Inventory Intelligence: Unlocking Omnichannel Retail and the Future of the Store
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DESCRIPTIONOmnichannel retailing adds the flexibility of cross-channel and mobile shopping to the unique revenue- and loyalty-building capabilities of the face-to-face retail experience. It offers opportunities to build deeper shopper relationshipsor risks ending them, when availability promises go unmet. Keeping availability promises depends not only on integrated IT systems, but on reliable inputs and outputs to those systems, across the boundaries of physical locations and technologies, covering both the short and long term. Retailers who succeed at integrating their inventory intelligence for shoppers, associates, and managers can cut costs, accelerate turns, and build revenue by driving high-fidelity information back into the supply chain, aligning it with shopper demand. Retailers who fail will subject omnichannel shoppers to a fragmented retail landscape, marked by jarring,disconnected changes and unreliable information. Integrated inventory intelligence is essential to deliver on the omnichannel promise. But even more, it future-prepares retail by eliminating information islands, adapting quickly to new processes and technologies, and keeping cost and waste low.
<ul><li>1.Safer. Smarter. Tyco.TMInventoryIntelligenceUnlocking Omni-ChannelRetailing and the Futureof the Store</li></ul><p>2. / 2 / Inventory Intelligence / Tyco White PaperIntegrated inventoryintelligence isessential to deliveron the Omni-Channelpromise.// Executive Summary Omni-Channel retailing adds the flexibilityof cross-channel and mobile shopping tothe unique revenue- and loyalty-buildingcapabilities of the face-to-face retailexperience. It offers opportunities to builddeeper shopper relationshipsor risksending them, when availability promisesgo unmet. Keeping availability promises depends notonly on integrated IT systems, but alsoon reliable inputs and outputs to thosesystems, across the boundaries of physicallocations and technologies, covering boththe short and long term. Retailers whosucceed at integrating their inventoryintelligence for shoppers, associates, andmanagers can cut costs, accelerate turns,and build revenue by driving high-fidelityinformation back into the supply chain,aligning it with shopper demand. Retailerswho fail will subject Omni-Channelshoppers to a fragmented retail landscape,marked by jarring, disconnected changesand unreliable information.Retails future: many locations,one promiseWhile there is no standard terminology forretail channels, industry experts generallydistinguish three types, which well name:Single Channel retail moves goods,orders,payments, and information to andfrom shoppers along a single path in-store, catalog, or online. Physical andonline stores, for example, are separateSingle Channel operations supported bythe retailer.Multi-Channel retail dissolves SingleChannel barriers to offer anywhere-to-anywhere purchasing and order fulfillment,with product, promotion, inventory, andcustomer information available within aselling channel and brand. Multi-channelretailing offers shoppers choice andconvenience but does not ensure acoordinated and cohesive customerexperience across the brand.Omni-Channel retail merges physical andonline stores with mobile and socialselling into one seamless experience forthe customer. There is a single view of allavailable inventory, products, promotions,and customers regardless of channel withinthe retail enterprise. Shoppers and retailersinteract simultaneously across alltouch points within the retail brand, not theselling channel. 1,2For years, analysts presented multi-channelas retails ultimate goal. So why shouldretailers bother with Omni-Channel now?The answer begins with a single integratedview of the available to promise inventoryacross all locations in the enterprise. Inaddition, is the ability to leverage the uniqueadvantages of the store environmentto serve as a sales location, order fulfillmentsource, and center for personal customerinteraction within the Omni-Channelretail brand. 3. Inventory Intelligence / Tyco White Paper / 3 /predictions, stores remain as relevant todayas when Bainbridge and Le Bon Marchopened in the 1830s.Omni-Channel retailing recognizes storescompelling physical and interpersonaladvantages, and links them to the high-speed world of electronic retailing. But itplaces shoppers, not stores, at the center,extending traditional measurements like in-store sales to include revenue per shopper,measured across all retail channels.Why Stores Still MatterFor shoppers, stores are an escape fromtheir homes and offices into attractive,exciting spaces staffed by pleasant, well-informed people attentive to their needsand preferences. Stores let them browseand learn about multiple categories ofmerchandise, compare them by touch andsmell as well as sight, assemble theminto coordinated outfits or packages, andenjoy them immediately without delays orcharges for shipping.For retailers, stores are a way to engageshoppers face to face, building loyalty,trust, and revenue through expert personalservice, up-selling (wool to cashmere) andcross-selling (a necklace for that sweaterand earrings?). For all the doomsdayOmni-Channelretailingrecognizes storescompellingphysical andinterpersonaladvantages...Figure 1: Three ways to organizeretail channels. In Single Channelor traditional retailing, pickupsand orders occur within the samechannel. Multi-Channel (or cross-channel) arrangements alloworders and pickups from anychannel. Omni-Channel retailingallows browsing and orderingfrom any channel, but focuses onincreasing the shoppers spendand that means bringing theshopper to the store.Omni-ChannelMultiple ChannelsSingle Channel 4. / 4 / Inventory Intelligence / Tyco White Paperrelationshipsexplicitly through cross-channel loyalty programs, and implicitlyby building an experience of satisfyingshopping experiences.But the risks are serious, too. Omni-Channel raises shoppers expectationswith a promise of availability. Breakingthat promise affects all channels andcompromises the brand. Serious errorspre-Christmas stockouts, for exampleareemotional events, and rebuilding trustis slow when its even possible. Theperformance of pioneering efforts by CircuitCity and others lagged expectations, withresults ranging from embarrassing todisastrous.Risks compound when retail salesassociates dont trust the system. Staffmistrust causes hesitant selling, wastestime double-checking inventory, andcommunicates lack of confidence to theshopper. Refunds and returnsessential torecovering trustare often the weakest link.Why is this still a problem?the need forintegrated intelligence.Retailers, suppliers, and software providershave been working on cross-channeltechnologies for more than a decade now,Mobile Challenges andOpportunitiesThe advent of mobile and location-basedelectronic commerce is about to makethe retail world even more interesting.Smart phones are often seen as threats,introducing services that allow instant pricecomparisons with online retailers usingbarcodes or even snapshots of an item.But mobile devices also bring opportunitiesinto the store, from location-based findit services, in-store navigation servicesto make browsing more efficient, androaming smart terminals that liberate salesassociates from fixed stations to bringinformation and transactions directly toshoppers.Omni-Channel Opportunitiesand RisksOmni-Channel retailing gives storesomnipresence, an advantage onceclaimed exclusively by online merchants.Omnipresence lets stores offer theirmerchandise to shoppers at the momentof interest, and sell it at the momentof decision, all without sacrificingtheir environmental and interpersonaldistinctions and the instant gratificationof in-store pickup. Omni-Channelretailing helps cultivate deep consumerand made considerable progress towardintegrated InformationTechnologies (IT)but IT integration alone cant provide theintegrated intelligence that Omni-Channelretail requires.IT organizes, accelerates, and distributesinformationthe way Google Search doesfor information on the Internet. But IT alonecant assure the quality of that information,Omni-Channelraises shoppersexpectationswith a promiseof availability.Breaking thatpromise affectsall channels andcompromisesthe brand. 5. Inventory Intelligence / Tyco White Paper / 5 /in retail or on Google. Thats why GoogleMapswhere errors matter more than withSearchuses old-fashioned camera trucks tomake sure it delivers up-to-date informationthat matches the physical world.Omni-Channel retail has the same problem:quality information depends on trustworthy,up-to-date inputs and outputs, not justreprocessed information that was alreadyin electronic form. Timely, accurate inputsand outputs, organized into actionableinformation, make up what we callintegrated intelligence: spanning physicallocations, technologies, and time. Letstake those one at a time.Integration Across PhysicalLocationsRetail supply chains are vast, efficient,andconsidering their complexityveryaccurate. Supply-chain partners watch theirinputs and outputs carefully, cross-checkingorders, packing lists, manifests, receivingrecords, and warehouse cycle counts, whileelectronic systems like barcode and RFIDhelp them align virtual records with physicalreality. But even the fastest, most accuratesupply chain is at the mercy of poor qualityinformation from retail endpoints.And thats where information risk sneaksin, from inputs and outputs outside thewalled garden of integrated supplychains, and especially inside the store:// At the back door, inputs must document a complex array of sizes, styles, colors, and options, and outputs must reflect the same information on returned items.// On the items themselves, inputs and outputs are coded in tags that must be compact, detailed, and tamper-resistant yet easy for store associates to remove.// At the point of sale, systems must capture transaction, loyalty-program, gift card, and coupon data, and help detect, remove, and recirculate tags.// At the front door, inputs and outputs should show real-time store traffic and intercept shoplifters without intruding on the legitimate shoppers experience.Integration AcrossTechnologiesOn a large scale, technology integrationmeans interoperability and datacompatibility across hardware, operatingsystems, and general-purpose applicationslike Internet browsersthe domain of IT.Timely, accurateinputs andoutputs, organizedinto actionableinformation,make up whatwe call integratedintelligence 6. / 6 / Inventory Intelligence / Tyco White PaperBut integration of retail-specifictechnologies has been slower. Thechallenges may be smaller, but thepressure to drive for compatibility is alsoless intense. Suppliers attempts to keeptheir solutions exclusive create needlesslyincompatible hardware, data formats,and information models. Effective Omni-Channel retail needs to overcome suchbarriers to integrate:// Execution, task management, and workflow, so a task like enter line item means the same thing on a POS terminal as on a smartphone// User interfaces and reports, so systems give users, the same information in the same way, even when it comes from different sources// Sensors with high-fidelity data, so inputs span sensor technologies, and offer enough detail for shoppers to make meaningful choicesStandards organizations such as theAssociation for RetailTechnology Standards(ARTS) support technology integration, butlow IT investment by the retail industry haskept progress slow.3Integration OverTimeShoppers want item- and location-specificinformation right now; retail executiveswant to track seasonality and long-termtrends by region or market segment.Integration over time requires aggregationover time periods spanning:// Instantaneous availability, location, shipment, and order status: information that answers questions like, Where is it?// Short-term aggregation to define events, track cycles, and evaluate locations, to answer manager-level questions like, Whats happening?// Long-term analysis to answer strategic questions like, Where are we headed?Over any time period, inputs shouldoffer end-to-end visibility across stores,distribution centers, and manufacturersas well as top-to-bottom visibility fromthe retail floor through regional sales anddistribution centers, to the executive suite.Most important, the information collectedshould provide actionable intelligencewith execution support to make thoseactions effective.Standardsorganizations such asthe Association forRetailTechnologyStandards (ARTS)support technologyintegration, but lowIT investment by theretail industry haskept progress slow. 7. Inventory Intelligence / Tyco White Paper / 7 /Direct and Indirect Business BenefitsWhat can retailers expect to gain frominvestments in inventory intelligence?First and foremost, they will have theframework to implement Omni-Channelretailing with confidenceopeningshopping to omnipresent online and mobileenvironments, while retaining focus onthe store. They can also expect significantdirect and indirect business benefits inthe areas of cost reduction, inventorymanagement, and revenue growth.Workforce ManagementInventory intelligence helps improve laborutilization, productivity, and morale instores and distribution centers throughautomation, accuracy, and upscaling jobresponsibilities. It cuts the time spenton manual entry and inventory counts,and the time wasted followingand thencorrectinginformation that is either wrongor insufficiently detailed for its intendeduse. Accurate inventory, allocation,and replenishment information reducespre-emptive buying and the inevitablemarkdowns and write-offs that followfrom carrying too much stock. And anautomated system that offers top-to-bottom visibility cuts losses from internalshrink fast.Inventory ManagementFast processes and lean inventoriesimprove inventory turns, and reliabletracking of items and store locations helpsstores reorganize their stock to maximizefloor-space utilization and sales persquare foot. More accurate forecasting,ordering, allocation, and replenishmentintelligence helps stores tune their productportfolios, and make better use of fixtures,displays and other capital assets. Data-based collaboration with supply-chainpartners raises compliance with ordercycles and delivery requirements, andopens opportunities for closed-loop, end-to-end collaboration, for example in tagreclamation programs.Revenue growthInventory intelligence could be justified ona cost and efficiency basis alone. But thereal prize from Omni-Channel retailing isrevenue growth, from:// Fewer abandoned orders due to out-of-stock events// Higher loyalty, from rewarding consistent shopping experiences across all touchpoints within the retailer brand// Greater merchandising potential, using clienteling and customer relationship management (CRM) information from in-store, online, and mobile channels 8. / 8 / Inventory Intelligence / Tyco White PaperHigh-quality inventory intelligence collectedfrom stores in real time feeds back throughthe entire supply chain, harnessing itsefficiencies in the service of shoppersdemand.Avoiding Implementation RisksAfter the false starts and missteps of first-generation Multi-Channel retailing, retailershave earned the right to be skeptical. Butthe lessons learned from that experiencecan help them sidestep the errors offragmentation, transition shocks, andimmature technologies with theirOmni-Channel initiatives.FragmentationBy definition, fragmentation is the enemyof integration, in retail intelligence as withanything else. In planning their transitionsto the Omni-Channel model, retailersshould take care to avoid:// Geographic fragmentationthe global reach of retail supply chains demands inventory information continuous from the manufacturer to the point of sale. For forward logistics, that includes tagging at the source; for reverse logistics, it includes recirculating tags all the way back to the manufacturers// Technology fragmentationinventory intelligence needs inputs from established Bar Code and Electronic Article Surveillance (EAS) technologies, emerging technologies like Radio Frequency Identification (RF...</p>
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