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Originally published 2 May 2007
Retail is the most dynamic business area that I know. In retail, we are constantly having to react to an ever changing landscape. The changes are at both a macro and a micro level and are both short and long term in their effect. The agility required to deal with this dynamism is totally dependent of provision of timely and targeted data through effective and well designed information systems. These systems have to be both flexible and pervasive.
However, most retail businesses still operate in silos with each functional area using different systems, many of which are extremely hard to adapt and which can’t easily be welded together into a cohesive whole. When the organisational ship needs to be turned, then these systems act like anchor drag and reduce the competitive effectiveness of the organisation.
In the transactional area, this sclerosis might be acceptable, and maybe even desirable. No one wants to be changing order processing systems every couple of years without a good reason, after all. In business intelligence, though, this would be inexcusable. Business intelligence needs to be flexible enough to adapt to the ever changing questions posed by retailers. I got a good example of this last week when I was talking to a client who said that their online channel had gone from 0% to 15% of sales in less than three years. The impact of this on the questions asked within merchandising and logistics was, and remains, huge. Consider the impact of this change for a moment. In merchandising sales now need to be forecast separately across the two channels. The impact of returns is far higher with a knock-on effect into logistics. In the distribution centre, 15% of sales now require single item picks. This has implications on staffing, physical layout and operations management. It would be an understatement to point out that supporting these changes requires an agility that has not always historically been enabled by MIS.
As the business intelligence market matures we see ever-increasing consolidation. Vendors on the lookout for new avenues for sales in this still growing but increasingly saturated market are latching on to the potential of analysis “applications.” I am dubious about the pre-canned analytics that are being hawked now by vendors old and new. In my view, these pre-canned analysis approaches can be counterproductive, even though they can be superficially attractive. They seem to suggest that they can provide you with all of the answers that you need – but if you really don’t know the questions that you should be asking, or if the questions keep changing, then this type of application may prove to be just another, prettier straitjacket. This is, after all, the approach that was tried by Pilot Software here in the UK a few years back. The application looked wonderful, but in the end, it was not an attractive enough proposition to generate a strong level of sales.
Today’s environment requires us to have proactive and future-oriented business intelligence systems that integrate the activities of planning and analysis, whilst destroying the artificial boundaries imposed by proprietary systems within each functional silo and widening the activity so that it has an organisational rather than a departmental scope. This presupposes that we are able to use a common platform across the different operational activities for both analysis and planning. In fact, the distinction that has historically existed between planning and analysis is now being called into question.
Twenty years ago, fashion retailers created a seasonal plan, put it away for six months and then finally began to analyse and reforecast. Today, with lead time in fast fashion down to single weeks in some cases, this distinction is not only unhelpful, it is counterproductive. The plan has become a weekly – if not daily – activity, and the “Quick Response” buzzword of the early 1990s has become a reality, even if may not have made millions for the consultants who hyped it up back then.
So, retailers need to be more agile than ever, and they need to implant the operational business intelligence systems and processes ever deeper into their organisations. As this happens, the data volumes get bigger and the processes get ever more detailed and idiosyncratic. Unfortunately, the law of diminishing returns kicks in at about the point that most retailers start to move beyond the traditional business intelligence strongholds of finance and merchandising. Applications take longer to develop, more seats are required for the software, change happens more frequently and sponsorship tends to be weaker. It takes real commitment to extend the reach of business performance management, but the returns are there if it is properly targeted and executed.
Today’s business intelligence applications are more flexible than ever, and, as was noted in the OLAP Report 6.0, the business intelligence software market is becoming increasingly commoditised. It won’t be too long before the open source software developers can provide us with a credible alternative to the highly priced product suites and support packages offered by today’s vendors. This may send a chill down the backs of the vendors who have quietly been pushing up prices and maintenance percentages over the last 10 years, but it is good news for retailers who will benefit from the increased competition and the ever-increasing power of the products available to them.
It’s a bit like buying a car – even the cheap models now come with all the bells and whistles and will carry you reliably where you need to go, but you can still buy a Ferrari if you want to (and if you have the budget). Of course, just like with the Ferrari, you still have to know what to do with all that power, and it won’t do you much good if you leave it stuck on the drive (or in the finance department). In today’s fast developing environment, retailers need agile and pervasive business intelligence systems that can carry them forward whilst building on, rather than being hampered by, change.
SOURCE: Never Stop Moving!
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