It was not so long ago that the phenomenon of Internet retailers was expected to wash away traditional retail outlets. Instead, most retailers survived the initial onslaught and became bricks and clicks, multichannel organizations. Yet many retailers continue to struggle to be profitable, global competition continues to grow and the complexity of outsourced products and supply chains marches on. Enter the social networks, product review sites and increasingly empowered consumers, and retailers know that they must change still more if they are to survive and thrive. Retailers are going to have to:
This means that they are going to have to improve the precision, consistency and agility of their operational decisions. They must order more accurately and target customers more tightly. They must act consistently across channels and between their supply and demand sides. They must be able to change their targeting, their store layouts and their offers more rapidly. How might such a retailer look, and where might they go for inspiration? On the supply side, retailers have to make decisions like when and how much to reorder for a product and from whom to order commodity products. These decisions involve both rules - only approved suppliers might be allowed for certain products, maximum allowed prices might constrain the minimum quantity for an order - and analytics - predicting the reliability of a particular supplier in terms of on-time delivery, for instance. Smart enough retailers would link these supply-side decisions to the demand side with predictions of future demand, rules about seasonality or particular events and so on. The classic example of supply-side efficiency and effectiveness is Wal-Mart. Using sophisticated systems, Wal-Mart consistently orders what it needs, gets it where it can be sold and does so without carrying large inventories. This is the benchmark for a smart enough retailer.
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