You’ve unified stock and integrated legacy systems, but how do you turn that into a genuine differentiator and source of increased profit? Craig Sears-Black, UK Managing Director, Manhattan Associates explains.
If we want to improve sales performance and profitability, we need to establish what we do and don’t know about the challenge ahead.
So what do we know? We know that customers expect a lot: click-and-collect as standard without charge, for instance.
We know speed and accuracy are important for any kind of interaction – be it customer service or order fulfilment. We know that speed cannot be offset with a drop in quality.
We also know that we have to make sales as profitable as we can – and that means holding prices as close to RRP as possible. And it means stripping cost out of the supply chain without letting customer experience drop.
We know we need to make changes in our business – but can everyone honestly say that they know where to start? Which areas of the business have the biggest impact on all of these factors? Then how do we stitch these best laid plans together and turn them into reality?
DOWN TO BUSINESS FIRST
Integration of legacy technologies can be cumbersome. You really need to keep the systems, but without a single platform to view your stock in real-time, the rest is moot.
Once you have the supply chain commerce platform established, the next step is surprisingly not more technology.
Business processes need to be finalised before new, innovative technology can have its greatest impact.
Let us be nostalgic for just a second. Before we realised that the millennium bug was a bit of spin and the world didn’t melt, retail fulfilment was an easier life. Ecommerce existed, but only a few people used it. Channels were separate and easier to manage.
Online, catalogue and store managers would all have been bonused for their sales performance.
Fast forward 15 years. Click-and-collect and other cross-channel sales are omnipresent. The resulting new order flows throw up some difficult questions, such as ‘who’s sale is it?’ When multiple channels participate in a transaction, how do you measure the performance of each one?
You shouldn’t. Move away from that view of performance, because it’s a barrier to great service. Re-arranging your business around new performance metrics is not easy though. The key challenge is breaking free from entrenched processes.
Start by clearly defining your business goals. Once the whole business understands what you’re aiming to do, it’s easier to establish and communicate departmental targets.
The goals we should look at are around profitability and customer experience. Those two areas both require coordination across the whole business. These are improved by reducing the gaps in your business through single inventory visibility and ‘one retailer’ fulfilment.
This is not initially a technology challenge: get your business organised. Get everyone geared towards the things that are important.
SIMPLY SELL BETTER
To recap, stage one is to integrate legacy technology into an IT platform that can support growth. Stage two is to re-order the business so that it’s focused on profitability and service, not sales and top line revenue.
Stage three, then, is about taking those next steps. We know that we need to be quicker, offer better service and become more profitable. So let’s look at how to achieve that.
When a customer buys a product, their stipulations often include when they need it and where they want to pick it up from. This is relatively new.
First of all – do you have the product? Single stock visibility, which you’ve achieved in stage one, means you can make some sophisticated decisions…but the scale of your business means that you need to automate them.
An Enterprise Order Management application finds stock within the supply chain and serves it to the customer. This is new to many but is the best way to make profitable fulfilment decisions.
So how does that process work? First, you need to have a tiered pricing model in your merchandising system. This should reflect where a product is in the markdown lifecycle. A product in Band 6, for example, is full price. A product in Band 1 is at cost price.
These tiers affect fulfilment decision making. Order management historically made decisions based on location – with the perfect logic that the time and cost would be minimal to fulfil from there. However, if the nearest product is in Band 6, but a product 100 miles further afield is in Band 3, the decision changes. The opportunity for a full price sale of a product where it’s marked down elsewhere means you’re going to make more profit.
You should also identify the different replenishment layers in your business and associate how easy fulfilment is from those units. If there are two items left on the shop floor, you may not want to fulfil from there. But one item in the warehouse is acceptable.
It’s also important to establish optimal capacity when looking across these replenishment layers. At a glance, one store with 200 items versus one store with 10 would prompt a simple replenishment decision: take from the store with 200. But if that store is Oxford Street, and the other store is Basingstoke, your decision may be different. The 200 items may last Oxford Street for one day, the 10 items might last Basingstoke for one week. In which case, you should source from the 10 to make your replenishment cycle easier.
All of these decisions can be made in real time to make sure that every sale maintains profitability.
But don’t stop there. There are other factors that you should consider.
Click-and-collect continues its popularity with consumers. Ship-from-store is becoming more profitable for retailers for certain products. Both use similar structures: orders made online are fulfilled using high street stores.
If you have a busy high street store, do you want people picking up orders from there when staff are at maximum capacity already? It seems like a recipe for longer queues and lost sales. Similarly, do you use the Oxford Street branch to ship out orders, for the same reason?
The alternative is that you direct customers towards another store; one that’s close by, but not as busy – in Holborn, perhaps. Labour management makes these decisions possible.
But there are exceptions. If your best customer wants to pick up from Oxford Street, do you still send them elsewhere? If you can see from CRM that they’re a frequent high spender, you might send them to Oxford Street. They may buy more once they’re there – or you just want to keep them happy. Either way, knowing your most important customers can inform those occasional decisions that go against conventional wisdom.
Order management is a complex web of decisions – but leads to more profit and sales.
We have worked with many customers to integrate real-time visibility of store inventory into their websites. In one particular case, we saw a 23% uplift in sales - in the first week. This particular instance highlighted the sales this retailer was missing out on through a lack of stock in the ecommerce distribution centre and lack of stock visibility.
It’s impossible to know the level of sales that you’re missing until you take these steps. If you had infinite stock, you’d know the real level of achievable sales. Real time visibility of all your stock doesn’t quite make your stock infinite, but it’s the closest you can get – and it makes a huge impact.
Managing stock in a way that factors in all meaningful information and variables is the road to profitability.