Where Retailers Should Invest Capital to Improve Sales and Profits in 2009

In today's economic environment, making the right moves from a technology perspective is more important than ever. Retailers are under pressure to find new ways to protect margins and improve operating efficiency in the fight to offset falling sales. Raising the game is almost always going to involve implementing and taking advantage of the latest that technology can offer. Outlined below are the four most critical areas where retailers should invest capital now to drive tangible business benefits within three to six months according to JDA.

Inventory Management - The Core of Retailer Success
Improving inventory execution remains a solid investment for retailers in any economy. Specifically, accurate, informed allocation and replenishment decision-making can reduce carrying and transportation costs, while increasing margins and service levels; all of which are critical for retailers seeking margin protection in an uncertain economy. While many retailers have already planned the majority of their inventories for 2009, they still have the opportunity to adjust store-specific inventory assortment and replenishment levels as needed. The distribution methods and calculations employed by retailers still vary widely, with many retailers still relying on historical sales data and intuition. In today's environment, retailers need to push for superior execution and that means fact based inventory decisions that are responsive to the current highly dynamic environment.

Forward thinking retailers are turning to advanced allocation and replenishment solutions that transform key consumer insights into the right mix of merchandise for each store and perform statistics-based demand forecasting to accurately identify high and low selling items, enabling retailers to adjust vendor and distribution center orders accordingly. These solutions offer tangible results, significant ROI, and positively impact gross margin with the first inventory turn which is often less than 90 days.

To support capital investment in allocation and replenishment solutions, retailers are also relying on inventory optimization support services from their solution providers. These services can quickly identify stocking policies and inventory levels by category or item in order to free up scarce labor, storage capacity and shelf space.

Price & Promotion - Critical Retailer Tools
The ability to make sophisticated, real-time pricing and promotions adjustments in response to rapid market changes is instrumental for retailers seeking a competitive edge. In fact, pricing and promotions is still the biggest lever retailers can adjust to positively impact business performance.

While a simple fix, scaling back forecasts and markdowns can't replace smart pricing and promotions. Instead, smart retailers are increasingly relying on real-time consumer demand forecasting to conduct more effective pricing and promotions. By tapping into economic trends, demand, product lifecycles and price points, advanced pricing, promotions, and markdown solutions actually leverage consumer spending habits to help retailers remain ahead of the curve and up-sell consumers from necessities to discretionary spending decisions. Additionally, many retailers are now working closely with manufacturers to manage inventories. These advanced solutions improve collaboration on product assortment, while also providing manufacturers expedient feedback on customer buying behavior.

To derive maximum value from pricing and promotions solutions investment, vendor expertise is critical. Industry and process experts can assist retailers by providing the best strategy for pricing and promotions in order to maximize revenue as well as create processes to effectively manage end of season, excess inventory and short life cycle products.

Transportation Management Solutions - Drive Cost Savings, Improve Service Levels
Retailers are examining more closely the carrying costs of inventory relative to fuel, freight and other logistics expenses. As fuel and transportation costs spike, purchasing and warehousing product is a bargain, relative to more frequent shipments. Fuel costs are constantly variable, a fact that has been underscored in the latter half of 2008. Many retailers are opting to build product inventory while fuel is more affordable, anticipating upswings. Strategically carrying inventory allows greater responsiveness to fluctuating demand and can significantly reduce transportation frequency and freight expenses.

Retailers that invest in next-generation transportation management solutions can optimize the flow of goods within a complex, dynamic multi-modal environment, helping project and determine the ideal in-stock and flow of inventory relative to fuel prices and service levels at any given time. Additionally, managing transportation procurement through logistics sourcing solutions and optimization services minimizes exposure to dramatic rate increases while ensuring consistent and reliable movement of freight.

Customer Service & Support - A Key Consideration
While not a stand-alone solution investment, customer service and support is vital to maximize capital investment in inventory execution, pricing and promotions and transportation management. To help retailers deliver on anticipated ROI goals in marginalized time frames, the best-equipped vendors will draw on deep domain expertise and application knowledge to conceptualize and actualize the benefits their software and services can bring to customers.

In today's economic climate, retailers must compete for market share against peers despite decreased availability of consumer credit and the escalation of housing and fuel costs. In 2009, retailers would be wise to invest in the best proven technological solutions to improve inventory execution, pricing and promotions and transportation management. And, while these supply chain and logistics solutions are the cornerstone to effective and competitive retail operations, smart retailers will realize that vendor selection is also critical.

Partnering with effective and reliable service providers with process, software and industry knowledge can not only drive quick results within the initial implementation but can also dramatically increase productivity and lower costs through outsourcing operations that are not a part of a company's core competency. These winning strategies can help bridge the gap between floundering and survival in a recessionary climate, and ultimately, preparedness for when the economy turns around.
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