Synchronizing The Information Highway

Today's technology platforms offer retailers the opportunity to optimize store brand inventory, streamline design/redesign and improve product assortment, with little time — and sometimes little investment — on their part.

Last year, City of Commerce, Calif.-based Smart & Final Inc. rolled out 2,500 SKUs for three different store brands (its value, core and natural and organic lines) in just 10 months. Store officials credit their centralized software system for this rapid, coordinated product launch. And most importantly, they now have the history and data stored to repeat this process again.

Consider this: If a retailer could test a new store brand design or inventory assortment plan before instituting these changes in the real world, it could conceivably prevent costly errors and inefficiencies in approach.

Today's technology platforms offer retailers the opportunity to do just that — optimize store brand inventory, streamline design/redesign and improve product assortment with little time — and sometimes little investment — on their part.

Retailers' store brand programs are following the lead of national brand manufacturers, which are looking, for example, to new assortment technologies that take costs out of the system, enhance sustainability and decrease the risk of product out-of-stocks, says Jim Hertel, managing partner for Willard Bishop, a food retail consulting company based in Barrington, Ill.

"With store brands, many retailers are more focused on hitting a 'dead net cost' — to offer the lowest cost available within an acceptable specification," Hertel says. "They are focused on cost; their store brand suppliers are then focused on having a low-cost manufacturing operation, and no one is investing in research to deliver change."

Other retailers are simply trying to integrate their current software tools.

"Sometimes, companies have five to six software tools that don't talk to each other," says Maria Dubuc, creative director for Marketing by Design (mbd) and director of Workflow by Design, both based in Beverly, Mass.

For this reason, she notes, product lifecycle management software is becoming popular because it synchronizes strategic product roadmapping, idea development and innovation process execution.

"Centralized systems create 'one truth,'" Dubuc says. "A start-to-end integrated tool can create a visual roadmap for retailers of their product's ideation to on-shelf analysis, and show patterns and predictability so vendors also know what to expect from the process."

Optimize store brand inventory

Whether dealing with store brands or national brands, retailers' day-to-day challenges always come down to execution within their supply network. But additional pressure also is applied to suppliers that provide store brands to ensure they do not build up an extensive inventory of store brand goods, says Bob Rossman, vice president, supply chain for Washington-based Agentrics.

Retailers looking to "optimize" inventory simply are looking for a way to tie their supply decisions more closely to actual demand, determining where (geographically speaking) inventory needs to be in the supply chain network to ensure maximum availability, says Tim Robinson, chief operating officer of Agentrics.

"When companies take advantage of solutions which allow them to support a more balanced inventory, there is a significant — 10 percent to 20 percent — reduction in the amount of inventory required, as well as improvements in sales through the reduction in problems with product availability," Rossman adds.

Because retailers must make supply decisions rapidly, any inventory optimization solutions must adjust easily to changing demand requirements. Inventory optimization software tools aim to help retailers focus on efficient product development, trend optimization and lifecycle management, and can include distribution management, transportation and order lifecycle management, as well as planning and forecasting.

According to Rossman, a supply chain synchronization (SCS) suite can enable both suppliers and retailers to access and analyze point-of-sale data in near real-time and develop optimized inventory distribution strategies, leading to a more beneficial trust-based collaborative relationship.

"By analyzing sales and inventory data by item, by store and by data, retailers can more effectively balance the distribution of inventory between retail locations and distribution centers," he says. "This vital intelligence also can be shared with suppliers and other trading partners, providing unprecedented visibility into the workings of complex supply chains."

Retailers can determine the effectiveness of their inventory management programs by their inventory turns, Rossman adds. To put it simply, if sales are growing, turns will increase. If sales are slowing, the only way to change inventory turns is to reduce inventory accordingly.

On a more detailed level, retailers can monitor their inventory balance by determining the daily inventory requirements and measuring the inventory that is at risk of losing sales because of potential availability problems, he says, and inventory that is at risk of wasting working capital because of overstocks.

Develop a cohesive design system

Before store brands hit the shelves, they need a fresh, cohesive design that measures up to the national brands' appearance. In the past, many suppliers handled this aspect by choosing a software system and working with the design agency and prepress house. But today, more retailers are becoming involved, Dubuc says.

"Retailers have realized it could become a problem if they want to change agencies or use multiple sources for the service," she says. "Therefore, they are more apt to purchase a system they own and encourage the vendors to work with it."

New integrated software tools can help retailers manage a project lifecycle from start to end and then back again, with product development tracking, electronic artwork or content approval, file sharing or file release into a central repository for all stakeholders to access and update, Dubuc says.

"Often, companies have multiple systems that don't 'talk' to each other, which creates a disconnect and a lot of manual labor," she says. "With a centralized solution, all stakeholders begin working together and spend less time chasing information from multiple places in multiple formats."

Although real-time collaboration technology has been around since the early 1990s, Dubuc explains it is a more accepted, dependable timesaver and collaboration tool now. It allows all stakeholders to view the same artwork at the same time, and add comments, compare revisions, check colors and even invite others to review.

In addition, systems have an improved user interface and can handle more graphics.

"Software for retailers used to be very difficult to use, and it would often take several clicks to find what you want," Dubuc notes.

The benefits of these new systems are obvious: more time savings, increased speed to market and a roadmap for retailers and vendors to predict when they will need to update packaging again, she says.

"Databases will allow for retailers to plan for these changes while they are negotiating the deal upfront with the vendor," she explains. "They may also want to account for times that they want to make changes and the vendor does not. This requires a budget; a lot of retailers are realizing they need to budget for these sorts of things."

The trick is to develop a fluid-enough brand design that can allow for updates while still maintaining a cohesive brand across the stores. In fact, if retailers don't stick to their brand strategy, it doesn't really matter what software systems they use because they will have a scattered or undefined brand.

By using a centralized design or artwork house to manage the brand and creating clear guidelines (that can be broken when necessary), retailers and suppliers can present a stronger product, Dubuc contends.

Ultimately, no software or computer truly can measure the emotions of a shopper who picks one brand over another, notes Greg Feinberg, president of Los Angeles-based Aisle 9, but accessing shoppers and querying them will get down to the root cause of their purchase decision and serve as a guide for packaging design.

"Store owners have a tremendous 'home field advantage' through their access to their own shoppers," Feinberg notes. "This is an asset national brands do not enjoy."

Test assortment decisions

Online virtual shopping tools provide shopper insights by having consumers "shop" the aisles to gauge their reaction to new product design, packaging, assortments or arrangements before a retailer institutes these changes in the real world. They help retailers avoid costly mistakes.

"It's not an expensive or onerous process," says Valla Roth, director of communications for Decision Insight, Kansas City, Mo. "It's just a matter of having images available, and we can do the project in eight weeks."

The full-service market research company also conducts projects to create shopper decision trees (e.g., do they first choose by diet cola vs. regular cola, by cola vs. non-cola or by brand?), which results in the creation of three to four planograms to test the impact of SKU placement on the shelf, including private label products and brands.

For example, after a major retailer cut its product assortment dramatically last year and took out the number-two brand, the delisted company asked Decision Insight to run a virtual shopping test of the current aisle and how it was before the brand was dropped, Roth says. The results showed that when the brand was added back into the store, sales volume was higher and shoppers reported greater satisfaction. The retailer was convinced to put this number-two brand back on the shelf.

Other times, retailers are not sure where a new product or flavor should be located on the shelf.

"It has to make sense for the shopper, and it's not always obvious where it should be," Roth says.

So when Nestlé wanted to launch a new line of single-serve ice cream cups last year, Decision Insight tested whether they should get their own door or be intermingled with their parent brand's tubs.

"Shopper feedback indicated that a dedicated door was the way to go," Roth says. "Ninety percent of retailers implemented the merchandising strategy, and sales were 50 percent higher than in stores that placed the cups with their parent brand."

Assortment technology also can review a retailer's risk of product out-of-stocks, and take a hard look at inventory turns.

"What we see is that there are products with three facings and hundreds of days of supply," Hertel says. "And others have one facing and only four to five days on the shelf. If you have products with hundreds of days of supply, that is incredibly unproductive and is putting more popular items at severe risk of being out of stock."

He notes that going forward, the next big step is integrating shopper data and loyalty card data into databases to understand who is buying at the store level.

"You'll find that loyalty card data is locked up in the marketing department, but store-level operations and merchandising should be the heaviest users," Hertel says.