Traditional retailers are striving to offer an omnichannel experience – where the customer experience between online and in-store is as seamless and painless as possible – but this digital effort is wasted without knowing exactly where stock is in real time.
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"Accurate inventory is the single thing retailers have got to get right for everything else to work," Bill Hardgrave, professor at Auburn University in the US, said at the National Retail Federation (NRF) conference in New York in January.
But that is not easy to achieve when many retailers are still running on siloed legacy IT systems – with a different system for warehouse management, transportation logistics and sales software in-store. Throw in a new system to deal with e-commerce, and retailers are struggling to keep their heads above water when it comes to managing IT systems that don’t speak to each other. So how can retailers know where their stock is if their IT systems don’t connect?
The challenge of gaining a single view of stock has been exacerbated further by the trend of retailers offering click-and-collect services, which see customers buy online and collect in-store.
Click and collect
Andrew Starkey, head of e-logistics at IMRG, says that without a real-time or near real-time view of inventory, retailers are struggling to provide these click-and-collect services.
Retailers that do not have this single viewpoint will need to have extra stock in their stores to satisfy customers who reserve items online and come into the store to pick them up within a short period of time, he says. Otherwise, retailers have to lengthen the delay before customers can pick up goods, or even incur costs by sending a duplicate item to a store that may already have that item on its shelves.
More on retail IT
Starkey says many omnichannel retailers were caught off guard by e-commerce and often set up an online division even further removed from the traditional bricks-and-mortar store systems.
"And when online all kicked off, they’re still running on different legacy systems," he says.
It's not just about providing a shiny click-and-collect service; having a single view of stock also helps bricks-and-mortar stores deal with online returns.
"Retailers in bricks-and-mortar stores hate their online colleagues with a vengeance," says Starkey, explaining that UK customers who order online can take their goods back to a store for a refund. "They’ve not made the sale, yet they have the liability of taking the stock back."
Argos stock view
Starkey points to Argos as one of the few UK retailers to have a perfect single view of stock. "It’s because of their business model," he says. "Argos has always been click-and-collect, just that in the past it was ordered from a catalogue instead of a computer."
Argos has a hub-and-spoke distribution system in which 140 larger stores stock 20,000 lines across its entire fleet of 756 stores. "They’ve got that huge network already in place," says Starkey. "Which is effectively forward stock rotation."
Starkey points out that because Argos’ goods are ordered by customers and then fetched by staff from the stock room, the customers can’t go and move the goods around within the store. "So they know exactly how many items are in the stock room," he says.
Mike Sackman, IT director of Argos, says it is still challenging to join up the channels to give customers a truly connected shopping experience. "We are in a good position because of the unique way Argos has organised its stock in the past," he says.
Mobile is growing fast and grew by 40% to represent 28% of total Argos sales in our most recent trading period
Mike Sackman, Argos
The Argos website runs on IBM’s WebSphere Commerce and Sterling Commerce platforms, and it is the latter that gives the retailer its single, company-wide view of stock.
"Mobile is growing fast and grew by 40% to represent 28% of total Argos sales in our most recent trading period," says Sackman. "People expect to shop across channels, and to get hold of products quickly."
Other retailers with accurate view of stock
John Lewis is another retailer that Starkey says provides a good customer experience when it comes to fulfilment. John Lewis itself says it uses a mix of real-time inventory with daily replenishment of stock to meet demand, but it says gaining a full view of inventory is a priority that it is working towards.
Clarks director, strategy and infrastructure, David Grant told Computer Weekly toward the end of last year that the sheer volume of data makes this project challenging. "Not only the amount of data, but the changes that happen, such as customers changing orders, or a new line of a particular shoe," he says. "Adapting to the modern marketplace puts pressure on those systems.”
David Stover, global head of B2C omnichannel commerce, solution management, at SAP Hybris, says retailers should be able to update systems and receive information as quickly as possible. But traditionally, retailers’ information is updated in overnight batches, not in real time.
Stover says an in-memory database could help to improve the return time on stock information, but it still doesn’t solve the problem in terms of re-engineering back-end legacy systems to speak to each other, which requires significant transformation investment.
Is RFID the answer?
One of the solutions being suggested by the retail industry is tagging items with radio-frequency identification (RFID) tags.
RFID allows us to reposition our stock, address consumer demand and allows us to feel confident to be able to fulfil orders in the omnichannel space
Pam Sweeney, Macy's
Speaking at the NRF show in New York, Pam Sweeney, senior vice-president for logistics systems at Macy’s, championed the technology, saying the company was "totally committed" to RFID after beginning a trial in 2009.
Sweeney said that although retailers may have an online presence, the ability to conduct click and collect, and send products from one store to another, it all depends on one thing: "Confidence that your product is in the originating destination."
She added: "RFID allows us to reposition our stock, address consumer demand and allows us to feel confident to be able to fulfil orders in the omnichannel space."
RFID also provides Macy’s with data to make better business decisions when reordering stock, and Sweeney said the retailer had even seen sales improve in departments that had rolled out the technology.
"We’re very confident that the technology works, that our store execution is absolutely flawless, and where we do have issues, we address them quickly," she said.
But Alex Golshan, VP international e-commerce and omnichannel at luxury retailer BCBG, says RFID is helpful, but only if the in-store point of sale (POS) and e-commerce systems are integrated. And updating legacy systems means effort and cost.
He points to American Apparel, which has done a lot of work with RFID, but BCBG is currently looking at the technology as more of a digital engagement tool in-store, to trigger videos in changing rooms depending on which items of clothing a customer is trying on.
But while retailers are trying hard to become more digital and multichannel, it is actually the supporting back-end systems that need to be up to date and joined up in order to fulfil customer demand in a modern retail age.