Today’s financial markets are rewarding retailers who understand the strategic importance of IT with significantly enhanced earnings multiples, and companies in the sector can no longer afford the view that their industry is an art when the leading players are increasingly managing their businesses as a science.
One of the biggest areas in which retailers are benefiting from technology is in the sphere of supply chain management. Integrated systems have helped drive like-for-like sales growth through better ranging, assortment and display planning, coupled with the availability of near “real time” sales and stock data. In addition, collaboration techniques such as CPFR (Collaborative Planning, Forecasting and Replenishment) and VMI (Vendor Managed Inventory) have helped retailers optimise inventory and on-shelf availability. If you review the performance of apparently comparable retailers over the Christmas and January sales, technology has played a key role in differentiating success from failure.
Technology has also brought benefits to the customer experience, notably in facilitating alternative (web-based) shopping channels and self-service options. Meanwhile in-store efficiency has improved through the use of more flexible and responsive staff scheduling systems.
But for many retailers who have patched their dated bespoke systems with string and Sellotape for the past 10 to 15 years, overhauling the entire portfolio of systems won’t be easy and certainly won’t be cheap. The challenge faced by retail CIOs is how to prioritise investment to support the fast moving nature of the retail industry. Only the most nimble of IT systems can support a constantly developing agenda of strategic, tactical and operational business initiatives but that is what 21st century retailers will need to survive. At the same time, CIOs must demonstrate IT is delivering value for money to a wide range of business stakeholders, often with apparently conflicting demands.
In retail, as with other business sectors, this can leave CIOs in a catch-22 situation. The board, often looking to deliver immediate results and meet the short-term demands of shareholders and investors, is more likely to throw money at solving short-terms problems, rather than securing the foundations for achieving the higher levels of productivity and service that will deliver longer term competitive advantage. And, while retail IT departments may look to promote the long-term benefits of investment in strategic systems, they are often frustrated by the board’s short-term approach.
Successful CIOs have managed to work through this issue by:
1. Ensuring IT investments are prioritised based on the value and strategic importance of business initiatives, rather than employing temporary measures to plug holes
2. Assessing the implications of business initiatives on the portfolio of business systems in an holistic manner
3. Rationalising IT investments into a manageable number of strategic programmes of work aimed at delivering the maximum return for the business investment in IT
4. Ensuring interdependencies between the people, process and organisational dimensions of business initiatives and IT programmes are effectively understood and managed
By taking this approach, businesses have been able to develop a common focus and language between the board and the CIO, so all key stakeholders can be engaged throughout the process of planning, prioritising and aligning IT investment.
The good news is retail business leaders are moving into the 21st century with a firm appreciation that a modern, integrated and adaptive systems infrastructure is central to their future success. Furthermore, the wealth of mature packaged systems across the retail value chain, from range planning to web based EPoS, and supply chain visibility to labour scheduling means there is now no excuse for retailers to reinvent the wheel.
If retail companies want to achieve long-term advantage, maybe it’s time to consign those old “green screen” systems to the annals of history and create a systems infrastructure that will make them the envy of less agile competitors.