Daily Archives: August 17, 2006

A Synchronized Extended Retail Industry Optimizes the Supply Chain

Recently, TIBCO Software Inc. released a whitepaper entitled Synchronizing the Extended Retail Ecosystem (RetailSystems, registration required) discussing how retailers are being challenged by the consumer to provide solutions quickly and efficiently (“Time”) by offering the right combination of products and service and 100 percent “trip assurance” (“Value”) and making actionable information available at the point of decision (“Information”). How retailers are challenged to be a “brand” unto themselves”. And how in the Extended Retail Industry (ERI), retailers are part of an ecosystem of participants including manufacturers, wholesalers, logistics companies, and other service providers that [need to] work together to create solutions for the consumer.

However, the key takeaway is in the overview of traditional retail value chain and the potential value of ecosystem synchronization. Traditionally, product availability is guaranteed by excess physical inventory. This causes a distributor to over-inventory which, in turn, causes a manufacturer to over-produce. This produces a net effect of slower inventory turns, the need to sell-off excess inventory, and a negative financial impact. However, a synchronized retail ecosystem where a retailer is linked into its distributors which are in turn linked into their manufacturers, allows the retailer to share updated demand data in real time, allows the distributors to meet the retailers demand without significant overstocking, and this in turn allows the manufacturers to produce the right quantity. In addition to significantly reducing excess inventory, it allows for faster inventory turns. Furthermore, the distributors will see patterns across the retailers they support for different product lines and can push normal usage data back to the retailers to help them produce better forecasts.

In addition to optimizing the supply chain, an extended retail ecosystem, once implemented can reduce systems friction, technical complexity, and improve the cross-channel consumer experience. Integrated systems reduce erroneous, redundant, and unsynchronized data that lead to “garbage-in garbage-out demand forecasts. Web-services based integrated systems also reduce the complexity of the supply network for each participant who can now receive a cohesive picture instead of a collage of fragmented snapshots. Finally, the reduced occurrences of out-of-stock situations that will result will provide a better experience for the consumer who will not be leaving the store empty-handed.