Most systems that retailers have are dumb!

Ali Athar

If they moved to intelligent systems they could further transform their business.

Retailers have invested millions in systems, most of which are focussed on operational support in that they are function- or process-centric.

They allow you to set up products, price them, create promotions, take sales, order stock, move stock, pay for it, and account for it (often too expensively). Yes, they spew out massive amounts of data and with Business Intelligence tools you can interrogate that data to your heart’s content. But they have not made retailers much smarter.

Their main contribution has been operational productivity; you can do more with fewer people.

Dumb systems focus on process − getting things done − not on outcomes. What’s more, these systems only present you information about the past; to get better outcomes you really need to project forward.

When I look at most retailers’ performance over the last 10-15 years; systems investments have not considerably changed outcomes. I am not convinced stock turns have improved dramatically, or availability is that much higher, or sales per square foot is that much better, or margins greater. The bulk of expensive ERP implementations have not delivered better performance.

In fact, most of the profit growth we have seen in retail in the last 10-15 years has been more to do with the China effect (more and more countries opening up to provide cheaper supply) than any smarts our systems have provided.

In the absence of intelligent systems, retailers relied on “people” for better outcomes. Merchandisers, buyers, marketers, store staff and management and their spreadsheets (!).

Yet people are not perfect. Performance varies based on experience, intelligence, aptitude, training and numeracy. Retailers now employ large numbers of people in head offices supporting decision making.

But today there is now a new generation of “intelligent systems” like itim’s Profimetrics. These are goal seeking, self-adjusting and continuously adaptive systems, focussed on outcomes. They achieve better stock distribution, better sell-through, more effective promotions and much reduced markdowns.

They can automate 80% of the decisions retailers make (with minimum oversight), and the decisions are usually better.

They use a combination of statistical analysis and coded human judgement (rules derived from the most experienced people) to automatically drive processes, improving outcomes.

They improve outcomes by optimising. They can do this better than people, because they can focus on the minutia of detail, which humans tend not to be good at. In retail terms, they work at the SKU/store level. Because they are better at statistical correlation, they do not work on averages, unlike humans. They consequently make more optimum (better) decisions.

Optimisation is the effect of applied intelligence. It means not wanting just process, but wanting a better outcome.

Better outcomes are significantly higher sales and profitability……surely that is what we should be seeking.

It’s time to take advantage of the reality of applied intelligence.

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