This blog is part 2 of an 8-part series. Today we are focusing on the issues of integrating merchandising and product life cycle management (PLM) systems to the world of unified commerce. To start with, let’s begin by explaining what we mean by merchandising and PLM systems:
MERCHANDISING:
Merchandising Systems provide information at SKU/location level. The underlying information informs merchants of best sellers, markdown candidates, and fuels replenishment and stock balancing activities.
PRODUCT LIFE CYCLE MANAGEMENT (PLM) systems:
PLM systems house information pertinent to each stage of Product’s Life, from inception to end of life. PLM typically links product information to the Important back office functions such as pricing, assortment, promotions, sourcing, and space planning.
What’s new for merchandising in the world of Unified Commerce/ Enterprise visibility
A key driver of Unified Commerce is enterprise visibility of products, prices, and inventories. (We’ll talk about enterprise customer visibility in a later blog). Merchandising and PLM systems play major roles in integrating the front office apps required for Unified Commerce. The graphic below depicts a central data repository to expose this data to all the subscribing applications. This is no small feat since every app is likely to have different mapping as well as different scheduling rules across a broad range of APIs and technical environments. Without such a hub and spoke approach, the retailer is faced with a troublesome series of point-to-point interfaces. We believe that hub and spoke architecture is an essential piece for “Unified Commerce”. If you’ve achieved it, congratulations. If not, RIBA can help.
The inventory availability dilemma
Except for traditional POS, all the above “front office apps”, process customer orders for which “inventory availability” is key. What is “availability” for a Unified Commerce retailer? Essentially, it’s your best, up-to-date approximation of what specific inventory is available to fulfill customer orders. To ensure this information is accurate there must be a dynamic dialog between the front and back ends. This is a dilemma for most back-office merchandising systems as they were designed for a brick and mortar world where stores were polled periodically and inventory on hand was updated in batches. This is a huge inhibitor for successful retailers according to the Retail Research August 2016 study where 62%, as opposed to 47% of “losers”, reported that they had not successfully integrated inventory and order management across channels. Assumedly the losers are going to catch on soon. The problem is that older back office systems usually do not distinguish between the various shades of gray of “on hand” inventory, such as:
“ON HAND” Shades of Gray
• Reserved for individual order
• Display
• Damaged
• Pending order confirmation
• Expected shipment
• In Transit to another location
• Back room stock
• Pre-allocated to other channels, customers
Sometimes it is asking too much of the backend merchandising systems to handle every customer interaction that might impact “availability”. Owing to the rigidity of the back-office merchandising systems, many retailers resort to a “shadow inventory” approach where the OMS algorithmically determines availability based on frequent loads of the inventory data. Although effective, this approach leaves open the probability that the two inventories will become out of sync.
Another complicating factor is that many branded retailers want to co-mingle inventory to serve both wholesale and retail channels, so that one channel can service another’s demand. The economies are obvious. However, this requires dynamic transformations between the wholesale and merchandising systems whenever wholesale allocates and ships to retail customers from pooled stock.
Distributing product and pricing
The back-office merchandising/PLM system is responsible for progressing products through every life stage, from price to price, and from one promotional offer to another. Often for larger retailers these distinctions are managed by region, location, or country. Distribution of product and pricing information, often called Content Management, is often a primary responsibility of a Unified Commerce integration project. According to recent studies almost all retailers are actively engaged in changing their back office system to deliver enterprise-wide content and inventory availability. If not done well, retailers resort to rekeying data from one system to another or awkwardly reloading data tables to keep disparate systems coordinated. Needless to say, these shortcuts don’t represent what we at RIBA consider to be best practices.
Our Recommendations
1. FACILITATE your distribution and updating of inventory, pricing, and product data through a central data repository following a hub and spoke architecture.
2. MANAGE permanent and promotional pricing from a central point.
3. BE RIGOROUS about each possible inventory status so that you can accurately project “inventory availability”.
