Anurag Jain's Blog on Bangalore Events, Travel, IIM Bangalore, IIM, IIMB, Management

Wednesday, February 23, 2005

Posted 6:47 AM by Anurag

IT in Retail industry

Retail has always fascinated me. And IT in Retail, more so. Here are some questions posed to me, mostly from a CIO perspective, and my answers, soon to be published in an Industry Wire published by a well-known market research company for a big IT firm.

# Why are innovations in Supply Chain and CRM so important in Retail?
Retail is, more than anything else, about these two things: Real-estate (location) and Logistics (distribution). The whole Retail value chain is highly dependent on supply chain and customer behaviour. Supply chain innovations are important in order to optimize the Retail business at the operational efficiency, whereas Business Inteligence/Data mining technologies such as CRM give insights into the customer patterns and thus helps optimize the business at a strategic level.

# Inventory means costs. How does a robust retail chain ensure that products do not sit on the shelves?
This situation can be compared to a practice called Yield Management in airlines, hotels, and other service industries. Especially, when we are talking about perishable inventory. IT plays a indispensable role in achieving a solution to this issue. Tracking inventory technologically (RFID) is a new and emerging area. Apart from bringing efficiency in the logistics, RFID also helps in minimizing inventory spoilage, and thus costs. The key to ensuring quick inventory offtake is a) good demand estimation/forecasting, and b) Good inevntory tracking systems. Both these require extensive deployment of IT.

# How can you link needs, technology and innovation and make it perform in Retail?
IT has a crucial role to play in Retail industry. But in order to know and act on the harmonious relationship between IT and business you need a 30,000-ft view of the business. Continuously scanning opportunities in the market, collaborating with academia on research, are some ways to be on top of the IT innovations, and their applications in the industry. About implementation or making IT work, it is ultimately a people issue. You need a very good team in place to see through a successful implementation. Indian Retail industry offers plenty examples of botched IT implementations.

# What are the intangible and tangible benefits to be gained by deploying IT in the industry?
Benefits from IT are hard to measure. In 1990 Robert Solow (a Nobel Laureate) gave rise to the term IT 'Producivity Paradox' to reflect the very fact. However, since then technology has changed a lot. Even as researchers and practioners alike are still struggling to measire the IT pay-offs, a few benefits can be clearly outlined. IT is useful for Retail industry not just up to 'Sale'. IT is also critically beneficial for post-sale interaction with the customer. On the pre-sale side, by deploying IT, Retail industry experiences cost-efficient and streamlined supply chain. And on the post-sale side, technologies like CRM, and in general Business Inteligence, provide the firm a handle to optimize the service & product-mix to the customer, and to optimize the revenues by leveraging the customer data that they already have.

# How does the industry appear to a CIO? What are the advantages and the pain areas?
Retail is a booming industry with a lot of scope for growth. Organized retail is just measly 2% of the whole Indian Retail industry. With this growth, IT requirements are expected to grow. There are of course issues such as allowing FDI, recognizing Retail as an industry in order to boost the sector. About the IT of Retail, there are standard off-the-shelf IT products available for the Retail industry. But, we need more innovation for India-specific Retail. Few Indian companies such as Scope have carved out a niche for themselves in the IT solutions for Retail industry.

# Can you name some of the successful retail chains in India with a robust IT deployment in place?
# Shooper's Stop (although, intially they faltered with JDEdwards implementation)
# FoodWorld.

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