to redouble their efforts. How To Develop A Road Map For Connected Supply Chain Operations And Transformation What should SMRs be planning for as they develop a road map for connected supply chain operations that both reduces cost and improves service levels? Victoria Brown: For SMRs to stay competitive across their supply chains, they need to think smarter, not harder. More than ever, the immersion of e-commerce in buyer behavior forces a need for accurate inventory and strategic fulfillment options. According to IDC's 2016 Vertical IT & Communications Survey (IDC, May, 2016) data in retail, roughly 31% of SMRs do not have inventory tracking systems or have no intention to invest in such systems in the coming year. On the flip side, only 19% of large retailers don't have a system or intend to invest. (See Figure 5.) If retailers don't invest in their supply chain and inventory accuracy, they greatly reduce their ability to sustain customer satisfaction or scale effectively. Given the opportunity to grow at a rapid pace, if the systems aren't in place to manage inventory, customer satisfaction will suffer, in turn depleting that opportunity. Larger retailers who are investing in demand and supply planning and inventory optimization tools are empowering their stores to act smaller and localize their inventory. This puts SMRs at greater risk, and the only way to fight back is to get on a level playing field with tools such as distributed order management. Distributed order management tools create the opportunity for SMRs to allocate goods to demand signals to reduce margin erosion without a need to increase inventory levels. Smaller retailers can work with existing inventory instead of spreading SKUs across their supply network causing delays in delivery or empty shelves. Bringing e-commerce fulfillment into back rooms also keeps stores well-stocked for customers at their physical locations, but also reduces overhead on storage facilities across their network. By reducing the number of nodes in a network, inventory can be more strategically placed, safety stocks can be lowered, and customers receive goods in a more consistent and timely manner increasing their loyalty and total spend. Conclusion Digital transformation is sweeping through the retail industry, as consumers — making ever greater use of digital technology — have rising expectations for ease and convenience that many retailers can barely keep up with. With the compounding challenge that many subsectors of the retail industry are experiencing, hyper- competitiveness, innovation, and agility are more critical than ever. Digital transformation will require retail leadership to explore new business, risk and return metrics, reallocation of funding, and more assertive use of data analytics. The industry as a whole still has a long way to go to transform business, technology, and process. SMR companies need to embrace digital transformation as an enabler of agile business and an efficient way to provide the exceptional, easy, convenient, frictionless, conversational, and exceptional customer experience that consumers expect today. IDC recommends that retailers find a way to manage strained IT budgets to turn focus away from industry challenges and towards digital opportunities. 21 SMR Supplement 0% 5% 10% 15% 20% 25% 30% Intentions for Investment in Inventory Optimization Supply Management and Demand Planning No new investment Evaluating Purchasing Upgrade Homegrown solution Do Not Have/Not ... Intent to Invest Source: 2016 Vertical IT & Communications Survey, IDC, May, 2016 Large "Distributed order management tools create the opportunity for SMRs to allocate goods to demand signals to reduce margin erosion without a need to increase inventory levels." Victoria Brown, Senior Analyst, IDC Retail Insights SMR Figure 5

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