Encouraging long tail IT

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Despite whatever the latest figures from the Office of National Statistics – robustly “disputed” by the British Retail Consortium – would have us believe, sales in the high street are rather less than buoyant. The ONS’s 3.8 per cent year-on-year increase in July was really, argues the BRC, a 0.9 per cent decline. Footfall figures have been declining steadily for much of the year and many retailers will be contemplating Christmas with rather more trepidation than usual.

Will consumers throw caution to the wind and rack up mega credit card debts as they splurge on seasonal festivities – or will those rising food and energy bills finally dampen the Christmas extravagances? For retailers, accurately estimating demand and avoiding massive over-stocks will be vital – as will providing plenty of variety and differentiation to tempt shoppers.

It is a time of year when products from small, seasonal suppliers dominate the goods inward bays and when – inevitably – paper and mistakes proliferate since few of these occasional trading partners are likely to use the sort of dedicated electronic trading tools so familiar to large CPG players. Persuading the long tail of minnows to “go electronic” has been on many retail wish lists for the past couple of years. “Reducing costs means hitting the long tail,” says Tom Varghese, senior global product manager and SMB specialist at GXS. “Many are seasonal or short-term suppliers and they don’t want to invest in dedicated software.”

Web form technology and EDI over the internet have made it far simpler for small suppliers to exchange orders, invoices and advanced shipping notices (ASN) with their customers but, according to Varghese, the reluctance to use such systems is perhaps more on the side of the large retailers buying from these SMBs than with the small businesses themselves. “There is a perception among large IT departments that SMBs are not worth troubling with – that the effort to set up electronic trading is not worthwhile; also that SMBs will have little if any technical understanding or capability – yet all of them will be using the internet and PCs.”

Sterling Commerce, which has also been encouraging its user base to explore the “long tail”, worked with AMR Research earlier this year on a project investigating “long tail” dynamics in the inbound supply chain. The study covered a range of manufacturing and retail businesses in the US, UK, Germany and France and found that 44 per cent of players – mainly in CPG and retail – did not have a defined core group of suppliers. Some 18 per cent of those questioned confessed to a supply base that was 100 per cent “made up of small suppliers” while 26 per cent said their supply chain volume purchasing was “evenly distributed” among many suppliers: clearly establishing conventional EDI and regular electronic trading routines with these non-core partners could be something of a problem.

“Supply chain visibility is essential today,” says Josh Hardy, Sterling’s global product line manager for its Sterling Collaboration Network, “and that’s difficult if you have no form of electronic trade with such a high proportion of your supplier base.”

On-demand solutions and web portals, argues Hardy, make it easy not just to exchange data but to expand functions like transport management and global tracking more usually associated with large players. What seems surprising about all these initiatives and emphasis on poor collaboration with the long tail is why, in 2008, it Persuading the long tail of minnows to “go electronic” has been on many retail wish lists for a couple of years.all seems so difficult? With around five per cent of UK shopping now online, according to Verdict, a great many of us are used to completing web forms, tracking our purchases electronically and receiving the consumer’s equivalent of an ASN with those emails from the likes of Amazon telling us our order has been dispatched. If retailers can provide this level of supply chain visibility for their customers, why is it so difficult to use similar tools with their small suppliers?

Put such a question to the IT vendors promoting long tail tools and they tend to agree: modern technology makes it all very easy, what is lacking is the willingness of IT departments to take such projects on board. As Tom Varghese noted, the AMR study also found that IT departments liked to focus on larger core-related projects and ERP leaving long-tail collaboration to business departments which often lacked technical expertise.

With a challenging Christmas ahead, a lack of supply chain visibility – to know whether the goods are in transit or could still be cancelled – will certainly add to retail woes.

Penelope Ody is a regular columnist for SCS and is a retail market specialist.

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