Executive Briefings

Focus Is on Return on Assets, Inventory Turns and Revenue Growth

Retailers are making a fundamental shift in the way they do business by creating value networks that coordinate processes and technology to understand, shape and respond more efficiently to consumer demand. Leading supply chain organizations recognize the link between responsive networks and improved supply chain performance.

While metrics such as return on assets (ROA), inventory turns and revenue growth resonates across organizations, retailers recognize the nuances of their segment and the specific drivers of performance. For example:

• Fast-moving Consumer Goods-Heavy investment in real estate and inventory drives focus on ROA and inventory turns.

• General Merchandise-A keen interest by Wall Street shines a spotlight on revenue growth. When both are positive and gaining and profit growth leads, share prices tend to improve.

• Apparel-Seasonality and current trends place a premium on inventory turns, a metric made trickier to achieve by the ability of the retailer to innovate quickly to match those trends.

Fast-Moving Consumer Goods

A recent AMR Research and National Retail Federation IT budget study indicated 66 percent of respondents planned to add, improve or replace their warehouse management and transportation management applications. Today's environment requires real-time visibility and optimization platforms, not legacy, batch-driven applications.

General Merchandise

To satisfy an ever-maturing shopper, leading supply chains focus on supporting tailored assortments and review replenishment practices to support the growing desire for store specific space allocations. Some emerging focus areas include:

• Enhance your supply chain with the ability to use store level consumer demand instead of warehouse shipments.

• Extend your view of future demand through enhanced forecasting tools that improve alignment of supply chain assets and merchandise flow to meet consumer expectations.

Apparel

In recent years, apparel retailers have focused on rationalizing their supplier bases, reducing product costs to improve margins and updating store technology. Additionally, to create more relevant products for target shoppers, speeding those products to market, and delivering tailored assortments to specific stores inventory turns performance becomes the key metric. To support emerging technology priorities, two things are happening:

• Apparel retailers are overcoming their reluctance to spend IT dollars on improving product status visibility across their supply chains. Initially reticent to invest in technology that accomplishes this, the tide is shifting. A recent AMR Research study identified "increased supply chain visibility to product status" as the most important operational business in 2008.

• To lower supply chain costs, and improve efficiencies many retailers are revisiting pack sizes and flow strategies. By creating optimal pack sizes and a multi-tiered product flow strategies, retailers can lower inventories without lowering service levels and improve turns at the store.

The Outlook

Constrained IT capital requires clear focus on initiatives that create value for an organization. Moving forward, initiatives must clear three hurdles-quantified ROI, short- to medium-term payback, and minimal business disruption. Those projects that clear these hurdles and demonstrate improvements to ROA, inventory turns and revenue growth will make the shortlist of things to do. Those that don't risk being suspended or canceled altogether.

While metrics such as return on assets (ROA), inventory turns and revenue growth resonates across organizations, retailers recognize the nuances of their segment and the specific drivers of performance. For example:

• Fast-moving Consumer Goods-Heavy investment in real estate and inventory drives focus on ROA and inventory turns.

• General Merchandise-A keen interest by Wall Street shines a spotlight on revenue growth. When both are positive and gaining and profit growth leads, share prices tend to improve.

• Apparel-Seasonality and current trends place a premium on inventory turns, a metric made trickier to achieve by the ability of the retailer to innovate quickly to match those trends.

Fast-Moving Consumer Goods

A recent AMR Research and National Retail Federation IT budget study indicated 66 percent of respondents planned to add, improve or replace their warehouse management and transportation management applications. Today's environment requires real-time visibility and optimization platforms, not legacy, batch-driven applications.

General Merchandise

To satisfy an ever-maturing shopper, leading supply chains focus on supporting tailored assortments and review replenishment practices to support the growing desire for store specific space allocations. Some emerging focus areas include:

• Enhance your supply chain with the ability to use store level consumer demand instead of warehouse shipments.

• Extend your view of future demand through enhanced forecasting tools that improve alignment of supply chain assets and merchandise flow to meet consumer expectations.

Apparel

In recent years, apparel retailers have focused on rationalizing their supplier bases, reducing product costs to improve margins and updating store technology. Additionally, to create more relevant products for target shoppers, speeding those products to market, and delivering tailored assortments to specific stores inventory turns performance becomes the key metric. To support emerging technology priorities, two things are happening:

• Apparel retailers are overcoming their reluctance to spend IT dollars on improving product status visibility across their supply chains. Initially reticent to invest in technology that accomplishes this, the tide is shifting. A recent AMR Research study identified "increased supply chain visibility to product status" as the most important operational business in 2008.

• To lower supply chain costs, and improve efficiencies many retailers are revisiting pack sizes and flow strategies. By creating optimal pack sizes and a multi-tiered product flow strategies, retailers can lower inventories without lowering service levels and improve turns at the store.

The Outlook

Constrained IT capital requires clear focus on initiatives that create value for an organization. Moving forward, initiatives must clear three hurdles-quantified ROI, short- to medium-term payback, and minimal business disruption. Those projects that clear these hurdles and demonstrate improvements to ROA, inventory turns and revenue growth will make the shortlist of things to do. Those that don't risk being suspended or canceled altogether.