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Scaling Retail Operations - Linking systems and Changing business landscape

Retail Operations have always had challenges with scaling. Most of the challenges are related to typical operation processes and some of them are related to personnel and training.

Operational process challenges include designing process for operational efficiencies, identifying bottle necks, typical logistical challenges, ability to matchup supply to demand - both increasing and decreasing supply to match demand. With the advent of science in the last 30-40 years, most of the operational challenges have been solved.

Personnel and training is another challenge - trying to continuously up-skill people on new technologies and processes. This is a constant challenge. However, with the advent of universities that tie up with industry, this challenge is also partially solved. Vocational training helps industry with more trained candidates for the industry.

There are organizations at various levels of maturity that still face these challenges However, Retail operations industry as a whole has moved ahead. 





IT Systems as enablers

IT systems started out as enablers for handling operational challenges better.  Over the years, they have grown in complexity and maturity and helped automate a lot of processes. This also helped organizations adapt to changes in business environment.

With IT systems maturing and the industry-wide process getting standardized, there came a slew of IT products. This helped the industry further since more organizations had the chance to use best practices in operational processes. More organizations benefited from this and overall industry had adopted IT systems and was able to convert them into tangible operational and business gains

Changing Business landscape

With the advent of internet, the industry started moving at a different pace. There were more disruptions to established business models. With a liberal global commodities market and decent manufacturing centres in south east asia and china, the whole demand and supply situation changed. For more context, refer to the asia, abundance and automation context from Dan Pink. (http://www.danpink.com/books/whole-new-mind/)

With these changes in business models and landscape, the operational processes also needed change. However, a lot of them were wedded to the It systems and products that were installed and upgraded with a promise of specific operational and business goals. With no changes in forecast that could put a better cost disadvantage for existing IT systems, Retail operations continued with the existing systems.

The rest is history. A lot of retail operations lost the ability to scale when in really mattered since their IT systems were not in shape and ready to take the new challenge.

Specific challenges

Linked systems

With the organizational structure for operational efficiency, IT systems did not talk to each other real time. They were mostly independent departments each having their own IT systems. That lead to a lot of delay in data transfer and this was not efficient information exchange. 

With the manufacturing systems becoming more lean, IT systems were left behind. They struggled since they did not have the data and insight into how other up stream and down stream processes worked. This lead to challenges in scaling operations for retail companies when they really needed to.

Design for local vs global optimization

The other downside of  IT systems was that they were designed to address a specific problem and not the overall system. Even ERP systems were not implemented with much foresight into viewing the organization as a whole. 

They were used to integrate disparate IT systems but failed to drive global optimizations. They were still glued to solving independent problems with more data. 

Conclusion

With retail operations and IT systems becoming mature, it is time to look at designing a single organization structure. 

IT systems are no longer just enablers, they are an important part of the organization that helps bind the processes with the business model. 


With proper design, IT systems can be used as a catalyst and could help the industry forge ahead with new business models rather than just reacting to disruptors.
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