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People often ask what makes a software company like Exact Abacus ‘tick’. What drives us to innovate, take risks and commit significant amounts of investment into an intangible product?

Our business has been a part of the direct commerce landscape since the mid-1980s and along with our much-respected competitors, we should be pretty proud of what we have helped the industry achieve.

We are not perfect (no company is) and ‘techies’ can often be perceived as ‘dry’ and lacking experience at the coal face of multi-channel retailing. Naturally I would argue the opposite – firstly we operate a fulfilment warehouse that ships over 1000 parcels a day and recognise that back office software is a key driver of cost-effective growth. We know every nook and cranny of a business process and I should add that we have a perfectly good sense of humour!

It is therefore incumbent on companies like ours to work harder in helping people to understand what motivates us. This in turn may enable online retailers to fully realise the potential benefits of software and IT.

For a start, we believe in online and multi-channel retail. It is a genuinely exciting place to be and is perpetually and aggressively developing. Indeed this is the only marketplace in which we operate, committing our entire staff (80 people) and research & development spend (over £1m last year) into developing products and services that people demand.

We have never been afraid to challenge convention and try to lead from the front in looking to predict where the marketplace will be in 5, 10, 15 years time. Where will content be delivered? How will next generation delivery networks operate?

Thankfully, this process is not all guesswork. Adoption of technology and new ideas within the multi-channel marketplace tends to run at different rates. To assist, it is insightful to categorise online retailers:

The Superstars – retailers such as Amazon and eBay are renowned for high levels of customer satisfaction. They started off with no legacy baggage, but were also not averse to taking risks (not all successful) and spent millions developing unique facets of their proposition to gain a competitive edge. Only now, 10 years on, is Amazon turning a profit, but its impact on overall customer expectation has been phenomenal.

The Rest – this accounts for a vast majority of retailers, who either have significant legacy issues to overcome or do not have the cultural or financial means to innovate at the pace of the Superstars .

It could be argued that retailers such as Amazon and Play would be better classed as IT companies, and this is the fundamental difference. The Rest are good at what they do – sourcing and marketing top quality products, but they do not always have the technological focus to compete head on. Whilst The Superstars sold mainstream products such as CDs and Books, The Rest could build profitable niches on the periphery. Unfortunately this space is being invaded as ranges expand and, once more, technology is where the game is won or lost.

Software vendors like Exact Abacus exist to help The Rest. A majority of the retailers will never be the scale of Amazon. Therefore to survive and prosper, they must work smarter, adopting process disciplines and being fleet-of-foot, meeting ever increasing customer expectations.

Upon assessing the strengths of retailers with high customer satisfaction rankings, it is clear that they have many things in common:
1. Truly integrated IT systems, making no distinction between ‘back’ and ‘front’ office.
2. Accurate demand and stock forecasters.
3. High levels of process automation, which is key to the ‘virtual business’ model.
4. Exercise high levels of control over the supply chain.
5. Service demand with least-cost supply, i.e. do not overbuy, whilst minimising back orders.
6. Good price, product and stock availability.

Taking the benchmarking process to retailers is always enlightening. We have developed an assessment method dubbed the ’24 Hour Challenge’, which helps us to understand how prepared the retailer is to meet modern customer expectations i.e. the customer orders and receives their goods within 24 hours, every time. It is certainly a huge challenge and involves an honest line of questioning:

– What percentage of orders are dispatched in full within 24 hours of receipt?
– What is the cost of overbuying and back orders?
– What percentage of routine tasks are automated?
– Is the warehouse optimally mapped to handle demand?

The reality is that most cannot accurately answer any of the above, which highlights a fundamental issue that impacts their competitiveness. Imagine the multi channel process from start-to-finish; illustrated as a continuum:

– Analytics – looking at past sales trends, promotion performance, product availability and competitors.
– Planning – developing a cohesive marketing strategy and defining core metrics, from which we can forecast demand.
– Channel Development – creative process, developing the proposition in stores and websites.
– Forecasting – combining the creative and empirical data, plotting expected future demand for stock and resources.
– Stock Management – ensuring that the business is always carrying just enough stock to meet demand and resources are ready and able.
– Order Fulfilment – delivering your customer promises and, importantly, perpetually adjusting your forecast strategy in line with actual demand.

Explained in this way, everything sounds logical and common sense. In practice, chaos often reigns!

The processes are disconnected; people don’t share information and often make decisions based on individual interpretations of spreadsheets. In most companies we see this ‘islands of information’ problem, and have developed a method and application that enforces a discipline and culture of excellence. In a best practice environment each department is intrinsically ‘connected’ by a system, where information, decisions and events are controlled and communicated across the business. Whilst removing the spreadsheet crutch may hurt in the short-term, the longer-term benefits of a truly ‘connected enterprise’ will be realised.

Benchmarking and process improvement relies on honesty – can you compete cost effectively, now and in the future? The reality is that technology forms a major part of the answer. The connected retailer can compete against the leviathans if they harness the power of IT.

Going back to the opening question, it is this that motivates us – the classic David vs Goliath battle that we and our customers will enjoy fighting and winning.

by leet on 22/10/2014

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