Retailers go on 'war footing' as the Christmas sales rush and chip and Pin deadline loom

This Christmas season will be the most stressful for IT directors in the retail industry since the threat of the millennium bug...

This Christmas season will be the most stressful for IT directors in the retail industry since the threat of the millennium bug loomed almost five years ago.

The three-month Christmas sales period is a make or break time. With sales over this period representing up to 60% of annual turnover for some retailers, a problem in the supply chain can be catastrophic.

This year, IT directors are having to contend with an extra pressure - the roll-out of chip and Pin tills by the start of January. The additional burden of Christmas sales levels over the next three months will quickly highlight any weaknesses in their systems.

Retailer MFI, which has struggled with a difficult SAP enterprise resource planning system implementation is installing extra processing and memory capacity to meet extra demand over Christmas.

Earlier this year the retailer reported that supply chain systems problems had left customers with incomplete orders and that remedial work would cost £30m.

For most retail IT directors, planning for Christmas trading begins six months in advance. Any retailers that are still tinkering with their systems now, are exposing themselves to higher risk, said George Lawrie, senior analyst at Forrester.

"At this time of year they should be doing nothing with their supply chain. It is too dangerous."

Retailers aim to complete systems upgrade work over the summer, said David Southwell, director at the British Retail Consortium. Testing should take place in August with final testing in September. After that, it is a matter of locking down systems and keeping them stable.

"You want to reduce the snafu factor to its lowest during the peak trading period," he said. "Many IT managers and IT consultants will literally work through the summer to get a lot of stuff implemented."

Andy Billington, IT director at fashion retailer Burberry, said he believed the healthiest approach was to maintain consistent levels of IT support all year round and not just at Christmas time.

"From an IT perspective, Christmas is no different. We are permanently geared to support the level of transactions at the maximum trading levels, which are actually at sale time, not Christmas. Our supply chain is automated, so it caters for peaks and troughs," he said.

Edward McRobbie of retail systems supplier Reteck said Christmas preparations are so intensive, that most retailers are effectively on a "war-time footing".

"You will commonly see a check of the IP infrastructure, based on what they think volumes will be, and whether the infrastructure will support it," he said.

"They will be looking at how many transactions, sales and how much inventory they will have over Christmas. They will be looking at bandwidth and checking whether servers have the power to operate in the right performance windows."

It is vital that tills and back-office systems are powerful enough to cope with peak demand levels without slowing down and becoming ineffective, he said.

"Stores will query stock with head office, but customers get frustrated if something which should take a couple of seconds takes five minutes. If the hardware is not up to speed, you might get retailers missing batch windows. Suppliers get the orders late and deliveries are late."

This year retailers have focused on improving their forecasting systems, and making better use of historical data to prepare for the demands of the Christmas break.

"Stocking at Christmas becomes even more of a key issue than it does at other times of the year. It is not just a loss of potential sales. If someone cannot find an item, they walk out the shop and you are losing a lot of other potential sales around that product," said Southwell.

One approach is to install systems capable of sharing stock information with the head office and nearby stores in as near real time as possible. Advanced stock control systems, supplied by Reteck and others, allow stores to direct customers to nearby stores where products are held if their inventory runs out.

"Retailers will be ensuring they have good visibility of demand at the store level," said Lawrie. "For years people have been looking at ways to transmit that demand daily to distribution centres. But more and more people are now looking to broadband, real-time transmission."

This technology, which has been pioneered by US retailer Walmart, means that retailers are able to detect runs on stock during the Christmas period within hours of them happening, allowing time to place orders with suppliers and keep the shelves full.

Christmas is so important to most retailers that their advanced planning is extremely thorough and Christmas IT disasters are rare, said Southwell.

"Over the past five years there have not been any serious snafus over the Christmas period. IT specialists in retail, even though much of it is project based, are masters of feedback. If you have a problem at a till in a store today it will be fixed tomorrow because it has to be fixed tomorrow."

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