Specific retail requirements for ERP systems
ERP systems in retail - Today's dynamic times require efficient handling of goods. This results in specific requirements of retail companies for ERP systems in retail. You need to have a good understanding of the processes and operations of a retail company to be able to design a system that actually delivers the effect that retail companies expect. And let's face it, today's retail industry is IT dependent.
ERP systems in retail - how are they different?
Concept "ERP" itself is not unambiguous and refers to enterprise software that has been designed to record and manage enterprise data. ERP system therefore refers to the automation and integration of core activities that will help the company focus on efficiency and process simplification. In fact, we can think of ERP systems in analogy to the classic building of a house as its foundation - ERP does not impress anyone, but if it is not well executed and designed, the building will collapse.
In the retail sector, more than elsewhere, it is important to approach the implementation of ERP systems with knowledge of the environment. ERP packages are naturally designed to be as generic as possible, with components covering the core issues. But designing a generic solution that suits all types of customers is quite unrealistic. That's like wanting to have the same car design usable as a truck and a sports car. That's why it's important to choose a solution that offers vertical additions that allow customization to specific needs.
Knowledge of the environment is decisive
What goes against a generic ERP solution are the specifics that individual retail companies have; bending and adapting these generic frameworks is quite complex and costly. So what to do about it? When selecting a vendor, it is essential to find out who has real experience in delivering for retail companies, knows the specifics of the industry, and ideally has some "do-it-yourself" solutions to some part of the problem that speed up deployment and make the whole implementation cheaper, thus increasing the value of the system for the customer. Time is a parameter that plays a bigger role in business than elsewhere.
The customer needs an ERP specialist, but also a person who is not a newcomer to the retail environment - he can speak its language and knows the critical points. Companies need a robust solution that comes with layers to support its key differentiators. In retail, such family silverware is typically reward systems for operations people or inventory tracking systems. Proper motivation of salespeople in stores is what makes a store stand and fall successful. So when implementing ERP, you need software that is flexible enough to make the desired change. And also an implementer who will make the bridge between the complex IT world and the business world.
What key features must ERP systems in retail have?
First and foremost, retail ERP systems must be as reliable as possible to ensure fail-safe operation. Also, a properly assembled assortment and inventory volume are what determine the success of a retailer. It needs to have goods stocked and delivered in the right quantity, at the right time and in the right place. And to do this, maintain just enough stock in the central warehouse to ensure a continuous supply. It may seem trivial, but it's certainly not.
In addition, several channels currently need to be integrated - e-shop, brick-and-mortar stores, call centre and central supply. If a customer enters the system, he needs to be able to deal with complaints from both the brick-and-mortar store and the e-shop at the call centre, and to pick up goods ordered via the e-shop at the store, for example. Not to mention the optimal use of customer data across all sales channels.
Critical points
In retail, it is particularly critical failure-free operation of systems - it is very easy to lose the favour of end customers. Today's stores are vitally dependent on IT - a brick-and-mortar store would be completely crippled by a cash register failure. Heavy shopping seasons, such as the run-up to Christmas, will test many retailers' warehouse systems. There must be no stock-outs, i.e. situations where the store does not offer the goods that customers are currently interested in.
On the other hand, there is the need to optimise inventories. Retail companies have hundreds of millions of crowns in goods they need to sell, preferably at full price. This is marked, for example, in consumer electronics, which are becoming obsolete very quickly and losing value with each passing week. That's why predicting inventory needs and seamless distribution to all channels is an essential part of retail systems.
Most retailers currently have both brick-and-mortar stores and an e-shop. And these have a completely different sales cycle. So it's also important to align the two cycles in terms of both sourcing and pricing, and to capitalize on the opportunities that the combination of these sales methods offers. And as mentioned above, you need to share customer information across all channels.
State-of-the-art technology in retail
ERP is in some ways a dinosaur, but modern elements like AI and machine learning are making inroads. Typically just for inventory optimization, where the software is continuously "learning", combining sales data, looking for correlations in how sales are affected by, for example, discounting of various substitutes, what role weather plays, price changes at competitors. And according to this, it can optimize the stock of goods in stores in the future.
The second broad field of application of artificial intelligence is customer expirience - The ability to monitor customer sentiment, evaluate the semantics of online posts and translate these experiences into the real world. An example of this is our "mirror" app. It can evaluate that you are a man and have a beard and send an offer of shaving cosmetics, to ladies it offers lipstick suitable for their outfit.
AI systems will certainly be developed to ensure that advertising is truly tailored to the customer. These systems can combine the data associated with, for example, your Google account and shopping behaviour wherever you enter your address with systems in the brick-and-mortar branches of that retailer that, for example, map not only what you buy, but also what goods you linger longer or browse, and prepare a truly personalised ad accordingly.
ERP systems in retail should serve the business
The excellence I see in implementing ERP systems in retail is that I select what is the key differentiator in the market for the customer to invest in and prepare a tailored solution. Conversely, in some areas I advise to adapt processes rather than use what the implementer or software manufacturer offers. But core know-how needs to be captured and preserved, not adapted to the needs of a generically designed system.
Karel Pecl, CEO, Blue Dynamic
The author of this article is the founder of Blue Dynamic, a company with many years of experience in delivering IT solutions for retail.
