Financial pressures will create demand for private label sourcing software

As retailers enter 2003 under pressure to improve financial performance, they will drive up demand for web-based software systems that help them source and manage production of private label apparel and other goods, analysts tell InternetRetailer.com. “The two hottest areas in retailing next year will be strategic sourcing and retail revenue management,” says Paula Rosenblum, retail research director at AMR Research Inc. “These are two areas that can significantly affect margins, and better margins are what retailers need to get.”

Rosenblum, who is working on a study of sourcing software for the retail industry, says competition and the overall state of the retail market will most likely force merchants to improve margins by cutting costs and avoiding excessive markdowns rather than by increasing prices or expanding sales volumes.

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Meantime, new supply chain management products are coming into the market available to help retailers better manage sourcing of private label items. For example, she says, SupplyChainge Inc. is offering a Lead Time Optimizer application that helps manage excess raw material supplies so a retailer can avoid over-production of seasonal merchandise and the typical markdowns that follow.

Another vendor, New Generation Computing Inc., has launched ETMS, a web-based event-tracking and management application that enables retailers and their suppliers to coordinate multiple supply chain events calendars for monitoring production according to deadlines. And SPS Commerce Inc. has introduced a web-hosted application for reporting events or changes in production along the supply chain.

“The challenge with imported product is that you need to know if there is a problem and how you can react to it,” Rosenblum says.

Greg Girard, vice president of AMR, adds that new software such as that from SupplyChainge is helping retailers consider more cost factors when determining the true cost of sourced product, such as the costs of logistics and whether a product sells within an expected time frame. “Sourcing a product at the cheapest price isn’t always the best strategy,” he says, “because you also need to take into account the cost of holding the inventory and the potential for future markdowns.”