Productive and Profitable
When it comes to implementing new technology, retailers are notoriously hesitant. For example, the UPC barcode system was available to retailers for 15 years before the first retail company adopted it, says John White, co-CEO, Powershelf, Annapolis, Md.
“But within a few years of the first retailer adopting barcodes, the entire industry had adopted them,” he continues. “And after seeing the efficiencies that came with the implementation of that technology, members within the industry now laugh at how long it took them to invest in it.”
Today, retailers are bombarded with new technologies, all promising to help alleviate some problem or issue. While it can be easy to ignore these pitches, retailers might want to reconsider, especially when the technology could improve their private label supply chain.
“The No. 1 reason for a retailer to be open to using new technology is simple,” says Hari Pillai, CEO, Speed Commerce, Richardson, Texas. “It’s growth. Technology not only streamlines your supply chain processes so you can do more with less, it gives valuable inventory insight that can free up working capital.”
And while private brands offer retailers a significant opportunity for higher margins, brand promotion and personalization options, an inefficient supply chain can threaten these gains, says John Kenwood, vice president, retail sector, Capgemini, Paris.
Three technologies that could drive own-brand supply chain efficiencies include visibility tools, collaboration tools and out-of-stock notification systems.
Improve supply chain visibility
“Visibility tools are essential for retailers looking to maximize supply chain efficiency,” Kenwood says.
Such tools allow retailers to track products in transit to their final destination, monitor inventory, and even shift products to meet localized demands, he adds.
One area where retailers often lack visibility is inventory management. Often, multiple systems in multiple locations — warehouses, retail stores, transportation companies and supplier locations — will offer retailers various inventory statuses. To have true visibility, retailers need to be able to view product inventory at any time across each data silo. Technologies such as low-latency integration and real-time analytics allow them to monitor and respond to what is happening within the supply chain in real time, says Oliver Guy, global retail industry director, Software AG, Reston, Va.
“Frequently, forecasts, demand patterns or the erratic nature of different promotions can lead to excessive inventory levels and/or service failures,” says Matthew Lekstutis, lead partner, global supply chain consulting practice at Tata Consultancy Services Ltd., New York.
Even unforeseeable events such as inclement weather, worker strikes or political unrest can quickly lead to problems with inventory management, adds Vipon Kumar, chief sourcing and trading officer for Daymon Worldwide, Stamford, Conn.
And retailers that offer e-commerce options need to learn how to determine the correct amount of inventory to carry in their brick-and-mortar stores versus in their distribution centers, says Steven Rodgers, vice president of business development, HAVI Global Solutions, Downers Grove, Ill.
Therefore, retailers would do well to move on from traditional demand planning, which is primarily point-of-sale based, to predictive analytics technology, Rodgers notes. Predictive-based analytics “is a sophisticated technology, aggregating information from multiple feeds, including external sources such as social media, weather, current events, population patterns and even traffic reports,” he explains. It can help retailers plan replenishment levels, as well as inventory assortment.
Improve supplier communications
The private brand supply chain is often inefficient because of poor communication between retailers and suppliers, too. For instance, suppliers might not understand what is required or when information needs to be provided, or retailers might be assessing suppliers without first setting clear expectations, says Kelly Thompson, supplier collaboration program manager, TraceOne, Boston.
Complicating matters further, retailers and suppliers often work in “islands” or “silos” and exchange information with each other in different formats. Finding a way to merge the information is both cumbersome and manually intensive, says Paul Magel, president, business applications and technology outsourcing, CGS, New York. Plus, responses to these varied communications are often slow, which slows down decision-making processes and other vital functionalities.
“Supply chains require information to be shared in real time across the network,” Magel adds. “They should work as part of one completely integrated network designed to efficiently deliver products to the end consumer.”
To overcome these issues, retailers could implement collaboration tools — or software programs — to help promote communication and collaboration between retailers and suppliers. TraceOne, for instance, offers a program that is a mixture of business services, communication solutions and online supplier engagement portals, Thompson says.
Collaboration tools not only help retailers to communicate more effectively with their suppliers, but also help to manage relationships across the supply chain as a way of ensuring product quality, timeliness and accurate sourcing, Kenwood says. Such tools provide retailers with the “necessary intelligence” to make quick decisions, anticipate problems or opportunities, mitigate risks and predict localized demand.
Prevent out-of-stocks
Typically the supply chain refers to moving product between suppliers, warehouses and retail stores, but it also encompasses movement of product from the back of a store to the shelf. In fact, one of the biggest struggles affecting store brand sales is not knowing when the shelf is empty of product, White states.
“If you look at the scan data from the front and the back of the store, the difference should be what is on the shelf,” he states. “But that’s not the case. That number is inaccurate about 30 percent of the time.”
Often the product is in the back storage area of the store, but the shelf is empty because employees don’t realize that it needs to be restocked. Empty shelves cause retailers to lose revenue and consumers to become frustrated. To help combat this problem, Powershelf developed a technology that alerts store employees when a shelf is empty, White says.
Using on-shelf sensors that measure the weight on shelf, Powershelf’s technology sends an e-mail or text message to store employees when the shelf is empty. It also measures the amount of time it takes to fill the shelf and fix the out-of-stock situation. The analysis of these data helps retailers to find anomalies and trends, which they can then address and improve, White adds.
“Out-of-stocks are the leading driver of lost sales to retailers,” he notes. “They lose about 4 percent of their annual sales because the shelf is empty and they don’t fill it. That’s an extraordinary number, especially when most retailers are making 1 or 2 percent.”
Trax Image Recognition, Singapore, is another company that recognizes how important it is for retailers to prevent out-of-stocks. Its software uses image recognition to help store clerks restock store shelves faster and more accurately, says Steve Hornyak, the company’s CEO, Americas.
Clerks use an app to take a picture of store shelves and upload that picture to the Trax program. The images are analyzed, and the results are returned to the user in a matter of minutes. The app will alert the user to out-of-stocks, point out pricing errors, advise if a product is shelved incorrectly, and even provide insights as to how to better arrange the products on the shelf to optimize storage, Hornyak notes.
The company also offers fixed-camera deployments to help alert store employees of out-of-stocks. For instance, the cameras are pointed at store shelves or even end caps and periodically take images. When the shelf is running low on product or is out of product, the system sends an alert to designated store clerks, Hornyak states.
“This is particularly effective for end caps where promotional items tend to move very quickly,” he continues. “A retailer could be out of stock on an end cap for hours, even though there are pallets of that product just sitting in the back of the store. By using these ‘automated replenishment eyes,’ shelves and end caps can be restocked almost immediately.”