March 27, 2003, 12:00 AM

Retailers increase their interest in supply chain strategies, Aberdeen says

With a broad recognition of the importance of fulfillment systems, merchants are demanding more responsive, web-based supply chain systems that help them manage the many tasks involved in getting products to their customers.


E-retailers have come a long way since the early days of the dot-com era, when many expected to reap windfalls in sales by simply attracting huge numbers of orders over the web. But now, with a broad recognition of the importance of fulfillment systems, e-retailers as well as traditional merchants are demanding more responsive supply chain systems that help them manage the many tasks involved in getting products to their customers. "Some call it supply chain execution or demand chain management, but really it`s all about how to turn an order--or someone`s interest in an order--into a happy customer," says Kent Allen, a retail analyst for Aberdeen Group.

As a result, Allen says, the retail industry is positioned to increase its investment in supply chain execution and related technology. "If there`s any industry that will be busy investing in IT infrastructure, it`s retail," he says.

Retailers are showing demand for new supply chain technology in two general areas, he adds. They want better execution systems to streamline the way they handle inventory and manage and fulfill orders and they want to improve sourcing solutions. "Retailers are interested in software that helps automate inbound product logistics and distributed order management solutions that help them match inventory to committed deliveries and for alert-based event management tools," Allen says in a report released this week, Fulfilling the Retail Value Chain. "A growing number of retailers are beginning to shift their focus from supply chain planning initiatives to the automation of order management and fulfillment processes."

Alert-based event management tools help retailers to respond quickly to unexpected changes in the flow of inbound products. If a retailer learns through an e-mail alert that an order for 5,000 yellow spring jackets will arrive two weeks late with only 3,000 items, for example, a merchandise manager can take immediate steps to get replacement goods or to modify a promotional campaign.

But retailers are also pressed to invest in supply sourcing solutions, Allen adds, to overcome a growing problem retailers face in displaying an assortment of goods different from their competitors`. "It`s the stale-store environment, where consumers see everyone selling the same stuff," he says.

Vendors are responding to these new demands from retailers with a broader range of products, but they may need to revise their marketing efforts to more closely home in on what retailers want, Allen says.

"The increasing amount of marketing activity by IT vendors that offer supply chain execution software, demand chain management solutions, back-office integration tools, inventory management systems, and related order fulfillment applications clearly indicates that the order management space is heating up," he says.

But he adds: "It`s time for companies that sell retail industry software technology to get away from calling themselves just supply chain or CRM vendors, because retailers are now more interested in process flows. They want sourcing, merchandising optimization and order management, and they want to automate the whole process."


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