Where Retailers Should Invest Capital to Improve Sales, Profits in 2009

JDA Software: end-to-end merchandising, supply chain solutions and support services that garner quick ROI are critical in a challenging economic climate

Scottsdale, AZ — January 13, 2009 — In today's economic environment, making the right moves from a technology perspective is more important than ever. Retailers are under pressure to find new ways to protect margins and improve operating efficiency in the fight to offset falling sales. Raising the game is almost always going to involve implementing and taking advantage of the latest that technology can offer and with that in mind, JDA presents some key considerations based upon its industry-leading experience and successful track record.

"In the past, retailers could afford technological trial and error," said Wayne Usie, JDA Software's senior vice president of retail. "In these tighter times, management discussions and boardroom pressures are fueling demand for strategies that are proven and can yield short term ROI without the burden or risk of lengthy implementation timelines."

Outlined below are four critical areas where JDA Software believes retailers should invest capital now to drive tangible business benefits within three to six months.

Inventory Management — The Core of Retailer Success

Improving inventory execution remains a solid investment for retailers in any economy, JDA said. Specifically, accurate, informed allocation and replenishment decision-making can reduce carrying and transportation costs, while increasing margins and service levels; all of which are critical for retailers seeking margin protection in an uncertain economy.

While many retailers have already planned the majority of their inventories for 2009, they still have the opportunity to adjust store-specific inventory assortment and replenishment levels as needed. The distribution methods and calculations employed by retailers still vary widely, with many retailers still relying on historical sales data and intuition. In today's environment, JDA said retailers need to push for superior execution and that means fact-based inventory decisions that are responsive to the current dynamic environment.

Retailers are turning to advanced allocation and replenishment solutions that change consumer insights into the right mix of merchandise for each store and perform statistics-based demand forecasting to accurately identify high- and low-selling items, enabling retailers to adjust vendor and distribution center orders accordingly.

To support capital investment in allocation and replenishment solutions, retailers are also relying on inventory optimization support services from their solution providers, according to JDA. These services can indentify stocking policies and inventory levels by category or item in order to free up scarce labor, storage capacity and shelf space.

Price & Promotion — Critical Retailer Tools

The ability to make real-time pricing and promotions adjustments in response to rapid market changes is instrumental for retailers seeking a competitive edge, according to JDA. Retailers are increasingly relying on real-time consumer demand forecasting to conduct more effective pricing and promotions. By tapping into economic trends, demand, product lifecycles and price points, advanced pricing, promotions, and markdown solutions actually use consumer spending habits to help retailers up-sell consumers from necessities to discretionary spending decisions.

Additionally, many retailers are now working closely with manufacturers to manage inventories. These advanced solutions improve collaboration on product assortment, while also providing manufacturers expedient feedback on customer buying behavior.

Transportation Management Solutions — Drive Cost Savings, Improve Service Levels

Retailers are examining more closely the carrying costs of inventory relative to fuel, freight and other logistics expenses. As fuel and transportation costs spike, purchasing and warehousing product is a bargain, relative to more frequent shipments. Fuel costs are constantly variable, a fact that has been underscored in the latter half of 2008. Many retailers are opting to build product inventory while fuel is more affordable, anticipating upswings. Strategically carrying inventory allows greater responsiveness to fluctuating demand and can significantly reduce transportation frequency and freight expenses.

JDA said retailers that invest in next-generation transportation management solutions can optimize the flow of goods within a complex, dynamic multi-modal environment, helping project and determine the ideal in-stock and flow of inventory relative to fuel prices and service levels at any given time. Additionally, managing transportation procurement through logistics sourcing solutions and optimization services minimizes exposure to dramatic rate increases while ensuring consistent and reliable movement of freight.

Customer Service & Support — A Key Consideration

While not a stand-alone solution investment, customer service and support is vital to maximize capital investment in inventory execution, pricing and promotions and transportation management, according to JDA Software. A positive trend on the market, 40 percent of respondents to the annual 2008 RIS News IT Services Leaderboard Survey chose domain expertise as the most important factor when considering an IT services supplier.

In today's economic climate, JDA said retailers must compete for market share against peers — despite decreased availability of consumer credit and the escalation of housing and fuel costs. In 2009, retailers would be wise to invest in technological solutions to improve inventory execution, pricing and promotions and transportation management. And, while these supply chain and logistics solutions are the cornerstone to effective and competitive retail operations, JDA said that smart retailers will realize that vendor selection is also critical.