INVENTORY

Supply Chain Responsibility

BY CSA STAFF

Devastating sourcing and supply chain disasters, including the Bangladesh factory collapse in April 2013, have increased the push for retailers and other businesses to implement sustainable and responsible practices across the global supply chain. Tamara Saucier, VP industry – retail solutions, GT Nexus, discussed the topic, and proactive measures retailers can take, with Chain Store Age.

What can retailers be doing to ensure ethical and sustainable supply chain practices?

The challenge is in knowing where your goods are being made and who’s making them. This is a struggle due to the complexity of multi-tiered supply chains, but there are steps retailers can take to improve the visibility and traceability of the movement of goods throughout the production life cycle, from origin through delivery. Visibility means different things to different companies, but for the sake of ensuring ethical and responsible production of goods, visibility means knowing who every party is in the supply chain starting with raw materials, and tracing the steps in the production cycle to ensure compliance. Doing this from thousands of miles away is difficult.

Where should they start?

The first step is to connect all of the trading partners on an automated, electronic network that enforces workflows and procedures and ensures that the right parties are creating the goods with the right materials, labor and working conditions. It can be a challenge to mandate suppliers to log in to a system and report their steps or milestones in production. But we’ve found that by tying payments to the system, there’s a completely different perspective from the suppliers. By connecting all trading partners in a cloud environment that automates the orders, invoices, documents and payments, retailers have a fighting chance of obtaining visibility into the supply chain to ensure ethically and sustainably produced goods.

Are consumers’ purchasing habits being influenced by how ethical or sustainable a retailer is?

Yes, today’s consumers are tuned in to where goods are made like never before. They want the best possible deal, but they also want to feel good about where the product is coming from and how it has been made. More consumers are demanding responsibly produced goods, and companies that fail to demonstrate ethical production are seeing their brands and stock prices impacted.

What should retailers keep in mind when they are trying to create a more sustainable and ethical supply chain?

It’s important for retailers to remember that suppliers and trading partners are part of the brand and that they can’t be separated. Retailers should have a vested interest in the health and success of their suppliers — sometimes squeezing the last dime out of suppliers is a short-sighted approach. Instead, retailers should find new ways to partner with suppliers to ensure their brand is healthy. For example, leading retailers are offering early payment programs to suppliers to assist in delivering access to capital. A truly collaborative approach is a win-win situation for all parties.

Are there any retailers that come to mind that are doing a good job of making their supply chains lighter?

Companies like Patagonia and Levi Strauss & Co. have well-publicized efforts to do no harm to the environment. Levi has programs that drastically reduce water amounts used in production of its clothes, and Patagonia has marketing campaigns that tell customers NOT to buy their products unless they really need them.

Patagonia also has tools that allow consumers to track the carbon footprints of their products. It’s one thing for a company to talk about sustainability, but consumers really embrace a brand when they are able to put their money where their mouth is.

What tools or technology can facilitate retailers’ efforts in producing and sourcing goods more responsibly?

Tools that deliver visibility and accountability within the production of goods are making an impact. A retailer is in a good position to enforce responsible production policies if they are able to see where goods and inventory are in the supply chain, know each party that touched the goods in the process, and track and manage the delivery of goods to minimize shipping miles and carbon footprints.

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Healthcare Reform

BY Mark Walls

Since its passage in 2010, the Affordable Care Act (ACA) has been the subject of intense political debate and a source of anxiety for many retailers. While most of the attention has focused on the law’s health benefit requirements, there is little doubt that the ACA will also influence workers’ compensation costs, which are often the second highest expense for retailers after payroll. By taking steps now to understand and manage how the ACA will likely affect costs, payroll, and claims filings, retailers can lessen any potential negative impacts.

Probably the most predictable outcome of the ACA is that the number of individuals in the United States with health insurance coverage will increase. Proponents contend that this increased access to care will result in a healthier society and ultimately help curb rising workers’ compensation costs. In reality, however, the result is more likely the opposite.

For example, as the number of individuals seeking medical treatment rises, it has the potential to put additional stress on a healthcare system that is already short on doctors. This is particularly troubling as it relates to specialists and the potential for delays in obtaining diagnostic tests and scheduling surgeries and other procedures. Longer periods of disability and complications as a result of such delays would ultimately drive workers’ compensation costs up.

At the same time, proponents of the ACA say that because more people will have access to health care, there will be a reduction in comorbid diseases and disorders among individuals. To be sure, comorbidities can complicate workers’ compensation claims and have been shown to result in higher-than-average benefit payments. However, there is no significant evidence to support the contention that an employee is healthier and less likely to file a workers’ compensation claim simply because he or she is insured. For example, data from the Centers for Disease Control and Prevention indicate that heart disease remains the leading cause of death in the United States and that the percentage of Americans with a high body mass index has steadily climbed over the last 50 years — two trends that are not confined to the uninsured population.

In addition, greater access to care is also unlikely to reduce cost shifting, as some proponents have claimed. Retailers have long been concerned that non-work-related injuries are being shifted to the workers’ compensation system. While an uninsured employee injured outside of work may be tempted to file a workers’ compensation claim in order to receive benefits, there is still the temptation to shift non-work-related injury claims to the workers’ comp market due to the higher reimbursement rates and lack of deductibles and co-payments. Not only is it clear that the ACA will not result in every American having health insurance, these financial incentives will continue under the new law.

On a more positive note, the industry’s shift to quality care and better patient outcomes as a result of the ACA do have the potential to offset rising workers’ compensation costs. Traditionally, the healthcare industry’s focus has been on volume: more patient admissions, tests and procedures translated to higher revenues. Post-reform, however, the industry has shifted its focus to improving standards of care and achieving better patient outcomes.

If this transition results in less emphasis on costly procedures, which often produce questionable results, workers’ compensation costs could be reduced. Although it remains to be seen whether the standards of care developed under the ACA for group health care would be enforced under workers’ compensation, this is a promising development for retailers.

Another area under the ACA that retailers need to remain aware of has to do with premium refunds. The ACA allows insurers to rebate premiums to employers that have better-than-expected performance with their healthcare programs. Employers can either refund such premiums back to their workers or use them to offset future premiums. The National Council on Compensation Insurance (NCCI) has indicated that if premium refunds are given to workers, this would be considered payroll under workers’ compensation premium calculations.

Retailers need to keep this in mind when deciding what to do with healthcare premium rebates that may be received.

Until the ACA has been fully implemented, the full impact of the law remains unknown. However, retailers can take steps now to lessen any potential negative consequences. These include:

  • Increasing efforts to identify medical providers that can provide the best quality care for injured workers, and taking the necessary steps to ensure the workforce has access to these providers.
  • Carefully managing the approach to healthcare premium rebates.
  • Closely monitoring any shifts in injury claims away from group health to workers’ compensation.
  • Remaining committed to loss control efforts.

Mark Walls is senior VP and workers’ compensation market research leader for Marsh USA, the world’s leading insurance broker and risk adviser.

The ACA will influence workers’ compensation costs, which are often the second highest expense for retailers after payroll.

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Transforming Real Estate Management with Big Data

BY CSA STAFF

In an era of Big Data, retailers are finding new ways to leverage that information to improve processes and consumer engagement. However, there’s one area where Big Data can have a big impact that companies in the retail space may be missing: real estate.

Mark Ledbetter, global VP retail strategy for SAP, recently spoke with Chain Store Age about the promise of Big Data for retail real estate, and how retailers can best take advantage of it.

Where does retail real estate data originate?

There are three primary sources for the data for managing retail real estate. First is the retail store or shopping center itself. This might include energy-consumption data down to the sub-meter level for managing energy use. It might also involve sensors on equipment that can improve service and reduce downtime, minimizing disruptions that affect shopping. This data can improve retailer operations, lift tenant satisfaction, and provide mall owners with opportunities in areas like buying and selling energy.

Second is shoppers. Both retailers and mall owners can use video cameras, Wi-Fi, cellular signals and other technologies to measure shopper traffic to understand consumer behavior, reduce bottlenecks and optimize staffing. A lot of this data gathering can be done anonymously, protecting shopper privacy.

Third is customer sentiment data, gleaned primarily from social media. Sentiment data lets you see in near-real time what people are saying to their friends about your store or your mall, and offers clues to how you can better engage them. Shopper and sentiment data can help retailers and retail property owners evaluate the best places to open a store, or to acquire or develop a retail facility.

What technologies do retailers need to gather and analyze real estate data?

Machine-to-machine (M2M) sensors and communication can capture facility and equipment data. Mobile technology provides insights into customer behavior and sentiment. In-memory databases allow you to pull together this enormous volume of structured and unstructured data in a single place. Advanced analytics enable you to quickly analyze that data to uncover hidden insights and even predict future trends. Cloud platforms can make the resulting insights available to the right people at the right time and at an affordable cost.

What advantages can retailers obtain from in-depth analysis of real estate data?

Retail investments have generally been based on location and demographics. But today you can add actual behavior of actual consumers, helping you make smarter decisions about where to open a store, where to acquire or develop a property, which products and services should be offered where, what kinds of rents are appropriate, and more.

Beyond real estate, all the new data you’re acquiring can help you better attract and engage consumers, long an explicit goal for retailers and increasingly one for mall owners. This is a win-win for both the retailer and mall owner, with retailers finding ways to maximize revenues and mall owners able to increase rental income and better retain tenants.

What is the financial benefit?

Previously, retail finance was always in reactive mode, waiting for the monthly close to make adjustments. Today, with real-time capture and analysis of new data streams, finance can respond dynamically to changes as they’re occurring. Even better, finance can perform what-if analyses to get ahead of the curve.

For example, as you do budgeting and planning, you can analyze store profitability and understand why a particular location is under- or over-performing compared with forecasts. Even better, you can run scenarios to proactively decide to open a store at this location or divest yourself of a retail property at that location.

For retailers and retail property owners, Big Data means you’re no longer operating in a vacuum, making decisions based on best guesses. You have the insights you need to better manage your properties, deliver a superior consumer experience and run your business more profitably.

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