July 27, 2006, 12:00 AM

Crossing Channels

(Page 2 of 3)

As retailing in multiple channels has become more widespread-and particularly as consumers have come to expect the benefits of shopping in more than one channel-the retail industry has increased its awareness of the need to organize data from demarcated systems into a common database system that lets retailers view, analyze and use customer and product data regardless of which channel customers have shopped.

AMR’s recent study on trends in inventory and order management projects that many retailers will move to web-enabled integrated systems over the next two years. The study, however, refers to a significant gap between the level of importance retailers place on the business issues impacted by multi-channel inventory and order management systems and their level of current performance in these areas.

While 62% cited “creating a seamless multi-channel experience” as a highly important business issue, for example, only 28% said they were currently providing such performance through an integrated inventory management system. A similar but slightly smaller gap existed in the deployment of integrated order management systems for creating a seamless multi-channel experience.

Battling out-of-stocks

But the study also found that while less than a third of retailers had already deployed web-enabled multi-channel order management systems, more than half will have them within 12 months, according to their current plans. The study found similar usage and growth patterns for inventory management systems.

The out-of-stock rate was cited by the largest group of respondents, 22%, as the most important metric in gauging their success in handling multi-channel order fulfillment, and retailers said that implementing a web-based multi-channel order fulfillment system would improve their out-of-stock rate by 25% within the first 12 months. The study was conducted in May 2006 of 51 retailers with $500 million to over $10 billion a year in revenue.

But cutting-edge data management projects are not just for large retailers, as K&L;’s experience shows.

The wine retailer’s migration to a central database started after it became painfully apparent that its separate data systems and single store-based order management application simply would not support the rapid growth that kicked off in the late 1990s.

Without an integrated system of storing and managing data on sales and inventory across channels, Zucker says, K&L; was left re-keying orders received through e-mail, phone and other means into The Retailer store POS system, as it also struggled to manage information on the constantly changing inventory of its specialty, limited-run wines. “As our web traffic radically expanded, with orders coming via e-mail, I was re-keying hundreds of orders,” Zucker says. “I’d have to download the order, re-type the name and address and order information, then print out copies, pick the order and enter into it The Retailer. It was a complete waste of time.”

Evolution = complexity

As it evolved from a tiny northern California chain of discount wine stores into a multi-channel retailer targeting a national market of wine connoisseurs, K&L; developed a more complicated system of five databases of customer shopping activity, sales and inventory. The database system served K&L;’s stores, contact center and web site, plus special operations like its wine-of-the-month club-itself an important tool for communicating its constantly changing inventory of boutique wines to customers.

But with customer and inventory data in separate databases, it was difficult to provide services like tracking shipments or customer ordering activity across web, store and call center operations. “We couldn’t update customer order information with shipment tracking numbers, and when a customer ordered online, our system wouldn’t update our back-end order and inventory management software so when the next customer ordered online or in the call center, we couldn’t say accurately if the inventory was still available or not,” Zucker says.

The old database system also made it hard for K&L; to develop its new niche in selling boutique wines because it couldn’t easily access order and inventory data to analyze which wines were selling best or which were popular in particular markets. “We needed a system for entering, recording, finding and updating all the unique characteristics of orders, including the types of grapes and vintage, and the appellations and regions within broader regions, like the Howell Mountain region within Napa Valley or the Margaux region within Bordeaux,” Zucker says. “It was at that point that I was able to prove that we needed a new data management system.”

After interviewing technology vendors with different platforms, K&L; went with Microsoft Corp.’s SQL Server database, which is built on a web-technology-enabled platform designed to integrate with multiple applications. With the help of a systems integrator, Cygnusoft Inc., Belmont, Calif., K&L; customized its new database to process data from all customer touchpoints, providing the order and inventory visibility it needed to serve customers across all channels as well as the ability to analyze sales activity across its many selections of boutique wines.

Light years ahead

“SQL Server moved us light years ahead of where we were,” Zucker says, adding that the new database platform also supports a new in-house designed POS system that handles orders processed through the web, stores and call center. “The custom software development was a slow and painful process and took thousands of hours. But once we cut our first database over to SQL in 2000, we never looked back.”

The old databases continued to operate during the transition, preventing any loss of operations, he adds. The first four of the five databases were migrated to SQL fairly quickly, including three in the same day, but K&L; took about a year to migrate its Wine-of-the-Month Club database to make sure it operated properly with inventory updates.

K&L; has already upgraded to new versions of SQL Server, and it’s planning to soon migrate to SQL Server 2005, now with the help of a second technology consultant, Terrace Consulting, Oakland, Calif.

“Previously it wasn’t possible to scale our business, because we were running around to re-key orders and we had to physically talk to our shipping department to find paper orders and tracking numbers,” Zucker says. “With our new system, we have the technology infrastructure to do all this and more.”

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