Fast-moving consumer goods (FMCG) retailers are on a demand-driven mission, aligning business strategies and technology initiatives to better serve customers profitably. To help guide those efforts, AMR Research offers the following strategies for 2008 that FMCG retailers will need to meet their goals
Master data management (MDM) is a business processes and its technology components that ensure information about business objects (such as customers, products, employees, and suppliers) is current, consistent, clean, and accurate when used inside or exchanged outside the enterprise.
MDM is the foundation for future demand-driven initiatives. Many place it within the context of various application initiatives, including loyalty, pricing, and forecasting. However, MDM must not get trapped within individual projects; it's bigger than that. Data such as product, price, and promotion information must be consistently conveyed to consumers, regardless of channel.
To be successful, MDM must have executive support and a senior business executive for each type of master data element, including customer, product, supplier and location. Additionally, a centralized MDM group can help ensure success and data governance.
Perpetual inventory (PI) and computer-generated ordering (CGO) have been top inquiries from retail clients due to their real-time inventory visibility and management, and automated generation of product orders. Retailers often combine store inventory and ordering decisions with demand forecasting projects to inject science into the process, thus improving inventory levels and reducing out of stocks.
However, one big hurdle remains--the change management associated with new, automated processes. For those embarking on these efforts, make sure you have clear objectives, accountability, and closed-loop feedback systems in place in order to build momentum and trust with your employees. For example, if stores are given the power to change a recommended order, there should be a short, well-defined window of when the order can be adjusted. And there needs to be a clear feedback mechanism to the store about the results based on the adjustment versus the recommended order.
Clear education plans are also a necessity. A dedicated core group of super users with temporary release from their full-time jobs is one way to educate various divisions and build experts within each store.
Lifecycle pricing is an integrated set of processes that allows retailers to optimally determine and execute base, promotional, and markdown prices, while at the same time account for demand throughout the entire duration of a product.
While most retailers have had some elements of lifecycle pricing for some time, our research shows that companies are looking to take pricing to the next level. This means that while rules-based pricing has been a long-term staple in most companies, retailers are now looking at sophisticated optimization tools in pricing, promotion, and markdown that can support their complex needs as well as dramatically improve margins.
Pursue a holistic pricing strategy that includes clear objectives and cross-functional representation from merchandising, marketing, operations, finance, and IT. Once again, education and employee empowerment must be proactively managed; counter-intuitive pricing suggestions may lead to distrust of the systems.
AMR Research is currently conducting research for an upcoming report that takes a thorough look at the lifecycle pricing market.
Retailers are starting to share promotion and loyalty data with their suppliers, and building better relationships with supplier networks remains a top inquiry among our retail clients. Unfortunately, mismatches in the maturity level between retailers and suppliers are plentiful, hindering the creating of true joint value.
Both parties need to be willing to assess their maturity and be prepared to define mutual goals.
In the meantime, here are some suggestions for how retailers can prepare for collaborative account meetings:
1. Analyze the cost to serve. How do you compare against competitors in how much it costs a supplier to serve you? If you can make your processes easier, then there should be revenue sharing across the table.
2. Conduct trade performance analysis on recent promotion effectiveness and compliance.
3. Identifying gaps and areas that can be improved between corporate store planning and store execution (this may be good for additional initiatives like workforce and task management).
4. Review supplier scorecards. Measure the performance of the supplier versus other major suppliers in the category and ask for an action plan of how the supplier is going to improve performance.
Preparation is the key to success. For additional ideas about building collaborative relationships, see "Let's Get Serious About New Ways of Working Together." Upcoming research will also detail the questions retailers should be asking their account teams to foster more strategic action plans.
86% of FMCG retailers are looking to update their website functionality, and 100% are looking to revamp their loyalty programs, our studies show. A growing number of retailers also plan to use Enterprise 2.0 technologies, such as social networking, blogs, and wikis, to better understand their customers.
With such a proliferation of customer data available to retailers, what is the best way to use it, and how can you blend traditional commerce with the content and community that consumers crave? We have some ideas:
1. Examine the strategies holistically, and gain thorough understanding of the business objectives of various departments including marketing, merchandising, store operations, and e-commerce.
2. Study how your master data strategy can support sources of data collected at each cross-channel interaction.
3. Think of your website and stores as a destination or ecosystem that can address the various needs of your consumers through specialized communities, lifestyle information, and possibly extended categories or services that are not traditional to FMCG.4. Let customers have control of their data to promote loyalty and to help foster services that are valuable on an individual basis.
5. Think about how you would like to use or support user-generated content (product reviews, recipes, instructional videos, etc.).
If these initiatives are on your agenda, then you are on the right path to becoming a demand-driven retailer. AMR Research's Demand-driven Retailing Maturity Framework is useful for assessing your current IT roadmap, help prioritize initiatives, and highlight any gaps in opportunity or maturity relative to your peers. If you would like to discuss it and your initiatives in detail, let us know at firstname.lastname@example.org.
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