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FUTURE OF BUSINESSES `50 US$10JULY 2012 • VOL. 11 NO. 7

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EntrEprEnEurVarsha BhawnaniFounderVinegar Fashion IndiaThe apparel retailer makes a come-back

rEtaIl ExcEllEncEDilip Kapur PresidentHidesignThe leather accessories retailer has made luxury affordable

Technology: The GreatEnabler

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As modern retail expands in India, technology can help retailers reach the next level of growth. Lean and efficient but aggressive and forward-looking operations are the key to market domination in today’s cut-throat world. No wonder then that technology has come to be seen by Indian retailers as the great enabler which can help them cut costs and boost operational efficiency. They are increasingly open to new technological innovations, from enterprise resource planning (ERP) and in-store inventory management to mobile technology, social media and cloud-based solutions.

Indian modern retail is just a decade old – this has actually been a blessing in disguise. Indian retailers are not constrained by investments in legacy systems and can leapfrog to the latest technology available. And many of them are doing so already to gain a competitive advantage. In this special technology issue, we discuss the latest technologies available in the market for retailers and the opportunities these represent. One thing is clear though – for a modern retailer to grow and expand in the modern age, there is no alternative to technology, a fact that Indian retailers have increasingly begun to understand.

The next edition of Images Retail would be the special annual edition with a focus on Vision 2020 of modern retail. How will modern Indian retail look like eight years from now and what are the main bottlenecks hampering its growth? We will connect with dozens of prominent national and regional retailers all over India to ask their views about how modern retail in India is going to shape up and what needs to be done for the country to emerge as a retail powerhouse. So stay tuned and keep your feedback pouring in!

JULY 2012 • PAGES 108 • VOL. 11 NO. 7

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12 .........................................National Updates 20 ...............................................New Openings 96 ................................................. Store Design100 ............................Personality of the Month102 .......................................Situations Vacant 104 ............................................................Index

R EGULARS

CONTENTSJULY 2012

IN THIS ISSUE

26 ...............................................Retail Launch The Watch That TalksDutch watch-phone brand Burg has launched its products in India recently and is looking to take the store count to 20 this year

30 ........................................ Retail Excellence Hidesign: Luxury Made AffordableLeather accessories brand Hidesign, which began as a hobby of entrepreneur Dilip Kapur in 1978, has become synonymous with affordable luxury

36 .............................................. EntrepreneurSweet Taste of Vinegar Varsha Bhawnani, Owner, Vinegar Fashions India, tells her story about how she created a successful apparel brand

54 ..................................................TechnologyHottest Retail Technologies Aneesh Reddy of Capillary Technology lists 10 hottest retail technologies that can give retailing a boost

60 ..................................................TechnologyDriving Efficiency Through Supplier CollaborationSuccessful running of a retail business to a large extent depends on a retailer’s ability to complement his suppliers’ core capabilities, says Shijo Sunny Thomas

64 ...................................................TechnologyMagic of MobileRetailers should begin acknowledging mobile phones as the most powerful tool ever for retailing and integrate these in the retail environment, says Girish Khare

68 ..................................................Technology Technology in Fashion Trade Technology adoption has become a necessity in fashion industry which is influenced by the spoilt-for-choice customers

70 ...........................................................Profile Watch Out for EthosThe Chandigarh-based Ethos Swiss Watch Studios plans to strengthen its position as the largest retailer of luxury watches in India. What makes it tick?

78 .......................................................... ReportWhat do Online Buyers Look for in Websites?Priya Mary Mathew highlights the most valued attributes of a website being looked by online shoppers in India.

cOVEr StOrY 46

technology:the Great Enabler

CAN RETAILERS TODAY SURVIVE wIThOUT TEChNOLOGY? ThE ANSwER IS A CLEAR NO. TEChNOLOGY IS A FORMIDABLE FORCE MULTIPLIER ThAT hELPS RETAILERS TAKE BETTER BUSINESS DECISIONS, CUT COSTS, INCREASE OPERATIONAL EFFICIENCY, AND BOOST ThE BOTTMLINE. IT IS NOw A NECESSITY, NOT AN OPTION

88 ........................................................ColumnWhat is Your Tech Adoption Index?The key to harnessing technology in retail is to think beyond what is being offered by the vendors, says Harminder Sahni

92 ........................................................ColumnRetailing in Tough TimesBS Nagesh argues that carefully managed property, inventory, and customer are the key to survival for retailers

Anita

Highlight

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46 . IMAGES RETAIL . jULy 2012

the great enablerBy Priyanka Dasgupta

CAN RETAILERS TODAY SURVIVE wIThOUT TEChNOLOGY? ThE ANSwER IS A CLEAR NO. AS ThE CUSTOMER BASE OF RETAILERS GOES UP AND ThEY ExPAND IN SCALE, ThERE IS NO ALTERNATIVE TO TEChNOLOGICAL INNOVATIONS TO STAY AhEAD IN ThE MARKETPLACE. TEChNOLOGY IS A FORMIDABLE FORCE MULTIPLIER ThAT hELPS TAKE BETTER BUSINESS DECISIONS, CUT COSTS, INCREASE OPERATIONAL EFFICIENCY, AND BOOST ThE BOTTOMLINE. IS TEChNOLOGY ExPENSIVE? ThE UP-FRONT ACQUISITION COSTS MAY BE hIGh, BUT IN ThE LONG RUN, IT PROVES TO BE QUITE COST EFFECTIVE BECAUSE OF ThE RETURN ON INVESTMENTS IT PROVIDES TO ThE RETAILERS

Technology:

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jULy 2012 . IMAGES RETAIL . 47

The Indian modern retail, though starting from a small base, is on a rapid growth trajectory. Driven by a slew of factors, the sector is pegged to grow at 30 to 35 percent year-on-year in the foreseeable future. While multiple modern retail formats are mushrooming across the country, unorganised retailers are also fast sprucing up their act to compete better. Since the industry operates on wafer thin margins, the key to survival lies in optimising resources and maximising customer satisfaction.

Over the years, as retailers have geared up to meet the increased competition in the market and the heightened expectations of the customers, technology has kept

managers are increasingly diverting a significant amount of their budget and resources towards technological upgradation and adoption of latest hardware and software programmes to increase efficiency and deliver a better customer experience. Without doubt, technology has emerged as a competitive tool and key differentiator in Indian retail and encouraged a dramatic shift in the mind-set of the country’s retailers.

A recent study by the Retailer’s Association of India (RAI) has estimated that modern retailers in India would invest about `13,668 crore by 2017 towards technology solutions for cost control, opportunity assessment and risk minimisation.

used by larger retailers in India is ERP (enterprise resource planning), followed by store inventory management.

LOWERing COSTS ThROugh TEChnOLOgyTo a large extent, the business of modern retail is driven by prior planning and effective execution. It is also constantly evolving in step with the changing consumer expectations and behaviour. Says Shijo Thomas, Industry Lead, Retail & CPG, at Fujitsu Consulting India: “The evolution of modern retail is not only towards the consumer side but also towards the suppliers and operational partners. For the critical functioning of a retailer, it is important for him to have a sense of visibility and operational control. Any retailer who has achieved this operational efficiency can derive immense cost benefit that eventually would affect his bottom line.”

This sense of visibility and control in retail operations can be brought about by technology which can help lower the costs substantially. Explains Thomas: “When we talk about things like supply chain, store management and managing the work force in a business like retail, a major chunk of the costs of a retailer goes towards operations. The idea is to minimise this cost while maintaining maximum visibility and control. This is where technology comes in to lower the operational costs of a retailer.”

Echoing these views, Indranil Guha, Additional GM and Head, IT Integration, with the Kolkata-based retail chain Spencer’s, argues that technology is very important in today’s world of cut-throat competition and low margins. “It has emerged as the key differentiator. Without constant innovations on the technology front, a retailer just won’t be able to run his business,” he says.

Vikrant Pal, General Manager, Business Improvement, with the national electronics chain Croma, asserts that without technology one cannot handle retail operations at all. “Technology is the key to any retail strategy. If this crucial element is missing from the retail operations, the retailer cannot think of scaling

pace with the developments and evolved rapidly to support the growth of modern formats. In fact, technology has emerged as the key enabling factor helping retailers stay a step ahead of others and increase profitability.

Says an industry analyst: “Consumers have started expecting more bang for their buck and a higher level of service, so no modern retailer worth his salt can neglect the importance of technology in day-to-day operations.” This is a fact not lost on the Indian retailers. A few forward-looking entrepreneurs and

It has also discovered that on an average, a modern retailer in the country spends around `1.55 crore on IT products annually. The most prominent technology solution

aCCORding TO OnE ESTiMaTE, MOdERn RETaiLERS in india WOuLd inVEST aBOuT `13,668 CRORE By 2017 TOWaRdS TEChnOLOgy SOLuTiOnS TO gain a COMPETiTiVE EdgE

A typical modern retailer in India is estimated to spend around `1.55 crore on IT products annually

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up and optimising or maximising his ROI. Without technology, one cannot do any of these things on the harder aspects of the business. Even the softer aspects such as customer engagement and increased footfall are not possible without technology,” he explains.

However, the level of awareness on a retailer’s part about technology often depends on the size and scale of his business – the larger a retailer is, the more aware he usually is about the benefits of technology. But in some big retail chains in India, the IT department is still considered only as an enabler, not as a crucial business partner on par with other departments such as sales, procurement and inventory management. “In many retail companies, the IT department continues to function under other departments such as finance. This to

tale to tell. “From our experience of working with more than 800 retailers across the globe, we have seen that in many ways the Indian retailers are actually much more technologically up-to-date compared to many large retailers across the globe,” he says. “The reason is that modern retail is just a decade old in India, and most large retailers in the country have set up shop over the last five-six years. This has given them the opportunity to set up greenfield retail ventures using the latest technology that has become available in the past decade, thus allowing them to leapfrog to the global standards.”

This, he adds, is not the case with many international retailers which have been in this business for more than two decades and are forced to continue with legacy applications in which they have sunk a lot

our company needs to capture accurate customer information since we also do home delivery of products. Our customers have to be given a choice as to when they want the purchased goods delivered at their homes, the demo and installation – the things typically associated with home delivery. Our custom-made port allows us to enter all this information when we are billing the customer. That is not the standard mode in which retailers operate. This application we have built for ourselves on our own,” he says.

Croma has a delivery system integrated with the vendor. The company puts the stock at a vendor’s location. As and when a customer buys a product, the vendor automatically gets a purchase order. “We can pick up the product directly from the vendor and deliver it to the customer. This cuts our inventory holding because we are able to make a purchase order to the vendor as soon as a customer buys any product from our store. This is done online,” says Pal.

Croma has also moved away from the traditional method of stock replenishment and delivery,

TECh FiLE

At Spencer’s, technology has enabled the availability of previous day’s sales figures (pan-India, classified to article and store level) to reach target recipients through automated SMS and email in the morning. The Auto Replenishment System (ARS) generates automatic purchase orders that get emailed to vendors, indicating quantity and time of delivery suiting vendor preferences. The earlier manual ordering often used to lead to either excess stock or stock-out. ARS improved availability of SKUs at the stores

SPEnCER’S

“Our Auto Replenishment System pre-checks the vendor’s consignments for errors and auto approves, thereby reducing the wait time at our warehouses.” – Indranil Guha, Additional GM & Head, IT Integration, Spencer’s

a large extent limits awareness about what technology can do to benefit retail operations,” says Thomas of Fujitsu Consulting.

These attitudes are however changing, with retailers now taking a keen interest in technological innovations such as enterprise class applications and solutions to better manage the customer base, expand nationally and diversify the product range. Says Thomas: “Not only the larger retailers, we are also seeing the smaller state-level retailers having not more than 10 to 15 stores being very keen about using technology for work-force management and customer loyalty, which are traditionally the playing field of bigger retailers.”

nEW innOVaTiOnSMany people think Indian retailers are somehow slower in adopting technology in their day-to-day operations compared to their global counterparts. However, Thomas of Fujitsu Consulting has a different

of money. Since they have been using older technology for many years, they now face challenges in upgrading to newer solutions. “For instance, a global retailer might use modern technology in many of their customer-facing applications, but their backbone could primarily be based on mainframe computers, which is a legacy application. If you compare this scenario with the Indian retailers, you will find that most large players are using the latest enterprise class applications in different areas of their business,” explains Thomas.

Pal of Croma could not agree more. The retail chain uses the same basic technological structure for its stores as most other retailers. “We have a core ERP system which has got functionalities such as merchandising, HR, and finance built into the solution. This kind of system most other retailers also use. However, on top of this, we have built our own port which we operate in our stores. This is a custom development because

and upgraded to a new technology-based system. This has cut its inventory cost by about 25 percent and its EBITA by about 60 percent, according to company officials.

Says Pal: “Earlier we used to follow a min-max system at our stores, like most other retailers. This means that for any product, say a laptop, you carry four pieces as maximum and two pieces as minimum in inventory. So you will always have four pieces in stock, but if the cost of the product comes down, then you can source two more. This was our regular mode of operation which remained fixed even when the sales of the product fell. There was no proper method by which our replenishment system could follow the buying pattern of customers. We have now completely changed that system and made it elastic. Depending on how the customers are buying a particular product, the solution automatically increases or decreases the stock.”

Spencer’s uses ERP solution from SAP, with other web-based applications integrated for specific purposes. The company has introduced a “vendor portal” – an interface through which its vendors can log into its system to check information about them with respect to sales, stock, status of invoices, etc. This can be drilled down right to the individual store level. Spencer’s also uses something called ASN (Advanced Shipment Notice) which is an application by which a vendor’s consignments are pre-checked for errors and auto-approved before

they reach the company warehouse. This drastically reduces the wait time of the vendor at the warehouse. For customer engagement, loyalty and retention, Spencers is using a web-based CRM application system. For the back-end operations, logistics and store operations, the food and grocery retail chain has deployed SAP and a few other web applications, while it uses SAP BI system for analytics.

Industry experts say there is still a great deal of opportunity for Indian retailers to leverage technology to gain a competitive edge. “As retailers continue to expand in multiple product segments as across the tier II and III cities, they should invest in technology to create visibility in their operations,” says Thomas of Fujitsu Consulting. “In a large country such as India, retail segments like food and grocery are evolving at a rapid pace. Retailers should really look at some kind of maturity and technology advancement in creating visibility in the food supply chain. This is the area where many foreign retailers have scored extremely high.”

Some Indian retailers are trying to use business analytics to identify costs across the enterprise and optimise their business processes. They are increasingly looking at technology solutions for improved decision-making, better efficiency and enhanced productivity. However, on the other end, many mid-sized retailers are still in the process of putting a transaction system in place that includes a POS system. Industry analysts say this should be followed by

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systems for merchandise management and customer relationships. Later, they should invest in supply chain and logistics management systems as well as business intelligence and analytics software, thus completing their technological upgradation.

The need to adopt suitable technology solutions is being driven by business dynamics. Retailers are using technology applications for managing loyalty programmes, inventory management, supply chain management, security solutions, data repository and management, etc. to get the basic technology infrastructure in place. They are also beginning to move from card-based offline loyalty programmes to mobile-based real-time solutions since the cost of issuing physical cards is going up.

MOBiLE and SOCiaL MEdiaThe increasing popularity of mobile phone technology and social media has revolutionised how retailers connect with customers for marketing their business. Industry watchers reckon about 20 percent of modern retailers in India are using mobile and

Web interface in one way or the other to reach out to current and potential customers. Mobile-based solutions are expected to cut cost and increase efficiency of retailers but investment on these technologies take a slightly longer time to show actual returns.

In principle, the mobile customer engagement programmes are quite simple – the mobile number of the customer is used as the main customer key, leading to simplicity of customer engagement. It enables uniquely identifying a customer, communicate with them easily and cost-effectively, and authenticate while rewarding – the three most critical aspects of the customer interface for any loyalty programme. By combining this with real-time communication, mobile vouchers, and point-of-purchase analytics, the simple concept of mobile engagement can become a potent weapon for a retailer.

The most important aspect of using mobile CRM is to vastly increase the customer base. According to research by the technology product company Capillary, most mobile-based CRM

loyalty initiative can be launched with a far better understanding of the consumer-buying patterns.

National retail chains such as the Future Group, the Landmark Group, Reliance Retail and other players are extending their loyalty card programmes by adopting SMS-based marketing campaigns. For example, the Lifestyle chain of stores allows its customers to accrue and redeem points through a simple SMS without the need of physical cards. Apparel stores such as Chemistry and the beauty retail chain NewU have also adopted the same mobile mechanism, totally doing away with plastic loyalty cards.

Social networking is another medium which the Indian retailers are actively leveraging. They are using online portals – exclusive or otherwise – to reach out to their targeted audiences, making them feel special by offering deals based on an understanding of their unique preferences. Retailers mostly use the data generated through the customers’ transaction history to make new offers to them.

TECh FiLE

Electronics retailer Croma has developed a customised port. Customer information fed into it on the point-of-sale flows to a business intelligence platform. The captured information pertaining to the customer is quite accurate because of the home delivery of products. The chain has a detailed data of its customers numbering about 1.4 million. Its marketing department has a dedicated person who keeps mining data on a regular basis and looking at the psychographic and demographic positioning of the customers. Based on this, customer-engagement offers are generated.

CROMa

“We want everybody in our company to hook on to the cloud and work from there. That’s our technology vision for the next two years.” – Vikrant Pal, GM, Business Improvement, Croma

programmes are able to sign up as high as 80–90 percent of customers as against 10–15 percent in card-based programmes. The operating cost of a card-less programme is close to zero, cutting out the cost of cards, the effort in logistics and management, paper-based forms and data entry, relying on m-vouchers for gratification and SMS/email for communication, thereby generating massive ROI on investments. It is also quite environment friendly.

One of the key benefits of mobile CRM is that a retailer can launch a simple engagement scheme with data capture without a formal points-based loyalty programme, such as a simple seasonal milestone programme. After studying the programme for a few months, a well-modelled points-based

Needless to say, this trend has spilled over into the mobile space as well. For instance, if a shopper has the Bluetooth functionality on his mobile phone turned on and he happens to walk around leading malls in Delhi, Mumbai or Bangalore, he would automatically be “fed” promotional offers from individual stores in the vicinity. As he walks up to the next floor, the offers would change depending on the location and time of the day. Some would argue that this is an intrusive technology, but the fact remains that Indian retailers are now learning to intelligently target their customers using a variety of devices and solutions.

iS TEChnOLOgy ExPEnSiVE?Whether any IT solution appears

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expensive to a particular retailer depends on the scale of his business. According to Sunil Pandkar, Head, Portfolio Management, Fujitsu Consulting India, if a retailer chooses an IT application and the corresponding hardware depending on his scale of operations and the future plans for expansion, and manages to strike a balance between these, he will get an excellent return on investment.

He explains: “Sometimes a small retailer goes for world-class IT solutions which are expensive. On the other hand, many retailers who have got into a big scale of operations often settle for low-end IT solutions and products in certain areas due to budget constraints. It is not only the question of understanding technology – it is also about matching the right technology with the scale of the retailer. For retailers in India, the scale keeps increasing with time – that is what we have observed. So we can say that the technology that is available to the retailer is not expensive considering the return on investments it provides.”

Croma on its part is making significant investments towards its technology spends. Says Pal: “We spend close to .7 to .8 percent of our budget on information technology. On transformation projects such as new initiatives and innovations, we spend close to .2 percent of our revenue every year on improvisation.” At the end of the day, technology has to subscribe and adapt to the unique nature of the retailer’s business. But at the same time, to realise the benefits of technology, retailers need a lot of business discipline and operational consistency.

Says Thomas of Fujitsu Consulting: “In many cases, the expectations of a retailer from technology are huge. We need to understand that doing a business like retail in India is extremely complex because of the diverse demography. In many instances, particular businesses end up customising themselves to such an extent that it becomes difficult for technology to adapt to that kind of complexity. That I feel is the biggest challenge when it comes to

The technology available to the retailers is not expensive considering the return on investments it provides

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adopting technology for a retailer. In terms of the expectations of the retailer, choosing the right technology according to the scale of the business is crucial.”

FuTuREAs far as the latest developments in technology are concerned, a lot of interest is being generated among Indian retailers for open-source cloud-hosted solutions. When they expand rapidly, the cloud can provide them the ability to derive incremental cost savings in terms of operations, customer base and business division. Says Thomas of Fujitsu: “Open source has always been a favourite, not only among Indians but also retailers globally because of its cost-effectiveness. We are seeing a lot of retailer interest in business solutions,

“This is a population with extremely complex demographic characteristics, so some of the buzzwords we are hearing from retailers around the world include the term ‘big data.’ This is because a huge amount of data is being churned out from customers and operational activities of retailers in India,” says Thomas of Fujitsu Consulting. “The country is going to be an exciting case study for technology-intensive areas. The reason is that the technology play from ‘big data’ allows retailers to rapidly make decisions on an extremely voluminous and complex data. In a huge consumer base like India that is doing transactions across multiple locations and complex demographic characteristics, retailers need to quickly analyse the data and take business decisions.”

India would also see modern retail penetrating into tier II and III cities in a big way in the coming years. The retailers would need technology solutions to gain operational visibility at these locations, learning from international retailers which use technology more efficiently, resulting in healthy bottom lines and more satisfied consumers.

Looking at the middle-class growth and consumption patterns in India, retailers here have a unique opportunity to embrace technology in an innovative manner, thereby improving their services, increasing profitability and bracing themselves more effectively for the heightened competition once FDI in multi-brand retail opens up.

TECh FiLE

Swiss watch retailer Ethos, with its strong customer focus, wanted a business solution to integrate all its stores and processes acros India. The management also needed real-time access to critical information that could empower them to take informed decisions. To support effective and precise operations, Ethos was looking for single solution with modules for sale, purchase, finance, and inventory so that all retail operations could be managed centrally. A company called LS Retail helped Ethos standardise process flows such as internal location transfers, serialise items, back office control, and inventory look-up.

EThOS

“Technology helps in minimising costs of a retailer while maintaining the maximum visibility and control of retail operations.”– Shijo Thomas, Industry Lead, Retail & CPG, Fujitsu Consulting India

irrespective of the platform and the technology they are built on, because solutions ultimately provide value to the business division.”

Guha of Spencer’s says the company may deploy the warehouse management system (WMS) module of SAP’s ERP solution, leading to better supply chain management at all its stores in the near future. “We may also adopt technologies such as the HANA appliance software of SAP which aggregates huge amount of data for very fast computing. We may also upgrade our POS software platform leading to faster customer checkout at the POS counters,” he adds.

Further technological upgradation seems to be the future agenda of Croma as well which has identified technology as a major force multiplier. Says Pal of Croma: “We are trying initiatives in the field of mobile phones. We would want to give customers flexibility of paying at the spot where he purchases a product. He need not walk to the cash counter. We don’t want to keep any hardware

into the store. We want everybody to hook on to the cloud and work from there. That’s our near-term vision in the technology space over the next two years.”

Despite all the challenges the Indian economy is facing today, industry experts feel modern retail in India is going to sustain itself and grow further, driven by the billion-plus population of the country. Technology adoption by retailers will be governed by business decisions that will cater to such a huge number of customers.

The rising customer base is driving the adoption of technology by retailers


technology

Driving Efficiency through Supplier collaboration

IN A NEGOTIATION-ORIENTED RELATIONShIP SUCh AS ThAT BETwEEN A RETAILER AND hIS SUPPLIERS, A PRACTICAL AND INCREMENTAL COLLABORATION APPROACh IS REQUIRED, DRIVEN BY BUSINESS DISCIPLINE AND AIDED BY A FLExIBLE TEChNOLOGY PLATFORM. IN ORDER TO BUILD A hOLISTIC APPROACh TOwARDS SUPPLIER COLLABORATION, A RETAILER ShOULD TAKE GRADUAL STEPS TOwARDS IDENTIFYING MULTIPLE COLLABORATION LEVELS whERE EACh LEVEL SATISFIES A DEFINITE BUSINESS OBJECTIVE

At a recently concluded gathering for retailers in India, those present were asked about the supplier collaboration initiatives taken in their organizations. For many, supply chain collaboration implied automation and dissemination of transactional information to their supplier base. For some, the collaboration efforts were towards sharing sales and stock dashboards. A common premise across many responses was that collaboration was equated to automation and was an initiative to lower administrative costs. However, for a large group of retailers, the current levels of collaboration were

a baby step towards establishing an initial level of trust and a precursor to larger supplier engagements with a vision to increase revenues and market share.

In an execution-driven business such as retail, there are two relationships that are sacrosanct with customers and suppliers. Customer behavior towards a retailer’s product and service assortments represents the moment of truth for the retailer and is the result of an arduous retail planning and execution exercise. Suppliers in turn focus on product innovation, pricing, branding and timely shelf availability, thus boosting

the retailer’s confidence at customer checkout. Successful retail execution depends immensely on a retailer’s ability to complement the supplier’s core capabilities with a timely and decision-enabling insight into all points of the product path within the retail value chain.

The benefits of such collaboration were traditionally perceived to be only for the purchasing functions of a retail organization. That is the reason why most retailers look at collaboration as an automated transmission of purchase orders, delivery notes, invoices, etc. In order to build a holistic approach towards supplier collaboration, a retailer should take gradual steps towards identifying multiple collaboration levels where each level satisfies a definite business objective. For some, the ideal levels could be to first establish visibility in certain business areas and then to increase profitability and demand forecast accuracy.

Successful retail execution depends on a retailer’s ability to complement the supplier’s core capabilities

By Shijo Sunny Thomas


technology

In addition to the suppliers, equally important stakeholders in the supply chain collaboration are the various departments of a retail organization. The buying or sourcing function becomes the key stakeholder and owner of the supplier relationships. Supply chain needs to be involved to maintain discipline in inventory storage and movement throughout the chain from supplier to store or customer. Finance has a role to play not only for accurate payables but also for supplier receivables in the form of claims. IT is needed to orchestrate

Take the example of a large health and beauty retailer which is planning to organize a campaign for its entire range of makeup products. The campaign includes product promotions in the form of discounts, additional loyalty points on purchase, in-store beauty services, special display units, etc. in stores. The buyer sends out an email to all relevant suppliers on the impending campaign and asks them to submit the range of products and the applicable promotion offers. All supplier-submitted promotions need to be circulated to marketing, store operations, supply

multi-pronged approach. The first is to induce discipline into the supplier-facing business functions and the second is to employ technology that subscribes to the discipline. This is easier said than done. More than often, retail organizations follow different processes for different merchandise categories or geographic regions. Some of these are warranted by the peculiar nature of each of the merchandise categories. At the same time, there is a lot of opportunity to streamline and define a consistency to the processes across merchandise categories and geographical regions.

Technology forms a collaboration-enabling layer across a multitude of retail business functions. Commencing from a basic model making use of emails and data templates, retailers can establish transactional communication for activities such as item on-boarding, price updates, and promotions. This approach will work for smaller retailers with limited merchandise categories with a shallow depth of products supported by a few suppliers. As the number of SKU’s, suppliers and geographical footprint of a retailer increase, it puts a strain on the supply chain visibility and service levels. This situation calls for a totally different level of automation of the retail processes.

Retailers have a plethora of technology options available today for supply chain collaboration. A fundamental feature across these is that the supplier-facing application is integrated to inventory, finance and merchandising data hosted within a retailer’s internal application landscape. Suppliers can securely view and respond to information from the retailer’s internal applications using public applications such as Web browsers. The integration of the collaboration layer with a retailer’s ERP is the most key, crucial and critical aspect of any IT initiative towards supply chain collaboration. The options available for integration are many and should form a key parameter while evaluating technology options for supplier collaboration.

Some retailers opt for custom portals where they gradually build supplier facing functionality over

in ORdER TO dRiVE COLLaBORaTiOn WiThin ThE EnTERPRiSE and WiTh ThE SuPPLiERS, RETaiLERS nEEd TO adOPT a MuLTi-PROngEd aPPROaCh

all processes in the respective applications and is the enabler to the business. Visual merchandising needs to be in the loop for display units and space plans provided by the suppliers, a feature which was once the mainstay of fashion retail but now can be seen even in consumer goods. In summary, the entire retail organization needs to collaborate alike, internally with each other and externally with the supplier base across various business functions.

chain and the finance departments. The campaign needs to be executed, the stock shelved in stores on time, the sales lift monitored and supplier claims submitted along with the proof of sale for the hit on margins. And this is just one of the many possible business functions where collaboration could drive profitability and efficiency within the retail chain.

In order to drive collaboration within the enterprise and with the suppliers, retailers need to adopt a

Retailers have a plethora of technology options available today for supply chain collaboration


technology

time which are designed to work well on current processes. Addition of new business functions requires a fresh dose of engineering. Often, changes in processes and integration require an element of re-engineering. There is also the option to use work flow platforms to build supplier collaboration applications. Using these, retailers can build specific

consistency at a low TCO, minimum administrative complexity and the highest scalability. Every retailer’s business processes, organization structure and ERP application are unique in nature. The best collaboration layer will need to adapt itself to these unique retail requirements in the least possible time. Therefore, the most imperative

such as new product development and introduction, sharing range attributes for suppliers to propose assortments etc. Buying activities such as contracts, product information management, product price updates and supplier performance scorecards can be collaboration-enabled. Purchasing, distribution and payables are already the most technology enabled area where retailers have introduced technology to provide visibility to suppliers into the purchase to pay processes.

A growing interest is being witnessed in enabling supplier visibility into point-of-service areas such as promotion effectiveness, sales and stock reports, loyalty information, etc. The technology option chosen by the retailer should not be restricted to a few business functions; instead it should allow retailers to climb the collaboration maturity ladder in the shortest time.

At each rung of the collaboration ladder, a retailer will need to measure the impact of collaboration on each of its business areas through well-formulated KPI’s. For the planning functions, demand volatility can be address through collaboration, resulting in predictive replenishments. Supply chain lead times can be improved leading to faster time to market. Finance can optimize the working capital requirements by arresting revenue leakages and optimizing payables. Suppliers and the merchandising department can collaborate to devise and implement more effective and profitable promotions.

In the end, supply chain collaboration is directed at creating value for the customer. It is about retailers and suppliers transitioning from a “need-to-know” visibility into information to building incremental trust across the retail value chain.

Shijo Sunny Thomas is the Industry Lead (Retail & CPG) at Fujitsu Consulting India. He has spent over nine years associated with the consumer retail industry in India and other geographies

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processes and integrate them with their ERP applications. There are some extremely robust and flexible platforms available in the industry today for this purpose.

A third option that a retailer can consider is the best-of-breed ERP applications that offer supplier collaboration tools as extension to the ERP application. These tools offer process coverage of business functions in the planning and buying areas of retail which work well with the respective ERP applications.

A point that retailers should keep in mind while evaluating technology options to enable collaboration is that retail is not a process-intensive industry like banking and telecom. The priority within the retail business is to bring visibility, control and

value that a retailer should demand, demonstrate and derive from technology is whether it fits their business and technology landscape and the time-frame required to do so.

Process coverage is another important parameter. Retailers can induce collaboration across a wide area of business functions. In the planning area, retailers and suppliers can collaborate in areas

SuPPLy Chain COLLaBORaTiOn iS aBOuT MOVing FROM a “nEEd-TO-KnOW” ViSiBiLiTy inTO inFORMaTiOn TO BuiLding inCREMEnTaL TRuST aCROSS ThE RETaiL VaLuE Chain

The best collaboration layer needs to adapt to unique retail requirements in the least possible time

IMAGES RETAIL - SHIJO THOMAS

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