Retailers Cite Supply Chain Efficiency as Key Industry Issue for 2005

Supply chain optimization seen as priority initiative for getting closer to customers, NRF/BearingPoint study reveals

New York, NY — January 21, 2005 — Retailers will be focusing on supply chain efficiency in order to stay competitive this year, according to new research unveiled this week at the National Retail Federation's annual convention in New York.

The study, "Retail Horizons: Benchmarks for 2004, Forecasts for 2005," prepared by the NRF Foundation in conjunction with consulting firm BearingPoint, revealed that the majority of retailers cite supply chain optimization as a priority initiative for getting closer to the customer.

"In today's competitive environment, retailers understand the importance of leveraging their customer information," said Scott Hardy, a managing director with BearingPoint, a business consulting and systems integration firm. "Shopping data collected from the store level can be leveraged as valuable real time data and shared throughout a retailer's supply chain network of suppliers, factories and distribution centers to meet anticipated product demand."

Other key findings of the study include:

• Almost 25 percent of retailers plan for half of their merchandise assortments to be private label;


• In the next 12 months, more than half of retailers (57 percent) plan to replace or upgrade their point-of-sale systems;


• While 38 percent of retailers will focus on domestic expansion, 17 percent will focus on international expansion;


• This year, 33 percent of retailers will focus on redesign and relocation of stores; and,


• More than one in five retailers (21 percent) list outsourcing as a priority for 2005.

"Retailers realize that in order to improve their businesses, it is important for them to reinvest in new technologies and programs," said NRF President and CEO Tracy Mullin. "Consumers are rewarding retailers who utilize resources to feature new merchandise, new technology and new ideas."

The study suggests several approaches retailers can use to provide competitive advantage and generate robust prospects for profitability:

• Create true supply chain visibility with a synchronized demand network that eases inventory pain by providing trading partners with optimal flow through of product and near-real time sharing of forecasts and demand signal;


• Link disparate systems for common connectivity to aid in retailers' streamlining of operations; and,


• Target and segregate high-value customers from low- and no-value customers, and provide the right combination of product and services to earn loyalty.

This third annual study surveyed more than 300 retailers from an assortment of department, specialty, apparel, grocery and home center stores, with as few as a single store to more than 2,000 locations. The study focused on nine functional areas, including store and field operations, supply chain, customer relationship management, merchandising, advertising and marketing, human capital, information technology and online.

The full study is available through the online NRF Bookstore.