InformationWeek
Defining The Business Value Of Technology
| September 22, 1997 |
RETAIL:
Facing The Millennium
The time is now for retailers to address year 2000 issues
By
Mary Hayes
But if all the issues facing CIOs this year were arranged like a clock, the one positioned at 12 o'clock would be a different sort of time issue: the millennium bug. The country's top retailers say they
can't stress enough the urgency of the year 2000 date-field problem, which
is why many are expending considerable effort getting systems in place and converting software to resolve it.
"The larger companies are in good shape because they have the technical resources," says Joe Smialowski, CIO of Sears, Roebuck and Co. "The majority of midsize companies, meaning $100 million to $2 billion in sales, in many cases don't understand the problem."
The year 2000 issue is inescapable-large retailers say there's no way to ignore it, and that it could grind a company's operations to a halt. So they are biting the bullet and spending what they must to get it fixed. Technology-savvy retailers have wasted no time in getting year 2000 date-field projects under way.
"If a retailer has any clue, it will know that this is one of the biggest hurdles to get past," says Don Gilbert, president of the National Retail Federation, a Washington trade group. Products that aren't delivered, store vaults that won't open, es
calators and conveyor belts that don't work-these are just some of the nightmares imaginable in a year 2000 crisis. The NRF worked with IS executives from many leading retailers on a year 2000 report scheduled to be published in early October.
Included in the study is detailed information on how leading retail hardware and software vendors are upgrading their products for year 2000 compliance. This should provide retailers with purchasing guidance and put pressure on vendors to get systems in shape if they want continued business.
Morton Mease, director of planning technology and services at Montgomery Ward and Co. in Chicago, is chairman of the NRF's year 2000 committee. Mease says smart retailers are shooting for year 2000 compliance a full year prior
to Jan. 1, 2000, because some systems, such as business forecasting applications, could run into difficulties by
as early as January 1999.
"Our theory is that a lot of retailers are pushing this off as a noncritical problem," says Mease. "We pl
an to fulfill our goals by Dec. 31, 1998, to get around the bumps and bruises we'll feel going into 1999."
An Early Start
Meanwhile, CIOs in the business are trying to develop strategies that will allow IT departments to have a significant impact on their companies' market performance. One of the most noteworthy technology trends under way is the emergence of data warehousing applications, which help retailers determine customer demographics among various stores, allowing each outlet to move merchandise more quickly.
At the front of the supply cycle, a popular practice has emerged this year: giving suppliers access to inventory databas
es over the Internet, which promises to tighten the supply chain. Out on the floor, retailers are providing employees with a number of tools to speed productivity. These range from network computer cash registers to handheld wireless devices used for stocking merchandise and for inventory control.
Improvements in IT hardware, particularly Unix-based servers, are finally making data warehouses a reality. "Hardware has gotten much more powerful at the midrange level, and prices have come down in recent years," says Ken Brame, CIO at Service Merchandise in Nashville, Tenn., which built its data warehouse on Sun UltraSparc systems running Informix DMS.
Dayton Hudson Corp. in Minneapolis recently completed a 3-terabyte data warehouse for decision support, serving 1,100 stores, including its Target, Mervyn's, Dayton Hudson's, and Marshall Field chains. Dayton Hudson's warehouse, built using Oracle7 and Sun UltraSparc servers, helps the company customize stores to the point where it can determine popular clo
thing sizes and colors in given markets. "To manage that level of detail, we need a lot of capacity and great tools," says Vivian Stephenson, CIO at Dayton Hudson.
Databases On The Net
"It's in its infancy, but in 1998 it will start to explode with vast amounts of data," says Mease. As a result, Montgomery Ward will staff up in the areas of supply-chain analysis, merchandise analysis, and customer analysis, based on the data collected from the IT end.
Leading retailers are finding a convenient way for suppliers to access databases: over the Internet. Retailers provide suppliers with passwords that give them structured access to inventory databases, so they can see where their products are and how they're moving. By providing that access, Dayton Hudson saves time and money by not having to collect and rep
ort such information to suppliers.
"We spend a fair amount of time on tasks in retail that are better done by the provider," says Stephenson. "We see a potential expense reduction for us. Internet technology is tightening our relationship with providers." Sears is implementing a similar program with its suppliers, says Smialowski.
Finally, retailers are working to improve productivity and processes on the retail floor, primarily via new types of client hardware. Dayton Hudson and Service Merchandise are placing a strong focus on radio frequency-based portable data terminals in stores, offered through such manufacturers as Symbol Technologies Inc. in Holtsville, N.Y., and Telxon Corp. in Akron, Ohio.
One of the most useful applications made possible by such devices is in inventory replenishment, according to Dayton Hudson's Stephenson. A store stockperson scans the bar code identifying a product on the shelf tag, and a back-end system determines how much of the product was sold and the number of un
its that should be replenished.
Service Merchandise is examining portable data terminals in the hope that the devices can help move customers through the store faster. Today, customers write down the identification number of a given item on display and pass this form to a clerk, who then records the purchase transaction in the register, in the process sending the product ID electronically to the stockroom.
As the customer heads to the pickup area, a clerk searches for the item and sends it up; customers may end up waiting several minutes or more for the product to be located and sent to the pickup area.
Less Time In Line
Brame is also piloting a kiosk-based selection system in 10 stores in another effort to save customers time. Customers can select merchandise at the PC-based kiosks, using a touch screen with a graphical interface that includes images and model numbers of various products (typically, the customer matches the image against the store's display model). The product request is sent directly to the stockroom. Since the kiosk includes a credit-card slot and an electronic signature-capture device, the entire transaction takes place at the kiosk.
Many of the Information-Week 500 retailers are also seriously evaluating the variety of thin clients that are hitting the market as replacements for PC-based cash registers. Sears is one of the first major retailers to buy into the model, having committed to a purchase of several thousand thin clients from Boundless Technologies Inc. in Hauppauge, N.Y. Sears could potentially replace all 70,000 o
f its PC-based registers chainwide. The conversion to thin clients "will greatly simplify software distribution and version control," says CIO Smialowski.
Most retailers bought into the PC model a decade ago, but Smialowski expects other merchandisers to consider thin clients as PC-based systems complete their life cycles. "Most point-of-sale devices are just about obsolete," he says. "J.C. Penney, Wal-Mart, and Home Depot are all changing point-of-sale devices, and we're all trying to address simplification of administration."
Less administrative work for retailers' IT staffs means more time to keep infrastructures running smoothly and to develop potentially lucrative IT projects. In the end, it's not surprising that so many priorities in the retail industry focus on time: Time, after all, is money.
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sk CIOs in the retail industry about their priorities and it becomes clear that the big issue is time-reducing time to market, boosting productivity, making the shopping experience faster for customers, and getting to know customers more quickly.
