Linking disparate systems, functions and departments may be one of the toughest challenges facing supermarket executives today.
With the increased need to share data among departments within the organization, the seamless sharing of mission-critical data is vitalFor example, frequent-shopper data needs to be accessible not only to the marketing department but to purchasing managers as well so they can spot trends and ensure the right mix of products is on the shelves to satisfy the supermarket's top shoppers.
As retailers look to supply-chain initiatives such as collaborative planning, forecasting and replenishment, system integration is taking on even greater importance as they work more closely with manufacturers to become even more efficient.
With e-commerce initiatives becoming a key part of the business strategy for many supermarkets, enterprise integration is necessary not only to thrive, but to survive in the on-line world. The on-line business has to be connected to the rest of the organization to maximize inventory management and process orders, among other functions.
While industry observers say it is only a matter of time before large supermarkets embrace an enterprise resource planning system, most of the work currently being done in the area of enterprise integration has involved a "best-of-breed" approach. Using this model, retailers are choosing the software that meets their needs in various categories -- financial, marketing, point-of-sale and supply chain -- and flowing the data among these systems.
"Integration faces an uphill battle in the retail world, but it is certainly a noble cause everyone is striving toward," said Mohsen Moazami, vice president of electronic commerce for Kurt Salmon Associates, Los Angeles.
"For enterprise integration to be effective involves not only new technologies but new ways of thinking about the organization. Today, everyone has a category-management system, a warehouse-management system, and all of these other systems to fit their specific business needs. Now is the time to get that data out and make it easily accessible to everyone who needs it."
Retailers interviewed by SN agree that enterprise integration is the ultimate goal, and many are taking smaller steps rather than installing a large-scale solution to bring synergy to organizational data.
"We're really looking for big things in integration next year," said Thor Olsen, director of MIS for Magruder Inc., a chain based in Rockville, Md. He said that Magruder is taking a best-of-breed approach to enterprise integration. "Whenever we take on a new software package, it has to be compatible with what we already have."
Operating systems built on open architecture have made it a lot easier to swap data among applications, Olsen noted.
"The new operating systems developed over the past several years have a lot more flexibility," he noted. "For example, we're working on a project to do all price-book maintenance through the Internet. Open systems allow you to do that," he noted.
While integrating the front end is important, the supply chain is also rife with opportunities to benefit from enterprise integration.
"We're looking to integrate our direct-store-delivery system with the rest of the organization. In a perfect world, we want everything to be on the Internet -- when an item arrives at the store, when the store sells an item. That would be the ideal way to track item movement. One of our projects next year will probably be a virtual inventory in the store, and it will be integrated with all our other systems. The goal is to know at any point in time where your items are -- in the store, in the warehouse, en route to the store."
While the industry has made great progress in trimming inventory levels, Olsen said, integrated systems will provide even greater benefits. He envisions a system that will check in a direct-store-delivery with a handheld device and route that data to headquarters, where invoices are processed and projections for future inventory needs are compiled.
"Fifteen or twenty years ago, we had a lot of excess stock. That is a thing of the past. An enterprise solution can provide the inventory data that everyone in the organization needs to plan for the future, and we can do it on the Internet."
As on-line grocery sales grow, it will be much more important for the systems that track on-line sales to be integrated into the overall organization to provide for more accurate forecasting and replenishment.
One retailer, who asked not to be named, said selling on-line is going to force his company and its competitors to seek greater levels of integration throughout the organization to keep track of items sold in the physical stores as well as on the Internet.
"I do think enterprise integration it is where we need to be, but we're not there yet," the retailer said. "But I think on-line selling will give the industry the kick it needs. People buying on-line don't want to hear that you have run out of inventory on the product they want. But the only way we are going to accurately forecast inventory needs is to include the entire organization, not just what is sold in the stores. If we want to be serious about the Internet, we can't just run it as a separate business. It has to become an integral part of our company."
Manufacturers will also push retailers toward integration, according to an industry source. "The manufacturers are getting point-of-sale data that is six months old. This doesn't help them to know what to expect in terms of ordering trends. If there were a greater level of integration at the supermarket, this process could be accelerated."