The retail industry is facing a dramatic change. e-Commerce, low cost manufacturing, new consumer markets, and financial turbulence impact buying patterns. And these consumer patterns are characterized by unpredictability, shortened product life cycles, and minimal lead times. This new level of complexity demands new technology and new methods of managing the company. Two examples of new technologies that will reshape the retail industry are radio-frequency identification (RFID) and Cloud Processes for the Value Network.
e-Commerce, combined with increasingly sophisticated logistic services, has opened local markets for global competition. In many segments of the retail industry, the e-Commerce channel has exceeded 10% of the total turnover. So the established retail companies are challenged by newly established e-Commerce players that often specialize on subsegments of the market, thus capturing the potential market for established players.
Established retail chains are forced to meet the challenge the new e-Commerce logic presents to the customer, and, at the same time, they must be able to leverage the established wholesale infrastructure to attain satisfactory customer service levels, customer confidence, and product quality to compete with the specialized new competitors. Especially time to market, specialized depth in the product assortment, and agility in the demand chain represent major challenges compared to those from the new competitors.
For the new and fast growing e-Commerce players, both sourcing and automated order fulfillment are major challenges either because they require large investments in IT support or they tie up considerable amounts of capital in current assets and speculation in stock. This is especially pronounced in the high-tech retail segment, where one strategy has been to stock only the "predictable" items and source the rest “on demand” from local or semilocal suppliers.
Often retail chains choose to outsource all or parts of their fulfillment process to third party operators, in many cases, large transport companies’ supply chain/3PL/4PL departments. But no single transport company covers the whole umbrella of required service when it comes to geographical coverage and service-level coverage. This problem is accentuated in multicontinental deliveries that require complex cross-border and multimodal management. Thus replenishment and order fulfillment introduce multiple lead times, unpredictability and complex interactions with third party operators that degrade the overall performance of the retail company.
Many retail companies benefit from drastically lower sourcing prices from China and other low-cost countries, getting higher volumes because of price elasticity and better margins due to the low purchasing prices. However, the flipside is more complex and dynamic sourcing with increased responsibility to ensure quality and conformity with ethical, financial, and environmental aspects of each manufacturer. This puts new requirements on the systems governing the business, all the way to the shop floor of the supplier.
The greatest challenge is to manage this increased complexity in the business logic and to be able to leverage this complexity to the advantage of the company. Company dexterity becomes a major parameter for commercial success and creation of shareholder value.
After-market services are becoming a more and more important part of the retail business because of the increased complexity of the products, in combination with and consumer best-practice expectations and the laws that ensure a warranty and return guarantee. After market has already become a significant new source of revenue that is not so exposed to swings in the economy. But today the interaction with the original supplier’s global guarantee programs in the after sales return processes are a costly and cumbersome business that needs to be enhanced.
Cloud Processes for the value network enable management to take control of the complex end-to-end business processes, to create and maintain transparency, and to automate the basic interactions between the participants in the end-to-end business process. In addition, they shorten the lead times in both the value added activities and lead times when changing business rules and/or participants in the value network. If the lead time for changes in the value network is longer than the change in business prerequisites then the competitiveness of the business will deteriorate.
For the retail industry, Cloud Processes for the value network mean an opportunity to automate the administration between the stakeholders in the end-to-end demand chain. They introduce and automatically monitor Key Performance Indicators (KPIs) for each stake holder and for the overall performance, which dynamically promotes the best performers and optimizes the business rules driving the business. For example, the Cloud Process enables you to automatically choose the best logistics company for individual shipments based on contracted delivery times, achieved delivery times, and a host of other configurable factors. The best-practice Cloud Processes for Travel, Procurement, Order Fulfillment, After Sales, and Financial Transactions will create a new operational platform – Digital Management – to leverage the dynamics of the retail global marketplace.
Reduced Operating Costs
eBuilder Cloud Processes automate more than 50% of the manual administration in handling business transactions for procurement, travel, inbound/outbound order fulfillment, after sales/customer care, and financial transactions. eBuilder makes a reality of “more for less."
Reduced Costs for Sourcing
eBuilder’s Cloud Processes enable full transparency in the procurement-ordering-delivery-financial transactions flow, thus enabling you to consolidate purchasing and enforce the correct workflow and logistical consolidation to optimize the cost and quality for sourcing. In most cases, a 3-15% reduction of costs is achieved. Cloud Processes also implement “Control Tower” solutions to monitor and manage inbound order fulfillment.
Improved Customer Satisfaction/Retention
Our Cloud Processes promote the implementation of timely deliveries, as well as managed and optimized repair and return processes. This often results in a reduction of warranty costs by 5-10%. A reduction in consumer turnaround times by 10-50% is a major factor in achieving increased customer satisfaction, leading to greater loyalty to the supplier’s brand.
Enhanced Corporate Dexterity
The ability to handle dynamic complexity will have a vital impact on your competitiveness, profitability, ability to create an eco-friendly and sustainable operation, and on shareholder value. This is an even greater challenge when most organizations are increasingly dependent on external collaborating parties (the Value Network) to deliver end-user satisfaction. This growing interdependence is a function of increased competition, entering into new markets, and leveraging cost effective production. In these matters, the retail industry is exposed.
Cloud Processes link and control the value-added activities in the value network and link them to the enterprise resource planning (ERP) processes. The business rules and terms and conditions that govern value-added activities are managed centrally by the operational, tactical, and strategic functions to optimize your performance and to adapt to changes. The business improvements actualized by adopting Cloud Processes for the value network are dramatic; for instance, you can achieve ROI after less than six months.
Lean Change Management
The requirements for running a business are increasingly dynamic in our rapidly and unpredictably changing environment. And your business’s ability to react to change has a vital impact on its overall performance. With centrally managed Cloud Processes, business rules and master data, the business logic and terms and conditions between the participants in the Value Network can be altered and deployed globally within days.
A quarterly improvement service is built into every Community Edition of the Cloud Processes. The releases in this service contain new functionality, enhancements, and maintenance. These improvements are driven by the product roadmaps for each Cloud Process. They are based on factual, real-time information relevant for operational, tactical, and strategic decisions presented by the Cloud Process service for relevant target groups.
Our Cloud Processes enable managers of retail companies to optimize their business and to rapidly change participants in the value network to effectively maximize the efficiency of the business. This is business dexterity, delivered.
Lower the Amount of Capital Tied up in Assets
Leveraging the shortened lead times enabled by end-to-end connectivity, you can reengineer the business process and implement “on demand” sourcing and reduce the number of consolidation points for physical goods, thus reducing the amount of capital you have tied up in assets.
In most cases, Cloud Processes enable “on demand" sourcing for a large part of goods and services the company needs, while maintaining or improving customer service levels and reducing corporate expense by lowering the amount of capital employed. Strategies like vendor managed inventory and outsourcing of order fulfillment are methods used to leverage Cloud Process capabilities.
The increased transparency and microcontrol gained with the Cloud Processes enable you to reduce both inbound and outbound assets in the supply chain. Spare parts can be optimized for the aftermarket processes related to product life cycles and end of product life. New strategies can be developed when the lead times are lowered to a level where the delivery time allows for “production on demand.” This moves competitiveness and profitability to a new level. And it clears the way for sustainability and the minimum utilization of natural resources while satisfying the needs of the individual consumer.
Boost Your Competitive Advantage
To catch the trend and to be able to source the right items at the right time with maximum margin is a bigger challenge today than ever before. The paradox of having a big assortment, always up-to-date and containing the trend setting items that make a difference, means complexity and requires short lead times. Cloud Processes for the value network give you a new way of managing both the e-Commerce channel fulfillment challenge and the traditional sourcing challenge under full control, while measured in real time against chosen KPIs.
Cloud Processes for the value network give you increased transparency and reduced lead times both in the inbound/outbound business processes and for the aftermarket and customer care processes.
A retail company that uses end-to-end Cloud Processes for the value network will have a comparative advantage in shorter lead time to market and a higher service level for the end consumer, again leading to higher profitability and customer retention.
Better Information for Decision Making
eBuilder Cloud Process dashboards provide the operational, tactical, and strategic business information that enables digital management of your value network. Among other things, this gives the respective areas of responsibility the base on which to make well-grounded decisions needed to monitor the agreed upon key performance indicators and service level agreements, key factors in creating and maintaining a competitive business. The need for relevant and up-to-date information for decision making is met by deploying Cloud Processes, which connect your value networks. They automatically monitor business events (business activity monitoring) in the entire value network and present relevant data on operational, tactical, and strategic levels together with business intelligence functionality that combines real time business events into clearly presented statistics for improved business decision making.
This takes management to a new level by focusing on deviations from contracted KPIs and on improvements rather than managing and monitoring operational transaction issues that have little or no value for the end customer. We call this digital management.
Retail companies are crucially dependent on relevant information for decision making and follow-up of decisions. The information quality and immediacy must be superior. The ease with which you can change focus of your analysis and drill down is indispensible. These capabilities are standard in all Community Editions.
Shorter Lead Times in Operational Processes
eBuilder Cloud Processes enable online connectivity end-to-end, access to real-time operational, tactical, and strategic information; and they provide best-practice business rules. Automation of business processes frees resources from repetitive administrative tasks so they can be used to handle deviations and improvements. This leads to shorter lead times across the end-to-end flow, often in the range of 10-90%.
These reductions are remarkable, and they are a result of capabilities in the Cloud Process that enable the end-to-end, automatic business activity monitoring and ensure that the information is of sufficient quality and that its flow is uninterrupted in the end-to-end business process. This enables faster, but always monitored, movement of the physical assets.
Reduce Costs for IT Operations
Most IT organizations have invested heavily in building an enterprise-wide IT infrastructure and ERP functionality. The focus has been on internal processes and technical implementation, carried out by the business’s own IT organization or outsourced to IT consultants.
The historical trend has been to try to reuse more and more of existing investments and resources and to limit the company’s own investment to what is unique within the company to create competitiveness. This can be seen in the evolution from mainframes to client servers, to the PC, to the browser; and from in-house developed code to standard applications. So far, most projects show a limited ability to leverage external assets and investments. This results in long lead times for implementation, unpredictably high costs, and a focus on cost reduction. In most cases, this results in the IT organization lagging behind in projects that add immediate business value and instead being forced to focus on reducing costs in managing the infrastructure. And because more and more of a company’s business processes are under the control of collaborating business partners outside the direct control of the company itself, for example, transport companies, suppliers, and finance companies, this leads to changes in the role and needs of the IT department.
Cloud Processes for the value network give the IT organization an opportunity to implement a strategy for seamlessly integrating all external business parties (the Value Network), a strategy that complements the existing ERP and IT infrastructure investment while extending the enterprise-wide business processes into the value network. In the short term, this lowers IT costs and enhances the value of existing investments because the Cloud Processes generate a clear and visible business value within a short period of time.
The Cloud Process implementation is completely different from traditional implementation. For a Community Edition Cloud Process, the implementation process consists of two main activities: Connect to Cloud and operation. The Connect to Cloud project consists of three parts: configuration of the customer-unique business rules, integration of the relevant internal systems, and the addition of unique business partners that are not already connected in eBuilder’s existing business Process network. This usually takes less than 15 weeks. Then the operation of the best practice Cloud Process starts. The payment for the operation is done on a transactional basis. The ROI has been achieved in less than six months for the majority of all the projects eBuilder has implemented.
The key to this favorable ROI is the degree of reuse. eBuilder Cloud Processes for the value network reuse all the 10 main resources of the Cloud Process implemented in our Accelerator SOA technology environment. They also reuse the seamless integration of the 10 different areas and the supervision and control services that ensure availability, quality in the information content (information entropy), and technical functionality. Because many customers share the cost of developing and maintaining this generic platform, the cost to the individual user is dramatically lower than to the cost of implementing such a platform on an individual basis.
eBuilder’s Cloud paradigm enables a whole new way of using IT, where IT becomes the business, and computers execute the basic administration tasks that previously were based on human interaction. It also enables the IT organization to leverage joint infrastructure to address the challenges associated with creating efficiency in the value network and to participate in the business development. In another sense, it encourages the IT department, in its role as a controller of the entire value network, to work closely together with eBuilder as a “cloud broker”partner who helps them secure the services that will lift the enterprise to the next level.