Archive for February, 2010

Retail opportunities in the global community: overcoming the complexity of expansion

by Morgan Day • February 23rd, 2010 • Write a comment »

Blog part 2:

Last week, in part 1 of this blog series, I discussed issues and ideas around outsourcing and offshoring. In part 2 of this series I will discuss overcoming the complexity of global expansion. These ideas are based on a key-note speech I gave in India two weeks ago – on retail opportunities in the global community. Thanks for your interest – please feel free to comment!

- Morgan CTO // Quantum Retail

Supply-chain complexity comes from balancing both local and foreign sources to meet the localized consumer demand, on a global stage.

Emerging markets don’t represent opportunity for every retail vertical. First, you need to know:

  • What is your goal in expansion and how are you going to measure success?
  • Who is your customer in this new market?
  • Is the culture going to accept your brand, or do you need to create a new brand?
  • Is there enough demand to achieve your goal?
  • Who will your competition be and how are they likely to react to your presence?
  • What does your offering look like in this new market?
  • How will you manage your supply chain – distribution, allocation and replenishment?
  • How will you manage the people and processes in a global environment?
  • How will you deal with trade challenges such as tax complexity and product restrictions?

Integrating Processes:

How we can make it work:

  • Use of partnership – technology and fluid processes that blend the relationship into a strategic workflow
  • Value driven approach – common goals, measured results.
  • Process Efficiencies in – demand driven sourcing, multi-channel selling.
  • Leverage technology and partners – reduce system complexity, eliminate artificial boundaries.

What is the difference between a business process outsourcing (BPO) challenge and an IT challenge?

In many cases current enterprise systems and business processes are what constrain retailers from taking advantage of business opportunities. Today, every initiative have to show rapid, significant return on investment . If the current operating model is too restrictive then the cost can outweigh the short term benefits and fail to deliver that return on investment. This means that BPO has to be strategically planned, controlled and have the flexibility to be change, reflecting a retailers changing strategic priorities. The IT challenge is then to integrate the BPO with the entirety of their global supply chain.

Simplifying the complexity:

Retail is complex and it gets more complex every day. Global expansion and localization challenges are at the heart of this complexity. We can’t eliminate these challenges, but we can embrace them and simplify the processes and the way solutions are delivered.

Key components of a successful strategy:

  1. Combine strategic partnerships in ‘end2end outsourcing’ (not offshoring) that creates result-driven alliances
  2. Continuous process refinement that strengthens these partnerships and allows open sharing of ideas
  3. Seek process innovation (not just technology) – because retail is changing every day and solutions need to evolve at the same pace
  4. Embrace processes that localize assortments and create a dynamic supply network that integrates factory to shelf visibility

Seeking innovative partnerships:

A new look at partnerships will change the landscape of global solution delivery in retail. In order to get the most out of these relationships, the partners must create fluid, transparent communication based on information, not just data – giving trust and authority to both sides in order to steer the relationship in the most efficient direction. Integrating business processes to make partners an integral part of idea creation, solution development, delivery and support.

Fundamentals of successful partnerships:

  • Require a joint business plan with an incremental multiplier on potential revenue and margin
  • Provide a compelling and unique selling proposition – it is not sufficient to just offer a service
  • Address global market-space rather than look to multiple partners to solve one problem regionally. It needs to focus on a global service provider
  • Eliminate barriers to entry – IT, barriers due to corporate scalability, technology.

Get resources on how to adapt to the challenges of today’s retail market HERE »

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Retail opportunities in the global community: outsourcing and offshoring

by Morgan Day • February 19th, 2010 • 1 Comment »

Blog part 1:

Last week I ventured to India to give a key-note presentation on retail opportunities in the global community. The complexity of global expansion is daunting, as the processes and logistics of managing a supply chain on a global scale are immense. But here are some of the key points of my speech for you to consider. Look for part 2 next week. Thanks for your interest – please feel free to comment!

- Morgan CTO // Quantum Retail

Today there are two dominant strategies in retail:

  1. A continued global expansion of brands
  2. A need to tailor the offering to focus on the local customer

The fact that these are sometimes at odds creates complexity for retailers. With the global expansion of retail and the drive for brand consistency – many products are manufactured and sourced internationally, however – today customers are more sophisticated than ever, with competing objectives such as:

  • a return to locally sourced products
  • an eye to sustainability
  • value for money
  • brand recognition

These demands pose a challenge to retailers that have spent significant time and effot simplifying their supply chain sourcing and distribution. It also poses a big logistics question as more and more retailers expand their chains into global markets. Now retailers are faced with the task of restructuring their processes, re-routing their distribution patterns and re-branding their image to embrace the task of localization as they reach into the global sphere of retail.

So how do retailers think globally and act locally?

They need to have a supply-chain that is able to be responsive to customer needs, now and in the future, and one that can be efficient at distributing product on a global scale. Retailers need to look for opportunities that leverage intelligent international partners for ideas in technology, analytics, customer service, and distribution. This will allow them to extend their reach and scale their capabilities far beyond that which they can manage effectively today.

What is the difference between ‘outsource and offshore’ ?

Outsource – means you look for ways to scale and build capacity by divesting of critical yet non-core functions

Offshore – means you are looking for ways to reduce costs by accessing lower cost resources (this applies to US exports and imports) – lumber, steel, wheat etc.

What are companies looking for in sourcing and off-shoring:

  • Solutions not just lower costs
  • Scalability of business, processes and people
  • Technical innovation, not maintenance of existing systems
  • A stable environment that has a predictable cost with increased efficiency over time

Global presence means understanding foreign trade, complex supplier relationships and materials sourcing – it’s not just about IT or process… it’s about everything retail. Even with the recession of 2009 it’s important to note that thriving retailers are now even more aggressive about global supply chain expansion, they don’t want to depend solely on US revenue stream.

Get resources on how to adapt to the challenges of today’s retail market HERE »

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The truth about size optimization, SKU rationalization and localization

by Quantum Retail • February 4th, 2010 • Write a comment »

Getting the right sizes, colors, styles and quantities to the right location

Local demand changes at every store on a daily basis. Clustering stores together by store size and geography might simplify the process, but is inefficient and does not take into consideration individual store patterns for size, color, style and quantity of local demand and product preference.  Retailers need to monitor the changing demand at every store to align their assortment in the way that is most profitable and aligned to their strategic objectives.

It sounds like a no-brainer, but when supply chains become complex, retailers cannot keep up with store level demand and will send the same amounts of every product to similar store types. However, localization of store level assortments and order plans is proven to increase availability, full price sales and customer satisfaction. It is also proven to reduce overall inventory, wastage and markdowns which all erode margin.

Optimizing sizes and rationalizing SKUs

In order to optimize sizes and rationalize SKUs at a store level you need an acute awareness of product behavior. It does not make sense to only optimize on size – if a retailer is going to take the time to assess sales and demand at a store-by-store level, they should rationalize SKUs at a local level by using store data.

There are dozens of product behaviors unique to every store. In order to analyze these behaviors and make the most of their efforts, retailers should optimize by style, color, brand, promotion, price, and seasonality at each store. But the complexity of this exercise can become time consuming when a supply chain is vast.

There are however, technologies available that can simplify this process and make it ongoing, creating a strategy for these attributes and applying it to all levels of inventory management, from order planning, allocation, replenishment, forecasting and distribution.

The concept of localization works on two levels:

  1. Retailers can look at the unique behaviors of every product – to determine each stores’ selling patterns for size, color, style, quantity, brand, season, etc. With this understanding, a retailer can plan orders on a store by store basis to deliver the right amount of the products that customers are buying at each location, allowing the retailer to achieve the highest turn rates, reduce inventory to the appropriate levels, reduce over stocking and stock outs and ultimately increase margin. The second concept of localization comes from localizing distribution and utilizing vendors that produce products in the vicinity of each store. This type of localization is most easily applied to fresh foods and markets – where customers prefer to support their local farmers and local brands.
  2. When retailers realize that they cannot optimize sizes and packs unless they have an awareness of store demand, stock outs, and customer behavior at the local level, they quickly become more profitable and able to compete in today’s retail market.

Q – the quickest and most profitable solution for size optimization, SKU rationalization and localization

The Q system continuously monitors business strategies, profitability, service levels, stock levels and 35 different aspects of behavior for every product in every store. Q is so intelligent that it learns from data like stock outs, lost sales, slow movers, lumpy sellers, packs, sizes, colors and styles. It takes the most recent data for each item and automatically recommends inventory movement decisions driving toward your corporate objectives. Plus, it optimizes the way you phase in a new product and phase out another – ensuring that you are always reaching your optimal performance, sales and service levels, giving you the highest return on the inventory you are buying.

CLICK HERE for more information on Q

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Quantum Looks to Reach Broader Dealer Base

by Dealer Scope • February 4th, 2010 • Write a comment »

By, Nancy Klosek | DEALER SCOPE

Quantum Retail Technology has aimed high with the initial version of its Q retail business management software, which targets tier-one dealers with a billion dollars in revenue.

The company is also working on a scaled-down version, scheduled for release in about 18 months. Because the solution is not within reach of most independent dealers, Quantum is talking with buying groups, whose small-to-medium sized members have the aggregate buying power that makes acquiring the software more cost effective.

“There are some obvious names that pop out of a hat, both in CE and in the fast-moving consumer goods space,” said Chris Allan , Quantum’s co-founder and chief strategy officer. “Those are areas we’re looking at, because these members all have the same problems. When you look at how they scale across the small businesses they support, it’s a proposition that could work for everybody.”

Quantum, founded six years ago by personnel from retailers and existing software companies, devised Q after studying 200 of the top retailers in the world “so we could understand the constraints and problems that weren’t being solved by technologies already in the market,” said Allan.

The need to help retailers of all sizes with inventory optimization, replenishment, allocation, forecasting, ordering, and assortment and range planning have become all the more acute in the last year.

“What we’re now seeing is that the market is asking questions that retailers aren’t in a great position to answer. The rate of change in consumer behavior is significantly high—it’s almost a consumer revolution,” Allan said. “People are changing their habits overnight and retailers, with their heavily embedded, long-standing processes, are having to struggle to keep up with that rate of change. That’s what we’re trying to address.”

Quantum has molded a management solution, Allan said, that is flexible enough to work for businesses as diverse as the 210-store Guitar Center chain—the company Quantum serves that is closest in nature to the CE space—and Marks & Spencer, a hybrid retailer in the U.K. that sells both perishable goods and clothing. “What that speaks to is that the engine we built, and the capabilities we have to support retailers in this problem of inventory management, are broad,” Allan said.

Why is Q so pricey now? “A lot of the things we do require a lot of data, and that doesn’t come free,” said Allan. “Even if we gave the software away, there would be a cost to the business for pulling that data together. What we’re working on at the moment is how we can make that cheaper. As we experiment, and address more of those roadblocks, it will enable us to scale down further.”

For Guitar Center, the goal set for Q was to take a big chunk of inventory out of the stores while increasing overall customer service. “We were able to increase service levels across the board and take 10 percent out of their inventories—obviously, a significant cost savings, which added to their revenue,” Allan said. The company’s three-and-a-half-year partnership with Quantum also coincided with a 50-store expansion.

Before Guitar Center used Q, in-house forecasting was a major challenge since management had to keep track of more than 7,000 SKUs. Those products ranged from keyboards and amplifiers to iPods and Apple laptops, representing a mix of high- and low-ticket items with varied and volatile lifecycles.

“Those are all factors our system takes into account and helps to automate,” Allan said. “With it, we can understand the way every product is behaving at every location, and use that information to help dealers make good decisions. You tell it what you want it to do and to achieve, from a merchandising or a financial perspective, and it will pull those levers of inventory, placement and timing on your behalf.”

Q’s pricing structure does not include a large, up-front licensing fee, but rather a smaller annual fee. “We tried to lower the barrier of entry there, but it also keeps us on the hook to deliver on our results,” Allan said. “If it’s not working for them, retailers can turn it off.”

View the article on Dealer Scope HERE

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