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05/02/2006

Industry News for the week of May 2, 2006

HOTLINE

Circuit City Transforms Merchandising and Supply Chain Systems
Circuit City Stores, a consumer electronics retailer with 627 superstores and seven other locations in 158 U.S. markets, transforms merchandising and supply chain systems through a consulting and services contract with IBM.

A new merchandising system was designed to better enable Circuit City to focus on its customers and customer service, and will be based on IBM WebSphere Product Center middleware, with IBM Global Services providing the planning, implementation and integration services. As part of the contract, IBM will integrate several software applications composed primarily of Oracle Retail products.

Circuit City's new merchandising capabilities include more accurate planning and forecasting, enhanced assortment planning and space planning, promotion planning and pricing and increased visibility and collaboration in its supply chain. "Circuit City is committed to providing its customers with the right products and services at the right price," says Mike Jones, senior vice president and chief information officer. "With these new systems, we will have a much better understanding of what our customers want, as well as the ability to respond quickly and effectively."

The new systems will be phased in during 2006. As part of the agreement, IBM will maintain application development of Circuit City's legacy merchandising and supply chain systems.


TECH TACTICS

Bailian Group Expands RFID Pilot
The Bailian Group, China's largest retailer, plans for the second phase of the China Implementation Reference Project, a pilot program that seeks to expand usage of Electronic Product Codes (EPCs) and RFID. The Bailian Group will use VeriSign's EPCglobal Network, which enables automatic identification and visibility of product information, to track merchandise as it moves through the company's global supply chain. The second phase will track the movement of actual products tagged with EPC-enabled RFID tags.

Hy-Vee Introduces Faster Checkout
Hy-Vee, a supermarket chain with 224 stores in seven Midwestern states, speeds checkout with the installation of IBM's next generation of self checkout system, which features an ergonomic hardware design. Hy-Vee installs the models in their West Des Moines, Iowa store this month and plans to install the new models in five more stores in 2006.

Authentics Reduces Order Pick Time By 50 Percent
Authentics, a UK designer and retailer of gifts and housewares, implements Radio Beacon WMS to help track their stock with better accuracy. The implementation reduces pick times by 50 percent and stock counts from five days to one. Radio Beacon WMS also allows the company to track products and improve warehouse processes.


Abercrombie & Fitch Offers Private Label Credit Card Services
Abercrombie & Fitch, a women's and men's clothing retailer with 361 store locations and a Web site, signs a multi-year renewal agreement with Alliance Data to provide private label credit card services to its customers. The renewal includes account acquisition and activation, receivables funding, card authorization, private label card insurance, statement generation, remittance processing, customer service functions and marketing services.

NEW TECHNOLOGIES

RealTime Introduces Business Access Codes
RealTime Shredding, developer of the shredding kiosk to help fight identity theft, introduces business access codes for its self-service shredding kiosk. The new feature is designed to make it easier for retailers to incorporate the shredding kiosk with their standard operations and comply with HIPAA, FACTA and Sarbanes-Oxley regulations.

Business Objects Launches Compensation Management
Business Objects launches BusinessObjects Incentive Compensation Management (ICM). The application is intended to help companies link strategic plans to compensation in order to better align company goals with individual performance. ICM optimizes the process of planning, calculating, analyzing and communicating incentives.

NCR Introduces Two-Sided Thermal Printing
NCR introduces RealPOS 7168, a receipt printer offering simultaneous two-sided thermal printing. The printer is designed to allow retailers to customize messaging in receipts rather than relying on paper roll with pre-printed promotions. It can print in combinations of black on one side of the receipt with black, red or blue on the other side.

SUPPLIER SCENE

VTech Joins EPCglobal Hong Kong's EPCnetwork Initiative
In order to comply with Wal-Mart's RFID request, improve the efficiency of warehouse operations and enhance visibility throughout the supply chain, VTech's Telecommunications division, a supplier of corded and cordless telephones, announces pilot participation in the Hong Kong EPCnetwork initiative directed by EPCglobal Hong Kong. VTech's RFID solution is comprised of Cisco AON for RFID and Cisco Services for RFID, provided by Cisco Systems, and is based on platforms powered by Intel Corporation technologies, including Intel Xeon-based servers, RFID readers and PCs. The Hong Kong EPCnetwork project will enable VTech to track telecommunications products from the Dongguan factory to Wal-Mart distribution centers in the United States.

Goodyear Tracks Tires with RFID at 2006 NASCAR Series
Goodyear is using the Psion Teklogix 7535 with RD7950 UHF RFID Reader, along with a software application from CTI, to track and manage its tires at all three NASCAR top series in 2006, including the Nextel Cup Series, Busch Series and Craftsman Truck Series. With 43 cars at each Nextel Cup race and each car using about 10 sets of tires per race, the task of tracking all of the tires can be challenging and time consuming. Goodyear's goal is to optimize how it tracks the nearly 2,000 tires from manufacturing through distribution to the teams, and then to the final disposition of the tires after each race.

Pacific Natural Foods Leverages Trade Promotion Management Solution
Pacific Natural Foods, makers of high quality, non-dairy beverages, all natural soups, broths, gravies, and ready-to-eat meals, enlists MEI's trade promotion management (TPM) solution to manage all aspects of the trade promotion management cycle. Pacific Natural Foods expects to be up and running with the MEI hosted "out-of-the box" solution in less than eight months with a fully functional and complete trade management solution.

ALLIANCES

Fujitsu and Accelitec Form RFID Alliance
Fujitsu Transaction Solutions and Accelitec, a developer of RFID-based transaction systems, form an alliance to offer contactless transaction systems. Under the agreement, Fujitsu will resell and integrate Accelitec's PayPilot suite of transaction products into its GlobalStore point-of-sale (POS) application and Pervasive Retailing Framework (PRF).

Torex Acquires Savista
Torex, a provider of IT retail systems, acquires Savista, a global provider of EPOS software. Accel-KKR, a U.S.-based private equity firm and principal shareholder of Savista, will become a significant shareholder in Torex Retail.

Alien Technologies Collaborates with Unisys
Alien Technologies collaborates with Unisys to deliver RFID technology, products and services. The joint marketing and reseller agreement brings together Alien RFID readers, tags and professionals services with Unisys infrastructure and server technologies. The agreement also will leverage the RFID Solutions Center Dayton, a division of Alien, for implementation of mutual products.

MONEY MATTERS

Amazon Sales Rise 20 Percent
Net sales at Amazon.com rose 20 percent to $2.28 billion for the first quarter ending March 31, up $1.9 billion in the year-ago period. Net income fell 35 percent to $51 million. Q1 North America segment sales, comprised of Amazon's U.S. and Canadian sites, grew 21 percent year-over-year to $1.25 billion from $1.03 billion, while sales in its international segment grew 18 percent.

J. Crews Reports Financial Results
Consolidated revenue increased by 19 percent to $953 million, for the 52 weeks ending January 28, 2006. Store sales for the year increased by 16 percent to $670 million, primarily as a result of comparable store sales increase of 13 percent. Direct sales increased by 28 percent to $254 million.

Safeway Announces First-Quarter Earnings
Safeway reports net income of $142 million for the first quarter ending March 25, 2006 compared to $131.3 million for the first quarter of 2005. Total sales and other revenue increased 3.2 percent to $8.9 billion in the first quarter of 2006 compared to $8.6 billion in the first quarter of 2005.

EXECUTIVE INTELLIGENCE

Protecting Data Networks: Extending Vital Protection across the Retail Landscape
By Jamie Lerner, CEO of CITTIO

You're the IT manager of a national children's store. It is 5:00 PST and you've just discovered that two of your busiest mid-western outlets were out of commission for three hours today…

The Truth about Retail
Behind those onesies and cute sweaters adorning the aisles there's high-speed Internet access, a server, and four or five POS terminals. Not just in one store but in every store around the world. And at headquarters, there's an e-commerce server or two plus all the software and hardware to support SCM, CRM, payroll processing, product design, forecasting, inventory and logistics.

What all this technology has in common is its utter dependence on the health of the corporate network. As the number of technology solutions increases, the complexity of the network monitoring task grows exponentially—and IT management's biggest challenge becomes how to achieve the consistent visibility into operations that is only available through robust network monitoring.

Expanding the Data Center beyond Traditional Borders
Far from existing in isolation, retailer networks link to distributors', designers', manufacturers', and logistics providers' networks. Moreover, POS systems are not the dumb terminals of old, but rather Java-based, network-connected and touch screen-operated. Not only do they feed sophisticated systems such as vendor managed inventory (VMI), they also allow management to precisely gauge the sales productivity hit that occurs when a lane or terminal goes down or the boost in revenue after a big holiday promotion. In addition, a number of retail software solutions are available hosted or as services. They may not exist on your network, but you need to ensure that they are working properly.

The Costs of Visibility and Uptime
For retailers of all sizes, most network monitoring solutions are economically unfeasible, difficult to implement, and a maintenance time sink. Total cost of ownership, which includes licensing, installation and support, can easily run into the millions. On top of that, the more complex implementations typically require consulting services, which when delivered on a site-by-site basis, increase costs immeasurably. But for many retailers, it's a cost of doing business.

Some organizations are trying to reduce the cost of network monitoring by investigating open source solutions. Based on code that is available free of charge, these products may work as point or entry level solutions, but the time and expertise needed to integrate several into an end-to-end system and provide ongoing support may well offset their initial attractiveness. In addition, because open source products tend to lack enterprise class functionality and scalability, they may not meet future needs.

From a bottom line perspective, our hypothetical children's clothing retailer will have to earmark sales from (thousands of) little pairs of socks, shoes, and PJs to pay for this system and everything required to make it work.

Learn from Experience: Apply Best Practices
Just as there are best practices around inventory management and seasonal promotions, best practices must be applied to choosing the right network and systems monitoring solution. These include:

1. Web basis -- Monitoring software must support monitoring anything from any location. Where IT staff is limited or geographically dispersed, it is critical to be able to monitor network operations from any browser.

2. Standards basis -- The typical retail network environment is heterogeneous and requires a monitoring solution based on industry standards such as SNMP. Proprietary agent-based approaches greatly increase the integration effort, forcing IT to adapt, rather than vice versa.

3. Automation-driven -- With each outlet a mini data center, the ability to automate deployment across stores saves money. Software should automatically discover each store, including all the equipment and software within it. It should also be able to turn on multiple stores simultaneously—without requiring store manager involvement. Configuration changes made within each store should be automatically detected.

4. Business process based -- As noted in the IT Maturity Model, data center operations are business processes. A network monitoring solution should be able to translate performance data into solid business information—such as how long it takes to process a credit card transaction or how often a system was down in a given month. Reports with little but IT-oriented information communicate nothing useful to business users. However, if a report shows that one hour of down time for a check-out lane costs $3,200, management can determine the payback of specific IT expenditures and acceptable service levels.

5. Rational licensing -- Complex, multi-layered license pricing schemes make it difficult to calculate the business value of a network monitoring solution. It's important to know—up front—a software solution's total cost of ownership. An easy-to-understand licensing model can help. In addition, a vendor's willingness to structure pricing around your business model is a bonus. To control the cost of a monitoring implementation, IT needs visibility into 5 to 10 years of ongoing maintenance expenses. A corollary to this rule is that software with multiple modules and "optional" add-ons only increase cost and complexity.

Moving Toward the Right Solution
The right retail network monitoring solution should be cost-effective, flexible and customizable, and free of complex licensing processes or the need for expensive consulting services. It should be able to address the multiplicity of operating platforms most retail operation have embraced. And it should protect the integrity of the network all day, every day. No exceptions.