Assessing The Retailer's Payback From Application Integration

How much do your managers really know about the customer's shopping experience in your store? How likely is it that a shopper will find what she is looking for in your store today? Recent research suggests that about one out of every twelve shoppers fails to find in stock what she seeks. For the retailer, that means lost sales, which cost the retailer dearly. Such stock-out events represent 6.5% of all retail sales. Even after recouping some of the loss with sales of alternative products, retailers will still suffer net lost sales of 3.1%.

The lack of timely inventory data clearly hurts the retail bottom line. If your buyers and suppliers knew exactly where inventory was in the pipeline, they could avoid stock-outs and recapture those lost sales. If your Point of Sale (POS) and inventory systems quickly shared data with your replenishment systems, you could have avoided this stockout and the resulting loss of revenue. And, you could do it without overstocks, another situation that damages your bottom line by tying up precious capital. But this takes application integration.

Throughout the retail process, lack of true application integration exacts a costly penalty. Managers often make wrong decisions based on incomplete or, worse yet, incorrect data. Similarly, the lack of integrated synchronized data drives up the cost of adding new products and it slows down product introductions, which results in lost sales, as much as ten points in market share in a recent Wal-Mart/P&G test.

The lack of integration between POS applications and suppliers' systems adds cost and delay throughout the supply chain. This takes its toll on both your competitiveness and your bottom line. In the same way, the inability to integrate applications between retail channels results in higher costs, reduced customer service, and, ultimately, lost customers.

Achieving real-time, integrated applications is far from easy. Retail organizations are riddled with point solutions that solve a particular problem for one business unit but require slow, costly integration efforts, which, in the end, are still brittle in the face of business change. The common practice of throwing bestof- breed point solutions at each problem only increases the complexity of the systems environment and complicates the application integration challenge. Also, mergers and acquisitions have saddled retailers with incompatible, or barely compatible, systems and data sets.

Further complicating the issue is the admitted difficulty of linking application integration with retail business value. Too many retail executives regard application integration as a low-level infrastructure issue that does not directly influence the balance sheet, a misunderstanding that jeopardizes the very competitiveness of the retail business. As this paper will show, application integration does impact retail processes that affect the bottom line.