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The role of ERP in retail has changed

  • Posted on March 16, 2017

The role of ERP in retail has changed from an integrated system for conducting day-to-day operational tasks to providing a dynamic, unified, and strategic view of the retail business. The need for omnichannel customer demand, one view of product, and integrated financial and physical supply chain across all channels has meant that retailers need an upgraded and innovative approach to ERP.

A typical retail ERP system provides a centralized data mart and capabilities to manage and control financials, customer management, sourcing, demand forecast, inventory, sales order, invoices, and other retail functions. However, obsolete technology, lack of integration and high maintenance and support costs are all challenges that retailers have experienced for several years across most enterprise systems -- including ERP. A key challenge for 6 in 10 retailers is the outdated and siloed nature of operational systems that counteract the benefits of unified and streamlined multi-country and multi-brand operations.

Several problems exist within existing ERP and other operational systems (e.g., merchandising, sourcing, finance, others) that retailers use across their different brands, channels, supply chains and in different countries. There are several vital missing links including lack of process integration, disparate systems interfaces, disconnected data management, disassociated pricing between channels, and inconsistent key performance indicators (KPIs). There is an absolute need to bridge strategic planning, budgeting, business process automation and day-to-day execution to effectively manage and optimize operations in a global yet local setting.

Reading Customer Demand

Demand forecast is a function of reading demand signals at customer points-of-decision on a timely basis across sales channels. However, the accuracy of such a forecast lies in predicting accurate forecasts for merchandise buys in line with market trends. Over a third (36%) of retailers lack predictive tools to forecast customer demand accurately. This causes lack of inventory sell-through, demand-supply gaps and margin loss leading to channel losses and supply chain imbalances. Moreover, since customers use different sales channels to make purchases, it is difficult to merge data into master data records to get an accurate measure of enterprise demand. Fifty-six percent of global retail & consumer goods companies reported their customer data as satisfactory and just 28% said it was good or very good. This means gaps remain in reading customer demand accurately across channels.

Addressing and managing demand should be as close to the customer and market trends as possible. Managing demand needs to be supported by global demand planning optimization that can help retailers overcome many of the challenges of international and brand expansion. Benefits to the business include improved inventory turnover and faster cash-to-cash cycles. Additionally, in distributed stores that are spread over several countries or different brands, retailers need an integrated ERP optimization approach for fulfillment and logistics purposes. Such an optimization approach provides one view of financials, orders and cost management for optimal resource and financial operations management.

Expanding Brand Presence and International Growth

While finding faster response to customer demand is an age-old problem for retailers, the importance of streamlined operations is amplified today and may just be the silver lining that retailers are desperately seeking. For many retailers, commerce is growing through increased investments in stores, digital, channels, new supply chain partners and overall expanded presence in new international locations. International expansion, as well as overall brand expansion, highlights a growing need for streamlining financial and physical supply chain operations.

Such expansion requires retailers to exert greater control over global supply chain in terms of achieving a single view of order (from sourcing to delivery), integrated finance and logistics, and real-time inventory management that is visible enterprise-wide. These capabilities will help retailers maintain robust supplier relationships, optimum inventory visibility, and accurate in-stock levels. These steps also help retailers and suppliers attain one view of product/order throughout the supply chain cycle, and ensure profitable sell-through and efficient fulfillment of demand.

ERP in Retail for the Digital Age

Building digital age global retailing requires re-thinking and in many ways re-engineering multi-brand, multi-country, multi-channel and multi-site operations across merchandising, financial supply chain and physical supply chain.  However, it cannot be done at all once. A phased approach is ideal for transforming international retail operations. Streamlining international operations requires a unified and updated ERP-led strategy along with an integrated platform approach. Such an approach comprises of varied point applications and encompasses everything ranging from sourcing and product development to merchandise planning, order and inventory management to fulfillment and financial management. Any global retailer that wishes to improve the status quo surrounding their multi-country operations should plan on adopting a unified ERP and platform approach. By adopting such an approach, a retailer will successfully combine effective demand management with accurate forecasts and a single view of operations and financial processes with integrated global supply chain logistics.

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