Matching orders with back-end inventory and financial applications pays off in better performance on the web and across retail channels
By Paul Demery
At men`s apparel retailer Jos. A. Bank Clothiers Inc., the name of the game is promotions—like buy one suit, get one free—and it`s a game plan that has kept the century-old retailer and clothing designer posting strong financial numbers this year despite the poor economy.
“We have 50 to 60 promotions throughout the year because we really have to have a compelling offer to bring customers into our stores or to our web site,” says Dave Ullman, executive vice president and chief financial officer.
Until recently, however, the retailer`s web site, JosBank.com, couldn`t handle those promotions, which generate orders at a fast pace, because it could not communicate easily with inventory and accounting systems. “When we had a promotion of buy one suit and get two, we couldn`t execute that on the web,” Ullman says.
Lack of integration
Although recognized by Internet Retailer as a Top 25 retail web site in 2002 for letting customers shop for customized apparel, the site had not gone through the extensive software coding that would have been required to connect the customer-facing front end, including merchandising displays and orders that come through the web site, with crucial information in back-end inventory and financial accounting applications.
Without real-time updates of information like available inventory, cost of sales and projected profit margins of promoted products, the retailer didn`t have the data it needed to launch and carry out online promotions. It simply didn`t know whether there would be sufficient inventory to fill orders and whether the offers would hit revenue and profit margin targets, says Pete Zophy, divisional vice president, e-commerce.
“Now we`re able to accurately project online sales for each promotional event, what our margins will be, and how much inventory we have available among the promoted products,” he says. The new system allows the web site to get updated inventory data as quickly as every five minutes in the case of fast-moving sales, Zophy says. In the past, such data would be refreshed overnight, not fast enough for sale merchandise that can sell quickly.
The new JosBank.com`s ability to integrate with enterprise applications is part of an important trend among retailers to tie all of their selling channels to back-end inventory and financial applications, experts say.
Although e-commerce platforms generally do a good job of taking customer orders and providing customers with status updates on delivery, they have struggled to communicate with back-end inventory and financial accounting applications, says Nikki Baird, a managing partner at research and advisory firm Retail Systems Research LLC.
Without timely and accurate updates of inventory records, retailers can be at a loss for knowing exactly what inventory has been committed to customer orders, and how much stock is still available to fulfill additional orders. “That`s really important for online retailers, because otherwise they basically don`t really know if they have an item in stock until they have someone pick it in the warehouse,” Baird says. “It`s not like in a store when they can see if something is still on the shelf.”
Likewise, without immediate and accurate updates of financial accounting applications, retailers are in the dark about key performance metrics, such as profit margins to determine ongoing merchandising and promotional plans.
Jos. A. Bank can now routinely review all customer orders in aggregate every day to see not only the unit sales of individual product SKUs, but the profit margins realized on each item, Zophy says.
“We`ll look at these figures at the end of the day and see by each product category how many items sold and at what margins, then figure if we need to make any adjustments to our merchandising and promotions,” he adds.
Being able to quickly analyze customer orders in light of financial and inventory data can result in a significant boost to revenue, says Rick Odorico, general manager of business operations at Dal-Tile Corp., a manufacturer and retailer of ceramic floor and wall tiles.
Dal-Tile works with the Sterling Order Management application from Sterling Commerce, a unit of AT&T Inc., to show the profit margins of individual line items in customer sales receipts and invoices. Dal-Tile is currently using the Sterling Order Management system for its 250 stores, but also plans to extend it to an e-commerce site yet to be developed, Odorico says.
Viewing an online dashboard that pulls in information from back-end inventory and financial accounting applications to factor in the cost of products, Dal-Tile`s managers can see how each item listed on a sales receipt or invoice matched expected margins. “We can see if we mispriced something, then adjust the retail price for future sales,” Odorico says. “We project this will generate about $1 million per year.”
The Sterling system also is designed to support more efficient order fulfillment from throughout Dal-Tile`s chain of stores and, eventually, its future e-commerce site, Odorico adds.
By integrating its customer-facing order management system with back-end inventory management, Dal-Tile can automatically route customer orders from stores with insufficient supplies of desired products to the warehouse or store with the merchandise in stock. The system can determine, for example, that a particular store is best able to fulfill an order because inventory records show not only that the store has ample supply of the desired products but that it also doesn`t normally get much local demand for it.
The system also supports manual input from individual store managers, who may want to hold onto extra inventory to meet rising local demand for products stemming from a recent promotion. “When an order is routed from our Elk Grove, Ill., store to our store in Naperville, Ill., the Naperville store manager can either accept it or reject it,” Odorico says.
More flexible tech
Store managers can also constantly update their inventory profiles in the Sterling system, indicating, for example, that certain items are getting more or less local demand based on current promotional activity and the strength of the local economy.
Dal-Tile operates the Sterling software on a web-based Unix technology platform that supports refreshes of data in the order management system from back-end applications.
The flexibility the system offers in automatically updating inventory records while also accommodating manual input will continue to support higher levels of efficiency and customer service, Odorico says. “We`re on a journey from the Stone Age to the Space Age,” he says.
Supporting that journey from a technology standpoint is a level of web-enabled application integration that has evolved in recent years to make it easier for applications to work together, experts say.
Jos. A. Bank`s new e-commerce site, developed by the retailer`s in-house I.T. team on IBM Corp.`s WebSphere Commerce platform and iSeries web-compatible servers, uses XML, web services and other flavors of web-enabled integration tech built into IBM infrastructure to integrate with the Micros-Retail software suite from Micros Systems Inc., including the order management system, inventory management and financial accounting applications.
Not that it was easy to do. Building that integration took about a year of hard work in conjunction with technology experts at Rosetta Interactive Agency, Zophy says. “The hardest part of deploying a web site is the integration to back-end systems.”
Not your father`s platform
But, compared to what the same project would have required a few years ago, it went fast, and produced a reliable and effective system. “In the past, the technology and processes to build this kind of integration was not very efficient; it could take years to build, and it was more likely to break down,” Zophy says.
With the new ability to leverage that back-end integration in promotions on its e-commerce site, Jos. A. Bank also is able to better compete online with promotions that appeal to a wider audience—while also using the web as a testing ground for stores, says Scott Toth, divisional vice president in charge of I.T. “For example, we`re expanding our Big & Tall offerings, and now the e-commerce site provides us with the opportunity to conduct more promotions and market tests on the web as one big online store before rolling them out to our 469 physical stores,” he says.
While Jos. A. Bank used internal I.T. resources and Rosetta to build its new integrated environment on IBM and Micros-Retail platforms, other retailers resort to turnkey platforms from vendors like CoreSense Inc., Morse Data Corp., NetSuite Inc. and ShopVisible LLC.
Window treatments e-retailer Payless Décor is a good example. It expects to continue annual sales growth, despite the downturn in home sales, with the help of a more integrated order and inventory management system on its ShopVisible platform, president and CEO Seth Roseman says.
“Our growth has been slower because we`re closely tied to the housing market, but we`re still growing 5-10% year over year,” he says.
Payless Décor, which does close to $3 million in annual sales, attributes its ability to maintain growth to a new system designed to integrate customers` online orders with its back-end inventory systems on a new e-commerce platform from ShopVisible, Roseman says.
The retailer sells about 50 to 60 basic products in various styles of blinds, shades and other window treatments. Because customers can order each product in a wide variety of lengths and widths, the number of actual SKUs is massive.
In the past, it could take as long as 40 seconds for product data to load on a web page after a consumer specified what she wanted, and it was difficult to match orders with available inventory. The new platform is designed to not only speed up the product configuration process, but better match it with inventory so that shoppers are more likely to see updated and accurate product information and to have their orders shipped quickly.
“It`s better for us to tell customers up front that something is not in stock, instead of telling them two days later it`s not in stock,” Roseman says. “This way we can better manage customer expectations up front and create a better shopping experience.”
The ShopVisible platform also integrates the order management application with Payless Décor`s back-end QuickBooks financial accounting application, software from Inuit Inc. that is used by many small and midsized businesses. For larger retailers, the ShopVisible platform can integrate with more sophisticated financial accounting applications from enterprise software companies like Oracle Corp. and Lawson Software Inc.
ShopVisible`s small-business implementation packages start at $5,000, but can go up to $50,000 or more for larger companies based on the amount of custom design, systems integration and services, CEO Sean Cook says. The company also offers a percent-of-revenue model.
With such systems, integrated order management and enterprise systems aren`t just for the biggest retailers. Like Jos. A. Bank and Dal-Tile, Payless Décor is stepping up its game by better connecting customers with the inventory they want to buy.