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CIOs Still Spending


As CIOs become much more prudent when choosing which IT projects to pursue, they have made short implementations and fast returns on their investments prerequisites. As a result, supermarket chains are focusing on enterprise systems that streamline stock levels—one area that will help chains squeeze out returns over shorter time frames.

This point was highlighted in the first global retail CIO survey, jointly sponsored by Atlanta-based Aldata and IBM, Armonk, N.Y. The study was based on responses from 57 senior-level retail executives in North America, Europe, the Middle East and Africa, all of whom were interviewed during fourth-quarter 2008.

Fifty-six percent of retailers were supermarkets or specialty chains that sell grocery merchandise. The total number of stores for all retailers that participated in the study was more than 40,000.

Despite difficult economic conditions, 51% of retailers reported that they expect their IT budgets to remain the same in 2009, while 26% believe their IT budgets will actually increase, due to projects already under way, the study said.

Regardless of budget size, all retailers surveyed were being mindful to pursue projects that will provide the strongest and fastest returns on their investment. At the top of many respondents’ lists are automatic-replenishment applications, the systems that electronically prepare merchandise orders based on store-level product movement.

Negotiating Power

While CIOs are still willing to spend IT budgets, many are doing far more balancing of available dollars, and they are less likely to consider investing in areas that will not deliver short-term returns on investment, according to the first annual global retail CIO survey, which was jointly sponsored by Atlanta-based Aldata and IBM, Armonk, N.Y.

Aware of retailers’ curbed spending, some technology solution providers are working with retailers and keeping the lines of communication open, which is leading to more pricing negotiations. No company should enter negotiations lightly, however.

Retailers should come to the table with end-user requirements and business goals top-of-mind. Before agreeing on any purchases, both parties should document exactly what each expects the technology and the solution provider to deliver.

This culture shift is creating more opportunities for Big Y Foods, Springfield, Mass.

“Many of the hardware, software, telecommunications and service providers seem eager for business, thus they are willing to be more flexible on licensing and pricing,” said Michael A. Tami, VP information resources and technologies, Big Y. “We are using this to our advantage to reduce existing IT operating expenses and even lock in new capital projects.”

Globally, 87% of retailers reported they either have these automated systems in place or plan to add the solution in the next three years. Thirty percent of these retailers considered the replenishment solution as the most important stock optimization and management application.

Retailers in the EMEA are taking the lead on these projects, however, as 97% of companies already made an investment in automated replenishment. Half of these participants were either upgrading their existing system or planning to deploy a new solution.

“There is little appetite to rip and replace entire systems, but there is a real focus on putting in solutions in specific areas, such as automatic replenishment, where the gains can be felt in months, rather than years,” said Allan Davies, CMO, Aldata.

To ensure automatic replenishment will be successful, retailers need to make sure their logistics and distribution systems are up-to-date. According to the study, 84% of U.S. respondents already use real-time warehouse management systems to guide facility associates through warehouse business processes, including receiving, put-away, picking, shipping and inventory cycle counts. Their EMEA counterparts were further behind in their commitment to the technology, with only 29% of companies planning to upgrade or implement a new system.

At the heart of any automated-replenishment program is accurate item-movement data. Enterprise Master Data Management solutions are designed to manage a retailer’s non-transactional data, including merchandise, assets, customers and store locations.

While 36% of participants ranked MDM as one of the most critical data-architecture applications, a mere 28% of retailers are using the technology. On a positive note, 48% of chains are either planning to upgrade their existing system or will implement MDM within the next three years.—RTQ

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