I was reading a blog by Om Malik on his discussion with Pradeep Sindhu, co-founder of Juniper Networks. They had a long discussion on the future of networks. What stood out for me was how much can retail chains learn from the way the networks are evolving.
There are quite a few parallels that we can draw from networks/clients to retail industry. For example, lets equate network providers to retail chains, the bandwidth to the inventory on offer and clients (mobile and otherwise) to the retail outlets.
In such a comparison, the following aspects come out of the entire discussion:
- Cloud computing will continue to gain momentum and use à Usage of centralized warehousing is on the rise as well.
- Network performance will remain highly variable à Inventory availability is always highly variable as retailers struggle to forecast their sales. This results in shortages and lost sales.
- It is imperative that the device needs to operate well, even if the network has variable performance à Retail outlets need to perform well inspite of the variation of demand or the forecast.
- The rise of mobility, which I like to describe as “anywhere computing,” is going to change the whole notion of information infrastructure à The concept of “fit stores” will also completely change the way retail chains operate.
- You need devices that have just enough local storage but can tap into the cloud for everything else and are graphics intensive à Retail stores will have just about enough inventory in their stores and will tap into the central warehouses for quick replenishment.
- It is time to stop thinking in terms of boxes, wires and pipes. Instead, we need to start treating the network as a living, breathing platform and build infrastructure for it à Instead of treating each retail outlet as a separate entity, we need to think of the entire chain as a living, breathing inter-connected organization.
- The bandwidth requirements globally are only going to accelerate; the traffic is going to get a lot more stochastic in nature; the traffic is going to become more dynamic à Retail sales will continue to fluctuate and become more difficult to forecast.
So, to conclude, a retail chain can benefit by,
- Concentrate their entire inventory at a centralized warehouse.
- Have enough inventories at each retail store equal to ‘X’ days average sales for each SKU. For ex, 10 days inventory if you can replenish every 3rd day.
- This way, the store can carry more number of SKU’s.
- Replenish the stores with exactly what they have sold.
- Plan your purchasing in such a way that you never hold more than the inventory ‘Y’days sales average for each SKU. For ex, never hold more than 30 days of inventory if you can replenish the stocks every week from your supplier.
What all of these actions will do is the following:
- Reduce your overall inventory that you are carrying at any point-in-time.
- Free up the cash stuck in the system as inventory and dead stock.
- Increase the turnover of your inventory per year leading to increased ROI.
- Reduce shortages of items (usually fast selling items) at the retail store level, leading to increased sales.
- Reduce dead stock in the system and hence reduce the need for discount sales.
- Increased ability to launch or try new products at an un believable speed with minimal risks of dead stock leading to more probability of finding a winner.
- Increased customer satisfaction, as they will find more options available at the store (due to more SKU’s present) than ever.
All these will finally lead to
– increased revenue
– Lower cost
– Increased profitability & profits
Is this not the goal for all organizations? I would really like to hear your thoughts on this.