While retailers recognize that merchandising has become a blend between art and science, they're still struggling with the science part.
According to a survey of retailers by RSAG (Retail Systems Alert Group), fractured planning processes (lack of coordination between merchandise, store, finance and expense departments) tops a list of primary merchandising challenges. Of the 55 retail respondents, 54 percent said fractured planning had a "major influence" on merchandising processes while 46 percent indicated it had "some influence." (The study, sponsored by DemandTec and JDA, also included in-depth interviews with several retailers.)
In the accompanying Customer-Centric Merchandising 2007 Benchmark Report, Eric Olsen, RSAG's VP of content, wrote that while poor integration between cross-functional teams is nothing new, what's surprising is it's proving to be "stunningly intractable." This is particularly true as the benefits in reducing errors and moving faster become more crucial in meeting the needs of today's fickle consumer.
"Ultimately, this synchronization promises more accurate and efficient planning, which results in a single, yet collective, version of the planning truth in a much shorter time frame," said Mr. Olsen.
When RSAG asked respondents what prevented them from implementing new merchandising systems to enhance internal collaboration, "hard to quantify" ROI remained an obstacle. But other issues - particularly inflexibility in both business process and technology - were also mentioned given the persistence of the problem. Respondents clearly indicated a need for more sophistication in merchandising systems while also admitting to merchandising being viewed internally as more of an art than a science. Of the respondents, 75 percent agreed that their organizations were resistant to change to some degree. Many indicated they wanted to simplify rather than complicate their organizations.
To overcome this "organizational paralysis," RSAG is urging retailers to make a commitment to understanding and anticipating customer preferences. Truly moving from a product-centric to a customer-centric approach, according to Mr. Olsen, "will entail more sophisticated merchandising systems with advanced functionality, as well as a willingness of the organization to balance art and science within merchandising."
Second, RSAG recommends against a "roll your own" strategy in favor of packaged software, pointing out that many retailers are still working off customized versions of software bought in the early-to-mid nineties. Said Mr. Olsen, "Business logic has improved and the state of the application union is far better than it was before."
Finally, retailers must create a plan for modernization. "A plan must be put in place to reduce dependency on out-of-date infrastructures," observed Mr. Olsen. "Even though each application must justify its place with direct return on investment, attempt to define your integration strategy early, and then put pieces in place step-by-step, in accordance with the plan."
Mr. Olsen notes that for many retailers to get beyond the fractured planning process may entail "a completely new way of thinking and interdepartmental cooperation," and a big commitment to technology.
"In the age of geographically disbursed retail enterprises, customer-centric merchandising can only be accomplished with the assistance of technology to create localized assortments, space, and product plans," said Mr. Olsen.
Discussion Questions: What do you think is behind the "stunningly intractable" struggles by retailers to improve integration between cross-functional teams? What do you think of some of RSAG's ideas to improve cross-functional teamwork? Can you come up with some of your own?