Spring 2010

And if it is, should your retail web site say so? Can it? What if your supplier is delivering direct? Marcia MacLeod picks her way through an information minefield

Home shoppers expect goods shown on the web to be available – now, not tomorrow or next week or next month. After all, if they go into a high street store, they can buy whatever they see; they aren't shown pictures of items not in stock with a promise of availability in future.

But for retailers, knowing exactly what is in stock, or not, and making that information available to the online consumer, presents significant challenges.

To begin with, the e-retailer has to decide what information it is prepared to provide to the consumer. Most are happy to say an item is in stock or not, but few are willing to indicate numbers of items left.

 

'There is a resistance to showing numbers of items in stock,' says Harry Manley, managing director at Omnica, 'because retailers don't want their competitors to see how much stock they hold.'

Some retailers are specific, though. 'If an item is not being re-ordered, the retailer may show the number of units left in an effort to get rid of them,' points out Nigel Casperd, technical director at MMP.

'Some companies think it helps the purchase if they tell consumers there are only two or three items left,' adds Tony Bryant, head of business development at K3. 'Consumers feel they had better buy now, before the item is sold out.'

But he adds: 'We have a total mixed bag of requests from our retailer customers. Some prefer to give stock numbers on in-store kiosks, but not on the general web site; some have a traffic light system – green if available, red if not; most indicate when an out-of stock item will be available.'

Not every retailer is willing to do that, though, as Russell Dorset, sales and marketing director at Maginus, explains. 'Some retailers don't want to show consumers they're out of stock, for fear the customer will go elsewhere. Instead, they prefer to say when something can be delivered.'

Martin Stitt, senior IT business analyst at fulfilment house Spark Response, agrees. 'About a third of our customers will tell consumers when something will be available; the rest just say it's not in stock.'

And according to Glyn Carvill, managing director at Priam, there are still retailers out there that don't put any stock availability information on the web at all. 'Fair retailers want to provide up-to-date stock information, especially when they hold large amounts of stock. But there are some who just take the orders and deal with the consequences of non-availability afterwards.

'Lead time plays a part, too. If there is a long lead time for an item, it is important for the retailer to make sure it doesn't take an order it can't fulfil. If stock can be replenished in a few days, it doesn't matter so much.'

How real is real-time?

For those who do want to provide stock availability information, the next question is how accurate can that information be? How real-time is real-time?

Again, there appears to be a huge variation in what retailers can and want to do. 'A lot of retailers offer *near' real-time information,' says Wayne Holgate, commercial director at Axida. 'There is more to building a truly real-time stock system than meets the eye.'

Rob Smith, vice-president of marketing EMEA at Kewill, agrees. 'Most of our customers offer *near' real-time information, updated hourly. We do provide true real-time updates for some retailers, but it is not easy to achieve. Some companies start by offering real-time updates for certain stock-keeping units or product types and, if that works okay, then expand the system.

'But the other problem with real-time stock visibility is that consumers are more interested in finding out when they'll get their order than they are in knowing it's in stock. For that, the web front has to be integrated to the carrier, too.'

'Most of our customers update every two hours,' says John van Heuman, managing director of fulfilment house docdata. 'Most retailers keep enough stock so they don't need to give real-time information, although it is not hard to do.'

Software companies agree, claiming that provision of real-time information is not a technical issue. 'We can update stock levels in real time,' insists Russell Dorset of Maginus, 'but what happens if the back office system goes down? The web front relies on the back office, and it would literally stop if there was no way to feed it.

'So we duplicate the back office system in near-real time to provide a layer of resilience. Most of our retailer customers update ever 15 minutes or every two hours – although some only do it once a day.'

The key, says Steve Smith, senior vice-president EMEA at Manhattan Associates, is a good order management system. 'Order management systems match demand with fulfilment potential based on inventory location and availability. So we could say a consumer wants ten of one SKU – but those ten items are in different physical locations – the retailer's DC, the fulfilment house, a store, a supplier.

'Retailers are moving more and more towards one stock holding, not silos allocated to different channels, but we can still provide visibility information from that stockholding in seconds.'

Sterling Commerce also has an order management system that makes it easier to provide real-time information. But David Hogg, retail industry executive for Europe, claims that most retailers still only update the web on a daily basis.

'It is difficult to sort out all the systems involved to provide a real-time update. Few retailers outside the top ten can provide a proper cross-channel inventory update.'

He explains: 'Often the call centre technology captures orders differently from the way the web does. Too often the system to manage different channels is rudimentary. There is a recognition of the need to have an overall customer order management system on a cross-channel basis, but for most retailers, that is still a work in progress.'

One way round the problem of providing up-to-date information is for the retailer to hold buffer stocks. 'Everything to do with the web should be in real time,' says Brant. 'Buffer stocks don't have to be big – sometimes just three or four items – but it does ensure that all orders can usually be met. So if there are, say, five items left and six people place orders, the buffer stocks kick in and the sixth order can still be fulfilled.'

But, says Smith, as more and more retailers are trying to reduce working capital and therefore inventory, they are also reducing or eliminating buffer stocks – which brings us back to square one.

There are other things retailers can do to improve stock updates – and, indeed, stock visibility – for themselves. Having one end-to-end system from one supplier helps, as the more systems are involved, the more integration is required, and the more complexity and cost are added to the equation.

Putting a time limit on consumer check-out improves availability. 'To be accurate, the retailer's web site should reserve the item when the consumer puts it in the basket,' suggests Spark's Martin Stitt. Many don't, though, so the item can be sold to someone else before the consumer checks out. By giving the consumer a maximum time to complete their purchase, retailers avoid customer disappointment at the check-out.

Whatever measures are put in place to improve stock visibility are, however, overshadowed by the growing move towards drop shipping. If it's difficult to obtain real-time, or near real-time visibility when the retailer holds and ships stock, think how much harder it becomes when the supplier ships direct.

'It is possible to obtain access to supplier information – and their supplier's information,' says Priam's Carvill. 'So long as the retailer has a good relationship with their supplier and gives them enough business, it's in everyone's interest to make it work.'

'Integration isn't as complicated as one might think,' Smith adds, 'but you do need a full view of all inventory.'

And as we have seen, that's where the problem lies. 'The ugly truth is that no retailer has an accurate, real-time view of its supplier's stock availability,' says Hogg. 'The best they can achieve is 24-hour visibility – but most likely with errors, because some manual steps will almost certainly be involved. Retailers recognise that drop shipping is desirable in terms of savings for them, but it leads to customer service issues.'

The problem is exacerbated by the range of supplier systems, some of which are old and inefficient, and some of which are very basic, to say the least. 'A lot of suppliers are small companies, which are not always geared up to provide the necessary level of information and tracking of orders,' Wayne Holgate of Axida points out.

'There is an opportunity to put in common systems for use by retailer and supplier, but it's not happening. Retailers don't realise how big a problem this can be.'

Suppliers are not used to the individual order picking required for home delivery, either. 'Most suppliers cannot deal with shipments to multiple addresses,' says Casperd of MNP. 'Each order has to be sent separately, rather than in one file.'

Most suppliers involved with drop shipping allocate a daily stock level to their retail customers. Once that's gone, it's gone – until tomorrow. But Russell Dorset suggests that the use of a stock portal – such as Tradeplace, Freeway or Kewill ISF – can help, as retailers can then interrogate the supplier's stock system.

Once the right integration is in place, two-way communication is easy to achieve. Retailers can send order data to suppliers, who in turn can confirm orders and provide delivery information. But, says Omnica's Manley, most drop ship operations rely on email for anything other than sending the order to the supplier. 'Once integration is complete, any sort of information can flow back and forth – but there isn't always a value in making that happen,' he says.

Even if there were, there is one more potential snag to overcome: peak seasons. Unless the links between retailer and supplier are very robust, they can't always take the strain. 'In seasonal peaks, systems simply don't hold up,' Hogg emphasises. 'They fall down and it becomes obvious how compromised some of the technology is.'

But then, the same can be true of the entire multi-channel operation. However good the web store front, the warehouse management system, and the pick and pack processes, the retailer still needs instant and total visibility of its own stockholding, not to mention his supplier's, in order to provide any sort of meaningful data to the consumer. As consumers know only too well, for many companies, this is still an unachievable pipe dream.