Silos Within Retail Firms are So 2016. This Year it’s Integrate or Die

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Silos

Out with the old, in with the new. Easy to say. Difficult to accomplish.

That’s what retailers are finding as they attempt to adapt legacy mindsets, processes, operations and systems for today’s demanding consumers and omnichannel environment.

A recent report from retail consulting firm BRP, which incorporates responses from 500 North American retailers, takes a look how well these firms are recognizing the need for substantive changes, and to what degree they’ve been able to adopt them thus far.

People

Of the retailers that have recognized a need for change, some have focused on their org charts, specifically moving employees around to create an organization that better reflects one business rather than several silos focused on a single channel.

Hudson’s Bay Company, Macy’s and Walmart are among those that have streamlined their merchandising and buying teams to eliminate redundancies and foster quicker decision making.

Of those surveyed, 50 percent of retailers say they’ve undergone a similar reorg but the changes still need improvement. Another 25 percent anticipate changes along these lines over the next two years and another 11 percent plan to undertake the challenge in the next three to 5 years. Only 8 percent say their company’s reorganization is already working well.

As these stores integrate their teams, BRP said planners are no longer solely focused on their sectors and more concerned with the health of the entire organization. Another benefit is that lessons learned can now benefit the whole retail group rather than a single sector.

Processes

Getting the right people to talk to one another is just the first step, however. Next, the consulting firm said the retailers that also integrate their processes will be better positioned to meet consumer demand.

Take inventory management, for instance. When strictly allocated by channel, retailers aren’t able to meet consumer demand. Using a more flexible model that allows for the flow of goods wherever the consumer expects it, and facilitates sales. BRP found that retailers are making progress in this area with only 31 percent of those polled maintaining separate inventory across channels, down from 69 percent just a few years ago. The change illustrates that teams are working together and are sharing more information and resources across channels.

Of those polled, 11 percent say their integrated processes are working well, while 53 percent see need for improvement. For the rest, it will be another two to five years before they’ll be able to work in harmony in this way.

Systems

Systems are the final part of the equation. Those retailers that are willing to give up their spreadsheets in favor of more robust tools will find a greater ability to leverage raw materials, production, shipping and supply chain costs across the whole company, the report found.

Currently, only 47 percent have started down the road of integrating planning systems across channels.

“In many cases, the problem may be a combination of integration with manual processes, conflicting teams or technology patched together to span channels,” according to the report.

Though these respondents intend to upgrade within the next five years, currently 22 percent use spreadsheets for ominichannel demand planning, though even they recognize a need for a change. Another 36 percent employ either a vendor app or one they’ve developed in-house.

Two key issues emerged as potential stumbling blocks for upgrading legacy technology. “When asked about the concerns that retailers have when implementing a new omni-channel demand planning application, cost and technical expertise are the greatest concerns,” BRP found.

Retailers seem to be a bit further ahead when it comes to allocation, with 51 percent of those in the report using an app. Further, 55 percent say their technology is very or somewhat effective.

In many cases, whether it’s omnichannel planning, allocation, store planning or merchandise planning, too many retailers are still using a variety of methods, which itself creates problems.

“The increased complexity of a collection of homegrown and off-the-shelf apps, supplemented with spreadsheets, creates multiple versions of the truth, making it even more challenging for retailers to remain competitive,” the report noted.

Customers

And of course, retailers can’t use these updated organizations, processes and systems to serve the customer if they don’t know what he or she really wants. And while it may seem challenging to keep up with today’s shopper, BRP found that many retailers are overlooking resources that are right at their fingertips.

While 72 percent of retailers say they’re capturing customer feedback via social, most aren’t using the information to its full advantage. Thirty percent recognize the ability to use this data to inform product development, but far fewer are realizing the opportunity to use it to hone planning. For instance, 55 percent of those polled have no plans to use these customer insights for allocation purposes.

BRP said it’s time for retailers to recognize the value social affords.

“Merchants should consider using every data point available in the planning process, including: business intelligence, inventory movement, shopping behavior, customer relationship management (CRM), social media, clienteling data and customer demographics/segmentation,” according to the report.

Merchants are much more adept at using other data for planning purposes, however. More than 80 percent use information gleaned from POS transactions in the planning process, while CRM data and online transactions are tools 64 percent employ. That’s compared to the 39 percent who incorporate social insights, the 22 percent look to mobile transactions and the 21 percent that use external industry data to plan.

In order for retailers to effectively use the information they’re collecting, they face the challenge of being able to interpret what they’re seeing. To that end, 36 percent of those polled recognize the need for improved analytics.

With a focus on bettering their capabilities in this area, retailers will be able to get a handle on consumers’ price sensitivities, reactions to promotions, shopping trends and more, the consulting firm noted.

But even with these insights and analytics, to truly see benefits, the company must be operating as one. “A large number of today’s organizations have capabilities and processes that are inconsistent across functions. Without organizational alignment, it is difficult to maximize the benefits that big data can bring to omnichannel performance,” BRP noted.

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