Technology in Retail - Part I

As the Indian retail industry, estimated at USD 325 billion in 2006, negotiates a closely observed transition to a more modern and organised structure, technology has assumed a critical aspect in the strategy execution framework. The extent and depth of technology adoption has bearing on manufacturing processes, optimisation of supply chain and inventory management, ability to be in tune with customer trends, and maintaining leadership with some sort of edge. For that matter, even the gathering rush into small-town India will necessarily need technology support.

In its report “India's Retail Industry: IT Market Trends and Opportunities, 2006-2010,” Springboard Research deduces that after real estate and human resources, IT is the highest investment area for most large- and medium-sized retailers. This is pushing the case for Enterprise Resource Planning (ERP) systems. The Springboard study shows that IT revenue from the retail segment measured USD 253 million in 2006 and is expected to grow to USD 1.07 billion by 2010, with a compound annual growth rate (CAGR) of 44 per cent.

The research further points out that retail firms consider strong service and support (22 per cent of respondents) and price (17 per cent) as key factors in IT vendor selection. These were followed by strength in a particular solution area (15 per cent), knowledge of the retail business (13 per cent), and knowledge of the retail industry (12 per cent).

Also, in Springboard's research, SAP was identified as the leading primary influencer in terms of solutions investments (27 per cent of respondents), followed by Microsoft (14 per cent). Local vendors took up 19 per cent.

It may be noted that SMEs in Asia Pacific's retail sector are likely to invest up to $240 million in IT this year, as per a report by Access Markets International (AMI) Partners. Key countries expected to drive the spending are Australia, China, India, South Korea and Taiwan, with the total up 14 per cent from 2006.

In this special series, Indiaretailing talks to some of India's leading brands/retailers about their technology implementation framework. The series, anchored by Padma Pegu, is an attempt at grasping the ground covered by technology in Indian retail – and, equally importantly, the pockets that remain to be addressed yet.

Quite appropriately, the series starts with PK Bhandari, group president, Raymond Limited, which is India's largest listed men's apparel company and remains one of the most respected textile brands in the country. The brands in the USD 500 million Raymond Group's bouquet include Raymond, Manzoni, Park Avenue, ColorPlus, Parx, Be:, Zapp!, Gas, and Notting Hill. The company is planning to more than double its retail stores by 2010 – taking it to 950 from the current 450. Most of this expansion will be routed through small towns.

• What have been the three most important benefits of technology adoption in your operations?
  
  The technology adoption strategy at Raymond aims at making our enterprise more agile and creating competitive advantages in the long term. Excellence in manufacturing processes, optimisation of supply chain, ability to be in tune with customer trends, and maintaining leadership in product (fashion) design are the most important benefits of our technology adoption roadmap.
  
  
• To what extent has technology adoption helped improve productivity and lower costs?
  
  We have just started a focused journey in deploying technology. It may be difficult to immediately quantify the benefits of technology in terms of cost savings, but we are at a situation wherein most of our business is technology-dependent. Our partnerships with global leaders such as SAP and BARCO have enabled us to increase productivity manifold. Now, we are able to deploy our precious human talent more effectively and support growth in the business at investment levels that are very competitive in our industry.
  
  
• Do you think you are using technology optimally? Specifically, have your supply chain and merchandise control mechanism been benefited?
  
  We always feel that we can further optimise what has already been optimised. We are in the process of deploying “Advance Planning and Optimisation” tools in our supply chain, which will help us in achieving our goal of high OTIF (on time-in full). Due to the large number of SKUs that we produce, it becomes very difficult and complex to optimise the supply chain.
  
  
• Have your forecasting mechanism improved due to better and reliable technology integration?
  
  We use Business Intelligence (BI) tools for analysing the trends and patterns from the data that we capture in our transaction systems. When correlated with human intelligence, what you have is a very powerful toolset for business forecasting. However, specific tools to assist in demand forecasting will be implemented in the technology implementation phase commencing in the second quarter of this fiscal.

• How are you using technology to understand customers better and to retain their loyalty?
  
  We have built a huge data warehouse from the retail sales data. The BI tools provide us with analytical capability to understand consumer behaviour at a gross level. We are able to do segmentation much better and are able to design products targeted to these segments. We are also making use of CRM tools in our loyalty programmes to make sure that every customer touchpoint can provide a consistent experience to our customers.

• What role has technology played in your expansion plans?
  
  At corporate level, we use project management systems for tracking our plans. Our communication and collaborative platform helps our teams to work together from anywhere. At the plants, our manufacturing execution system coupled with ERP gives us a headstart in completing our expansion plans in time and within budgets. The same platforms also help us in scaling up the capacities or to accommodate changes in the plans. Technology also facilitates ‘standardisation' across business locations. Without tech support, we do not think we can even think of any expansion plan!