Retailers log into fresh options

Updated: Nov 14 2005, 05:30am hrs
Retailing is a highly complex business from operational management point of view and hence, technology plays a key role in managing the business efficiently. However, the functionality required varies from retailer to retailer depending on the retail format, positioning, operational set-up and stage of evolution in the retail cycle.

The core of all retail functionality is the Merchandise Management System (MMS). This is the component that handles the SKU set-up, purchase ordering, receipt, distribution, replenishment, monitoring and control. There are various other systems that add to the functionality of retail IT systems. The important ones being the Merchandise Planning System for the planning and budgeting component; Financial package which helps in balancing the budgets and keep losses in check; HR/Payroll for reward and incentive management in this labour intensive business; Warehouse system which controls the inventory flows from the vendors to stores and data warehousing and mining systems which is the brain of the retail system .

Any successful retailer has to invest in a comprehensive and robust IT infrastructure and systems as it scales up. There is a multiplicity of system providers and developers in the market. There are essentially three options before retailers. They can either buy and install an ERP system, or buy and install a MMS and then integrate it with packages available for other functional areas, or develop integrated systems on their own/through third party software developers.

For the first option, ERP solutions are available whose functionality spans the whole range of retail functions described above. Some of them are: IS Retail (SAP), PeopleSoft Intrepid, Oracle Retail, etc. ERP packages were the late entrants into the retail systems market. Most of these ERP packages were developed around a core MMS package. The advantage of using ERP solutions is that these are a solution for the enterprise.

However, they are mostly quite bulky and implementation is complex. In case, the retailer were to opt for the MMS system, it is best to implement MMS like JDA, Island Pacific, Retek (now owned by Oracle), etc.

The advantage of using MMS system is that the components can be added when required and one need not implement a full system all at the same time. However, one gets local optima for each of these functions but not overall optima.

A retailer who wants to set-up a strong IT infrastructure has a number of solutions to choose from and it can be quite a confusing scenario for a retailer, especially those who are not already IT-savvy. Given this scenario, it is essential that retailers define their business requirements very clearly and evaluate the options on these criteria.

The writer is principal consultant, retail and consumer industry practice, PricewaterhouseCoopers