Retailers and manufacturers are routinely bombarded with technology “must-haves” that may or may not deliver on their promise. But this year, five technologies rise above the hype and beckon executives to listen up.
The focus areas were identified following an informal poll of progressive technology executives who offer one key disclaimer: No technology is a good fit for every company and copycat implementations not aligned with strategy are bound to disappoint.
“I don’t think you can pick one technology and say it is the most important, but I’d say the key is to have a good understanding of the capability of the technology,” said Kevin Turner, president and chief executive officer of Sam’s Club and former chief information officer of Wal-Mart.
Smart & Final’s senior vice president and cio, Zeke Duge, agrees: “We overuse the term ‘enabling technology.’ It’s not the technology itself that’s enabling, but how it plays in the bigger picture.” Grasping the broader strategic vision — and where technology fits in to support it — requires a meeting of the minds between ceo and cio and the time for techno-speak is long gone, sources said. Ceo’s must insist their technology executives understand strategic objectives and articulate benefits of technology investments in business terms, not bits, bytes and bandwidth.
“Not only do cio’s need to be conversant in business jargon, but also in vendor-speak, consultant-ease and techno-babble,” said Andy Laudato, senior vice president and cio of the $1.8 billion Pier 1 Imports. “A primary function of the cio is to translate among these groups.”
Once the language obstacles are overcome, it becomes clear that the five areas of technology that have ceo’s and cio’s charged include:
1. PLM
Product lifecycle management is an all-encompassing, data-driven process that coordinates each step in the life of a product, from initial concept through production. Done right, it speeds product to market. That’s money made. It also streamlines design and procurement while eliminating costly excess samples. That’s money saved. Early adopters of PLM systems gain unprecedented visibility into — and control of — their entire product development cycle. That’s an edge.
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Apparel and footwear companies have traditionally orchestrated the steps that take a designer’s inspiration from sketch to production to sales floor with numerous systems, often spreadsheet-based, error-prone and not integrated.
“You could have dozens and dozens of files misrepresenting what you are going to build. It gets into total anarchy,” said Brion Carroll, president and ceo of systems integrator Aptavis Technologies. He gave a PLM presentation at the Material World conference in Miami Beach last month.
In an interview, Carroll said poor visibility into its own processes cost a New York-based company $50 million in materials it no longer wanted. Had a PLM system been in place to alert the company that its production needs had changed, the order could have been canceled.
Ceo’s can’t deny these outmoded practices are eating up profits.
With PLM, design and production activities are tracked and coordinated seamlessly to present “one version of the truth” to everyone involved in a project. With updated information about project status, accurate costs and approaching deadlines, everyone works smarter. Problems are anticipated earlier in the cycle and addressed. Activities once carried out sequentially can be done simultaneously, a big time saver. “Instead of doing everything in a series — finish the design, then buy the material, then cost out the production — things can be done in parallel,” said Alexi Sarnevitz, research director of retail at AMR Research.
New Look, a $1.3 billion U.K. retailer with a significant private label business, slashed procurement lead time by 20 percent using PLM. “And that 20 percent is the low-hanging fruit” that comes with newfound visibility into the product development process, Sarnevitz said. With this knowledge, companies can identify and eliminate inefficient processes to slash design and procurement lead time by up to 50 percent, he said. “There is no reason for [lead time] to be nine months.”
New Look is using a PLM system from UGS, which had been part of EDS before it was sold last year. Other manufacturers are switching out their homegrown systems with solutions from PTC, Geac, Lectra, Gerber Technologies, Freeborders, UGS and MatrixOne, among others, to streamline collaborative tasks.
“It is a shrinking world and collaboration is going to be the key of the future,” said John Seville, cio of Rocky Mountain Clothing Co., a division of Denver-based Miller International. His company is using Lectra’s PLM system and will soon test that vendor’s Web-based product management solution.
2. Biometrics
Used to verify a person’s identity through finger, face or retinal scanning, biometrics has clear-cut security applications such as access control. However, biometrics can play a broader role in an organization that is willing to think creatively about solving age-old problems, such as lines at the checkout.
“The technologies ceo’s need to know about are the ones that are going to give an advantage in hiring, service or saving time or money,” said Duge of the $2 billion Smart & Final, based in California. His biometrics deployment will enhance customer service by eliminating hang-ups at the checkout, such as special transactions that require a store manager’s approval.
Biometrics-equipped personal digital assistants will enable a Smart & Final store manager to remotely authorize a cash refund, for example, without customers having to wait for him to trundle to the front end and turn a key. The retailer is working on the solution with point-of-sale vendor NCR and PDA provider Hewlett-Packard. When alerted his attention is needed, a manager logs on to a wireless PDA from anywhere in the store to view the POS transaction details. With the touch of a thumbprint, whose physical attributes are linked to its owner and stored in a database, the manager’s approval or rejection is transmitted wirelessly to the POS, “where it goes: ‘ka-chunk,’” Duge said. The checkout lane is moving again and the store manager resumes his work with only minimal interruption.
Another biometrics application gives retailers the power to influence which payment method a shopper chooses, an opportunity no retailer would dismiss.
Food retailer Thriftway uses biometric payment terminals from PayByTouch and sets the default to debit because it’s less costly to process than credit. Shoppers can opt for another payment method, but debit is the first choice they’re offered, said Brian Bixenman, store director.
When shoppers enroll in a biometrics payment program, they designate which payment accounts are to be charged, register their fingerprints once and need not present their cards afterward. A biometric finger scan is all that’s needed to verify identity and authorize payment.
“Now it’s the store’s opportunity to [virtually] reach into your wallet and put a card on top,” said Samir Nanavati, partner with think tank International Biometrics Group. “The store could have an active say” about which payment method is used, such as a store’s own branded card. “I think a ceo would love to hear this,” he said.
3. RFID
Four words pretty much sum up why radio frequency identification needs to be on the ceo’s radar: It’s not going away. On that, there is consensus, even among skeptics.
A whopping 70 percent of major retailers with at least $5 billion in sales that have not made their RFID plans public will invest in the technology this year, according to survey results released last month by Deloitte and Retail Systems Alert Group. That same group of respondents will implement RFID in the next 18 months. The research findings validate the widely held perception that retailers are far more engaged by RFID’s potential than manufacturers at this point.
RFID tags, embedded with a computer chip and antenna, can be affixed to product at the pallet, case or item level to track inventory movement throughout the supply chain. Because the process is fully automated, unlike bar code-based systems, RFID evangelists predict monumental improvements in tracking accuracy and speed. With reliable knowledge about inventory disposition at any point in time and at any point in the supply chain, companies can replenish to reduce stockouts, decrease shrink losses due to theft and even reduce shrink losses as a result of spoilage of perishable food. The list of theoretical benefits goes on but few companies have demonstrated a solid return on investment.
The Gap chain tested RFID to track individual pairs of jeans in a store and to trigger stock replenishment from the back room to the shelf, when needed. Sales in that category rose 7 to 15 percent, said a Gap executive involved in the test. Gap reasoned that RFID captured sales that otherwise would have been lost when a particular size or style is thought to be out of stock, when in fact it is only misplaced somewhere in the store. Results like these are promising but fall short of the hard ROI numbers the industry craves.
Another store-level RFID application appeals to those retailers seeking to use technology to improve the shopping experience. When deployed in a store’s fitting room, as Germany’s Metro Group did at a test site, RFID can act as a personal shopping assistant. RFID-tagged garments communicate with fitting room computers to display information relevant to the garment being tried on, such as color options or coordinating pieces.
4. Mobile Devices
Mobile technology is not new, but smart companies are finding ingenious ways to deploy it to enhance the shopping experience, whether it’s a merchant or a consumer doing the buying. Home furnishings manufacturer Orbit began using wireless handheld devices to automate order-writing for retail buyers touring its showrooms. “Being able to walk around and talk about your product, rather than playing catch-up with handwritten orders, allows you to develop a relationship,” said Scott Berkowitz, Orbit president. “It allows you to meet with each buyer on an individual basis.” The Highland Park, Ill., company uses personal digital assistants from Symbol Technologies and order entry software from Upward Technologies.
In retail, the concept of using mobile phones as payment devices is gaining interest. Ron Ehlers, vice president of information services at Pacific Sunwear of California, said the ubiquity of cell phones among his young customers makes it a very attractive option to offer and one that he will explore further.
Both Ehlers and Gary Hawkins, ceo of food retailer Green Hills, cited the “m-commerce” solution called MobileLime from Vayusa as one to watch. To use phones as payment, customers enroll in the program through MobileLime’s Web site, where they designate the account to be used to pay for purchases. Or shoppers can set up a prepaid account so the phone works like a stored value gift card. To initiate payment with the phone, shoppers dial a toll-free number and enter the merchant’s location ID. The purchase total is relayed back over the phone and the shopper enters a PIN number to authorize the purchase.
“When used as payment,” Hawkins said, “the cell phone can also effectively ID the customer to the transaction and take the place of a frequent shopper card,” allowing retailers to gain insight into shoppers’ preferences, history and buying trends. With that information, retailers can send customized offers, via cell phone, while shoppers are still in the store and receptive to suggestive selling.
“This is very much a ceo issue,” he added. “I say this because I am convinced this whole notion of gathering, understanding and using customer data is a long-term business strategy, not just a marketing promotion.”
5. Workforce Solutions
Retail ceo’s can’t ignore technologies that directly impact their number one controllable expense — employees. While some labor-oriented systems accelerate the job candidate screening process, others use analytics to optimize workforce scheduling and management once those people are hired.
“If you don’t have the ability to hire quality people on the spot, you lose out. They go next door” and join a competitor, said a cio at a multibillion-dollar chain whose store base and labor force are growing rapidly.
A system from Unicru automates the screening process and uses filters to weed out undesirable candidates (such as those unwilling to work weekends). Through a series of questions, the system identifies those hires who will bring their new employer tax credit dollars from government-sponsored programs such as Welfare-to-Work.
“You have to file for that before they start working. Otherwise you could be leaving millions [of tax credit dollars] on the table,” said the cio, who requested anonymity. In the specialty retail category, Unicru estimates that 16 percent of job applicants are eligible for the Federal Work Opportunity Tax Credit program.
Heightened emphasis on customer service has retailers turning to workforce optimization solutions. Such systems analyze historical store traffic data to devise schedules that meet customer demand. They also track and document that schedules were adhered to, and that required employee breaks were taken, to ensure regulatory compliance with labor laws. Limited Brands and Burlington Coat Factory are among those using such a system from Workbrain, and late last month, Longs Drug bought RedPrairie’s workforce performance management solution. Longs’ system guides distribution workers’ activities based on industry-accepted standards for how long a given task should take to complete. Sears uses a task management and monitoring solution from StorePerform Technologies to assign activities at stores and ensure they are carried out.
Not every enticing technology may offer ceo’s the ROI they want. But systems that encourage collaboration among workers, streamline processes and offer something extra to the shopper that she can’t get anywhere else are the ones to watch.