A couple of years back, if you’d mentioned product lifecycle management to a retailer the response might have been some head-scratching and the suggestion that maybe it was a fancy term for stockturn or inventory control. Today, PLM is proving a favourite acronym with many IT vendors.
PLM has become one of those umbrella terms – combining aspects of collaborative supply chain activity, marketing, logistics, after sales service and much more – that can mean just about anything anyone wants it to. Core attributes, however, are likely to include better product performance monitoring to kill off the dogs sooner, and an element of collaborative data-sharing with suppliers to ensure a common language, plus improvements in internal operations so that those who develop products and those who monitor customer reaction are at least warbling from the same hymn sheet.
PLM also demands a high degree of systems integration to ensure rapid feedback on product performance. While some IT vendors in time-honoured style claim to supply PLM solutions, for most implementing such an approach will require a mixture of components from a diversity of suppliers.
There can be a need for such things as collaborative design systems, campaign management tools, financial applications, distribution, forecasting, and more.
The internal issues are often far more problematic than collaborating with suppliers or monitoring customer demand. There may be a mishmash of Excel spreadsheets, Word documents and Lotus Notes charting events; the files are likely to reside on a disparate mix of PCs, datamarts and servers spread through an organisation.
Take the simple factor of forecasting demand and the likely plethora of guesstimates that will result. In the US they talk of the ‘bullwhip’ effect, in Scandinavia it is a ‘snowball’. Whatever the label, it is the inherent tendency to over-estimate to cover your back, based on a disbelief that all will go according to plan. In retailing it is the inclination to order three cartons of a promotional line when two will be sufficient; in manufacturing it is the habit of demanding goods yesterday when really tomorrow will be fine.
US merchandise software specialist, Evant, which formally launched in the UK in March, talks of the need for ‘intelligence not data’ and ‘scientific replenishment’ as part of this balanced approach. ‘Data is not an issue,’ says the company’s cofounder Hau Lee, ‘We have the data, but we don’t always have the intelligence.’ Evant argues for ‘multi-echelon inventory management’ using complex number crunching to match consumer demand, history, logistics and supplier performance so as to manage inventory across a number of locations, thus improving sell-through and reducing markdown.
‘You need to respond to early signals to drive decision making,’ says Dr Lee, ‘Recording errors, pre-sales information and other inputs, which are so often ignored, is just as important as tracking sales.’
Dr Lee refers to this type of modelling as ‘responsive updating’ citing Spanish fashion chain Zara as one of the best examples. This company achieves a stockturn of 12 (compared with seven at Wal-Mart) by thoroughly testing designs in the planning stage and maintaining maximum flexibility in assortment throughout the product’s life. Zara takes barely 10 weeks to take new lines from design stage to shelf, managing allocation and markdown proactively to ensure maximum throughput.
In retailing PLM is also becoming associated with the new science of retail revenue management. Originating in the US, this is the art of optimising prices, promotions, space or markdown to maximise promotion.
‘Some of the optimisation systems now available are based on very clever algorithms,’ says Mikael Bisgaard-Bohr, European retail industry director for NCR Teradata, ‘but they’re often not really scalable to implement across the full product range or to apply to all stores.’ In Europe successful retailing is much more about sell through, he adds: ‘Selling as much as possible at full price and leaving as little as possible, ideally nothing, to be marked down at the end of the season. That means getting initial allocations right and understanding local markets.’ That, too, with a little amplification, is a pretty good definition of PLM.