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Exclusive: Getting Smart About Supply Chain Efficiency

BY Dan Berthiaume

When it comes to keeping supply chain and logistics operations as efficient as possible, retailers are getting smart. Using centralized cloud platforms and business intelligence solutions, merchants can achieve real-time inventory awareness and supply chain operational data that improves overall front- and back-end performance.

Here are three examples:

Gap


Gap Inc. is supporting front-end omnichannel retail operations of its namesake stores with back-end seamless inventory capabilities. Using a “seamless inventory” model supported by technology from GT Nexus, the San Francisco-based retailer focuses on having the right products at the right time for the right channel.

Global sourcing and logistics capabilities have allowed Gap to build innovative features like a “reserve in store” option on its e-commerce site. This allows customers to hold in store any items they see on Gap’s site so they may go to store and try on the clothes before deciding to make a final purchase.

Gap also recently deployed GT Nexus to enable package-level tracking of parcel cartons and provide feeds to recognize inventory as it is received at stores.

“An efficient and progressive supply chain is essential to profitable retail execution, and visibility is at the core of our global supply chain operations here at Gap Inc.,” said Shawn Curran, senior VP of global logistics for Gap Inc.

Lidl


German discount grocer Lidl is applying business intelligence technology to its planned expansion into the United States market. Lidl, which operates nearly 10,000 stores and 130 distribution centers across 26 countries, will use solutions based on the SAP HANA business intelligence platform to support its IT strategy, including supply chain and logistics, for entering the U.S. market.

Currently, Lidl is using the platform and business warehouse technology powered by HANA, as well as SAP customer activity repository applications, to help simplify and centralize its IT infrastructure.

The solution provides Lidl with a single platform to run essential applications that optimize and automate core merchandising, logistics and in-store processes. The in-memory technology behind SAP HANA can process large amounts of data in real time. Targeting the right markets and servicing customers with relevant assortments in all channels requires Lidl to systematically analyze data to better understand and react to customer behavior.

With SAP’s customer activity repository tool, Lidl is able to provide its business departments information on all customer interactions and current stock levels.

Pep Boys


The Pep Boys — Manny, Moe & Jack is shifting its inventory management efforts into high gear. The Philadelphia-based auto parts and service retailer is deploying 4R Systems Inc.’s retail inventory solution across its 800-plus stores in 35 states and Puerto Rico.

Pep Boys holds 16 million SKUs on replenishment, and 4R's scientific algorithm matches supply with demand for each SKU throughout the entire omnichannel supply chain. The retailer's inventory includes products with slow turns and others, like tires, that turn quickly and have demand substitutability. These variables add to the complexity of having the right inventory levels in each store without the risk of overstocking out-of-stocks, resulting in lost sales.

4R's analytics and client support teams continually analyze Pep Boys’ assortments against the 4R scientific algorithm, to optimize both width and depth.

For all three retailers, real-time awareness of inventory serves as a foundational point for improved supply chain and logistics operations.

In addition, advanced business intelligence systems and centralized cloud infrastructures help these retailers extend the benefits of supply chain and logistical efficiency across the enterprise. That’s important because in an omnichannel age, supply chain and logistics are not “back end” functions, but critical elements of a holistic customer engagement strategy.

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Deloitte: Holidays won’t be quite as happy as last year

BY Mike Troy

Holiday sales will increase between 3.5% and 4%, slower than last year’s 5.2% growth, as favorable economic tailwinds are offset by lingering negatives, according to an annual forecast by Deloitte’s Retail and Distribution Practice.

Deloitte tends to be one of the first to share its predictions about holiday sales and consumer behavior so its outlook is closely observed. The firm’s forecast of 3.5% to 4% growth is solid, but not spectacular as economic forces that would normally augur well for robust growth are offset by negative factors elsewhere.

“An improving labor market, increasing home values and relief at the pump gave more Americans reason to believe the economic recovery was gaining real traction this year,” said Daniel Bachman, Deloitte’s senior U.S. economist. “Those recurring improvements helped buoy sentiment and spending over the past several months. Housing and employment tend to create a more meaningful wealth effect than that of the financial markets, so the recent stock market fluctuations and instability overseas should not have a marked impact on shoppers’ holiday spending intentions. However, while retail holiday sales are expected to rise, the increase may be smaller than last year due to the lingering effects of flat personal income growth in the first quarter.”

If Deloitte’s forecast proves correct, what’s at stake for retailers this holiday season is a share of sales pie that measures between $961 billion and $965 billion and an overall market that will decelerate from the prior holiday season when sales increased by 5.2% while continuing to shift online. Deloitte forecasts an 8.5% to 9% increase in non-store sales in the online and mail order channels.

“Online sales continue to be a growth channel, but more importantly, we’ve passed the tipping point where online and mobile engagement play a greater role generating sales in the physical store – where more than 90% of retail sales occur – than in digital channels alone,” said Rod Sides, vice chairman, Deloitte LLP and retail and distribution sector leader.

Deloitte forecasts that digital interactions will influence 64%, or $434 billion, of retail store sales this holiday season. This figure reflects the amount of traditional brick-and-mortar retail sales impacted by shoppers’ use of digital devices including desktop and laptop computers, tablets, and smartphones, according to Deloitte.

“Our research shows that people who shop on their phones, tablets and other devices while in stores are more likely to make a purchase and spend more overall,” added Sides. “Also, nearly 80% of shoppers say they engage with a retailer or brand through digital channels before setting foot inside the store. These interactions are retailers’ opportunity to engage shoppers seeking inspiration, reviews, product locators, or the option to buy online and pick up in the store. Retailers that are likely to come out ahead this holiday season are the ones connecting the dots between their digital channels and their stores – rather than focusing solely on the online ‘buy’ button.”

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AutoZone keeps firing on all cylinders

BY Mike Troy

The nation’s leading automotive retailer ended its most recent fiscal year the same way it has for the past nine years – with double-digit profit growth and a favorable outlook for the coming year.

AutoZone, operator of 5,609 stores in the U.S., Mexico and Brazil, grew total sales 7.9% to $3.3 billion and domestic same-store sales 4.5% during it fourth quarter ended Aug. 29. The topline growth was aided by the addition of 72 new stores during the period, leaving the company with 5,141 stores in the U.S., 441 stores in Mexico and 27 locations in Brazil.

The company did not disclose how many stores it planned to open this year or offer details on other capital expenditures such as information technology or e-commerce fulfillment.

Net income increased 7.4% to $401.1 million and earnings per share increased 13% to $12.75 from $11.28. Earnings per share growth benefited from stock buyback activity during the quarter, which enabled AutoZone to report its 36th consecutive quarter of double-digit earnings growth. The company spent $430 million to buy back 633,000 shares. For the full year, AutoZone spent $1.3 billion to buy back roughly two million shares. At year end, the company had only $348 million remaining under its current share repurchase authorization.

“Since our inception, we've been committed to providing exceptional customer service and trustworthy advice; our key point of differentiation. This commitment to our customers leads us to deliver exceptional financial performance,” said AutoZone chairman, president and CEO Bill Rhodes. “For the year, we reached many milestones, which included generating over $10 billion in sales and completing the IMC acquisition. Our testing of our inventory availability initiatives, including expanding our multi-deliveries per week to stores and opening mega hub locations has concluded. We have determined that these tests were successful and we will begin implementing our new supply chain strategy now and complete it in a few years. Additionally, as we have routinely stated, we will remain committed to our disciplined approach to growing operating earnings and utilizing our capital effectively.”

Full year sales increase 7.5% to $10.2 billion and domestic same-store sales grew 3.8%. Net income increased 8.5% to $1.2 billion, while earnings per share for the period increased 14.1% to $36.03 from $31.57.

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