A three-step approach can help retailers build an efficient foundation for product management.
by Prasoon Ranjan, March 2011
Retailers around the globe are looking at new ways to increase profitability and at the same time ensure that technical standards are being followed. They are attracting customers by providing a unique and consistent buying experience across different channels — in-store, online, catalogue and direct-to-home. At the same time, more products and product categories are being added to the catalogue as retailers seek to increase sales. Products and pricing are being constantly evaluated, with a high volume of products being both introduced and retired. Technologically, there is a greater push for adopting industry standards such as GDS (Global Data Synchronization) and RFID (Radio Frequency Identification). GDS will keep the data between retailers and suppliers accurate by using standard attributes and synchronized-with-near-real-time integration. RFID, which uses radio waves to exchange data, makes it possible to give each product a unique identification, and to easily exchange the identification. These technologies ensure efficiencies in data transfers and improve profitability for both the retailers and suppliers. In a world of changing customer needs, expanding catalogues and use of technology standards, managing product information is becoming critical.
Retailers have often faced challenges in managing product data as it is widely dispersed, stored in multiple places, in multiple formats and often duplicated. As a result, retailers face the risk of incomplete and inaccurate product information, lacking controls and adherence to any data standards. The effect of this and the associated data mismatch is compounded in process inefficiencies. Internally, process inefficiencies often lead to slow product introductions and changes. Externally, data mismatch between retailers and suppliers is impacting the ability to collaborate across internal (such as shop front and retail distribution center) and external (such as factory and supplier warehouse) constituents. This leads to error-prone and inaccurate product updates, and ineffective branding and merchandising, which leads to delayed time-to-shelf. In a recent study by the global data standards organization GS1 UK, based on a survey of the top four retailers in the United Kingdom, the correlation between suppliers’ and retailers’ data is between three and 47 percent.
The business impact of these challenges is enormous. New product introduction into the catalogue gets cumbersome and lacks consistency across channels. Store operations often get pricing wrong, have incorrect inventory or a mismatch between the label and what is on the shelf. As a result, retailers experience slower sales cycles and lower customer satisfaction, ineffective stock management leading to ordering the wrong quantity, higher return rate and higher safety stock (level of extra stock maintained to mitigate risk of stockouts), impacting profitability.
In one case study we conducted, a leading retailer had acquired one of their competitors. The synergies of the acquisition were very clear and evident both in terms of expanded catalogue and the channels for selling. The merged entity now had two brand names in the market and all the main sales channels — store, online, catalogue and direct-to-home. An analysis of their product lifecycle showed that the processes and the underlying systems across the channels were not integrated and continued working in their own silos. As a result, they had a separate catalogue for each channel for each of the two retail brands. While the procurement was managed centrally, suppliers were contacted six times when a new product was being introduced. Product data was entered at least five times and there were over ten systems dependent on this information.
In order to address the current issues and challenges, retailers should look to build an efficient foundation for product management. Based on our experience with several retailers, we recommend a three-step approach to make the process better, faster and more cost effective.
1. Have one product master that acts as the “single source of truth” and manages all product information across all channels. One product master will set the foundation for a strong information management layer. It will drive improved business decisions with complete, accurate, and timely data to business users, helping them make optimal business decisions in product management activities. It will avoid disruption to internal processes associated with fixing bad data. Improved data quality will also reduce operational costs or losses due to data inaccuracies that have permeated operations. These inconsistencies can create “catastrophic” labeling or branding issues, such as marking products with wrong price labels or not associating the right features for a product impacting its brand identity, and can lead to recall or other related losses.
2. Streamline processes around all aspects of product management in a retail organization, such as buyers, merchandisers, sales, stores and suppliers. Streamlined processes will improve efficiencies in product management and supplier relationships. It will reduce the time spent in the different steps of the product selection cycle, with buyers and suppliers working off a single product system. A centrally managed workflow, based on master product data, will help manage interactions, alerting and directing the product selection cycle to the right resource in a timely manner. This will avoid multiple contacts with suppliers. Eventually, a streamlined process will ensure that the retailers get the right product to the right place at the right time.
3. Rationalize systems and resources, leading to compliance with standards, integration with legacy, and business intelligence and reporting capabilities. Having a central source to manage all product information and the processes around managing this information will lead to rationalized systems, making it a cost-effective solution for retailers. A rationalized, centralized product information management system will provide a common platform and interface for any new system requiring product information. This will help reduce costs in managing changes to product management processes and integrations associated with new systems. Automation and embedded business rules will reduce manual touch points throughout the product information lifecycle, resulting in productivity savings. The benefits of a product information system span the typical levers of cost reduction and revenue increase — but the biggest impact is in improved customer satisfaction, and increased employee satisfaction through automation of manual tasks.
Prasoon Ranjan is a senior director of Industry Strategy and Insight at Oracle.