Retailers can overcome the save-versus-spend conundrum

One manufacturing and retailing conundrum is to sustain profitable growth and optimise the supply chain while limiting IT spend to projects that offer an immediate return on investment. Mark Lilje, MD of RangeGate, advises how to achieve this.

Wireless and radio frequency identification (RFID) are two new industry buzz phrases that vendors are touting as among the "next big things". Quite honestly, they are and they are not.

What they are not going to do is impact the bottom line immediately through offering staff e-mail, calendars and to-do lists in coffee shops. The number of people that truly require a solution such as that are few and far between. Where RFID and wireless technology will improve the bottom line, immediately, is in the supply chain.

According to a report by research firm IDC: "business agility, stock, optimisation and supply chain efficiency will be among the top pains that western European retailers face during 2005", and, "The ongoing modernisation process, the need to standardise systems, as well as the move towards collaborative value chains are key drivers of IT spend among midsize and large retailers. The necessity of improving efficiencies in the supply chain is pressing, especially for grocery retailers and apparel retailers, due to the growing need to have strong time-to-market strategies."

At the same time, CIO.com magazine ran a story that stated: "The emerging technologies most often mentioned by CIOs have to do with mobility - wireless devices and RFID. Although few enterprises are running large-scale initiatives, most are slowly getting their feet wet with mobile technologies."

Wireless in the supply chain makes perfect sense for companies looking to close the gap between order collection and delivery processing. Sales agents in particular stand to gain from this technology, as do warehouse, transport and delivery agents, and service staff.

Some of the benefits gained are:

* Up-to-the-minute stock availability;
* Enhanced sales management;
* Improved account management;
* Better order accuracy;
* Correct order fulfilment;
* More and better CRM and other customer-related information;
* Faster, more accurate quotes;
* Reduced operational costs;
* End-to-end supply chain management;
* Improved customer service;
* Better asset management; and
* Real-time workload, equipment and labour management.

For instance, UK retailer Tesco has used RFID and stock level tracking at its 708 stores in the UK and 1 202 T&S convenience outlets to ensure shelves are full, inventory is at a minimum and products are targeted at the right stores.

These systems helped the business achieve savings of lb200 million. Its IT director, Colin Cobain, said in an interview with Computer Weekly that every project must answer three questions: "Will it make the customer shopping experience better? Will it increase the capability of staff by making things simpler? And will it cut costs and improve efficiency?"

Tesco is currently rolling out RFID technology in its supply chain and Cobain expects it to meet all of his criteria. From the Computer Weekly interview: "This technology is going to enable accuracy across the supply chain like we have never seen before."

While businesses such as Tesco are realising the benefits of deploying RFID in the supply chain, some companies need a little push in the right direction. Suppliers to the US Department of Defence will have to deploy RFID on their shipping pallets and cases by January 2005. Those that don`t stand to lose out on the department`s estimated $24 billion spend. The new policy seeks to track around 45 million line items annually.

While some analysts believe the project to be premature due to hardware and software constraints operating in military environments, Forrester Research states that products that identify themselves and a self-managing supply chain are just over the horizon.

"Retailers must selectively deploy RFID today to lay the groundwork for a smarter, more flexible supply chain tomorrow. In 2005, retailers will aggressively use technology to sharpen their consumer value propositions and improve their net margins. Vendors will battle for budgets in four hot areas: anything data related, store technologies, e-commerce and RFID."

Some retailers are deploying RFID and enjoying return on their investment along with cost savings, enhanced efficiencies and better service for their customers. Others need only learn their lesson.