Merchandising Systems: Increasing Your Control over the Supply Chain

chillibreeze writer — Pavneet Singh

In today’s challenging retail environment, the dependability and accuracy of core merchandising systems in the supply chain is critical. Challenging sales targets and intense competition for customers, combined with aggressive profit targets, increases the need for reliable, integrated data across all business functions and channels in order to balance customer demand with inventory levels.

Merchandising Management Systems (MMS) act as an efficient, flexible and scalable foundation capable of executing a broad range of core merchandising activities, including inventory replenishment, purchasing and vendor management.

Specifically designed to manage complex merchandising activities in a global environment and across multiple sales channels, the Merchandising System enables retailers to perform crucial day-to-day operations more efficiently, allowing for greater focus on key decisions that will help drive profit targets and lower the merchandising costs.

Such a system can be home-grown or make use of a third-party application (such as Oracle MMS, Retek MMS) bought off the shelf, and can effectively manage the kinks in the supply chain. The real time data obtained as a result of implementation to MMS not only helps in on the spot decision making, but also serves as a key ingredient for future forecasting.

The Tradition….

Traditionally, the raw materials purchasing, manufacturing, and finished products retailing divisions of the supply chain operated independently. The objectives of these organizational divisions have always been different and therefore, in conflict with each other. While one of these focused on maximizing profits, the others emphasized on high customer service.

Many manufacturing operations were designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. Purchasing contracts were often negotiated with very little information beyond historical buying patterns.

The Result….

Not a single efficient and integrated solution for the Supply Chain.

Clearly, these kinks in the supply chain demanded a mechanism through which these different functions can be integrated together. It created a necessity for the development of advanced Merchandising Systems capable of integrating individual supply chain modules from dirt to doorstep.

A Merchandising System streamlines business systems and unifies business practices across the organization’s supply chain for increased profitability and improved customer service.

Some noteworthy benefits include:

Increased Customer Satisfaction - Inventory tracking throughout the supply chain enables quicker inventory response and ensures a balance between inventory cost efficiencies and customer service levels.

Increased Sales - Integrated merchandising functions enable less workflow overlap so you can concentrate on increasing sales rather than fighting with systems.

Reduced Markdowns - Improved inventory tracking combined with robust ordering, transfer, replenishment and integrated allocation functionality provides greater control over products and inventories, resulting in fewer markdowns.

Increased Gross Margins - Visibility to strategic purchasing and efficient inventory movement, with tight integration of day-to-day activities, provides greater gross margin efficiencies.

Improved Data Accuracy - Consistent business information across the enterprise reduces error potential and data redundancy.

Increased End User Productivity - Intuitive, easy-to-use end user interface enhances productivity and provides a quick learning curve that result in decreased training time and expenses.

A successful implementation of such technology was demonstrated by Procter & Gamble, which integrated their home-grown Merchandising System with their suppliers and retailers. When the inventory level reaches a certain low number, the retail commodities are ordered automatically by the advanced system. Therefore, the automated replenishment of inventory without any human intervention, saves not only time and resources, but also helps in avoiding a ‘Back Order’ situation for the retailers.

Merchandise Management, through such technology, brings in humongous benefits and potential for growth in the supply chain. The integrated power house sets the guidelines and processes for day-to-day buying and selling activities including Purchasing, Contracts Management, Costing, Accounting, Inventory Replenishment, Inventory Movement and Perpetual Inventory Tracking.

The MMS system just sets the groundwork for all merchandising activities, from establishing supply chain structure to managing thousands of merchandise items and category levels for greater control and accuracy.

The Future….

The integration of collaborative MMS software and the best practices of customers and partners will help retailers manage and fulfill consumer demand. Every component in the supply chain is a strategic link and has to be in-sync with all the partner members in the supply chain.

The success factor of supply chain management will progressively depend on a single element: Quantitative & Qualitative integration with more advanced enterprise Merchandising Systems.

Chillibreeze's disclaimer: The views and opinions expressed in this article are those of the author(s) and do not reflect the views of Chillibreeze as a company. Chillibreeze has a strict anti-plagiarism policy. Please contact us to report any copyright issues related to this article.

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—About our writer:

Pavneet says, "I am an IT & Management consultant residing in California, US. Born and raised in New Delhi, India. I believe that who we are is best described by what we do with what we have. My hobbies include singing, playing music on harmonium and cooking. I am a food critic, restaurant hunter and belong to the domain of food lovers who live to eat in contrast to ones who eat to live."

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