Digital Transformation and what it means for retailers in the “new normal”

Transcends – Connecting the Internet of Things with People (Web, Cloud, Big Data, Analytics, Mobility) Enabling Smarter Sensors. Smarter Applications. Simpler Solutions.

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By Markus

It’s early spring in New England, and people here always welcome the change from winter to spring. In fact, one of the most used phrases I hear these days is “the world is changing.” This spring, however, it does not refer to the weather, but rather to the rapid change in our lifestyle that we had not envisioned even a few weeks ago. While people adapt as quickly as possible their day-to-day habits, it often is not that easy for businesses to adjust to such new situations. Sure, a mom and pop store can relatively quickly switch from having a dozen consumers walk in their shop to taking orders over the phone, taking their credit card info and placing their order in a bag outside the store for pickup when the consumer arrives in the parking lot. For any sizable business, switching to a new delivery model is much more involved. Over the past few years many companies have been working on multi-channel strategies. Those retailers who implemented theirs are now in a fantastic position to utilize it to the fullest. Those who did not are struggling. This is a bit surprising, since there are proven steps that can be done to establish a minimum level of automation and inventory management that allows adding an online channel to a retail business.

Let’s take a look at an example: a retailer who started a business just a few years ago, renting out high-end clothing. As a startup you need to carefully balance between investments that are necessary and setting yourself up for growth that could come suddenly. This retailer put about 200,000 pieces of inventory into their warehouse initially, all labeled with individual RFID tags to allow for quick and easy inventory recording. Every shipment that leaves and comes back in a box can be recorded semi-automatically without opening the box, but accurately tracking each box and identifying every item inside the box. Workers are used to quickly scanning the box within seconds, before clothes are dry-cleaned and then returned into inventory. Overall, it is a semi-automatic process that can scale quickly by adding a few more lines of processing, even allowing for social distancing. It also has the potential to fully automate the shipping and receiving process if so desired. The advantage of individual tagging each item allows for full insight into the inventory level at all times. This is especially advantageous now with an unreliable supply chain and fluctuating inventory levels.

Having such detailed insight into the inventory is the basis of selling via multiple channels, including an online business. Once you have reliable, up-to-date data on your inventory, setting up your online shop is much easier, providing your online shoppers with accurate availability of your consumer goods. What this retailer learned already on day one is that their semi-automatic process helped them identifying human errors in handling their goods. As such they were able to run their business with higher quality and customer satisfaction than they had anticipated. A nice side-effect, in addition to allowing them to quickly add capacities when needed. Another lesson learned. Moving towards full automation is a next step, along with additional remote operations and monitoring capabilities, making this retailer even more resilient to disruptions.

RFID and other sensor technologies have made significant progress over the past years in many ways. Increased accuracies, lower prices, and being able to better tag items that were not possible just a few years ago allow now additional applications for retailers and in the supply chain. Further, software applications that aggregate such sensor data are so scalable and easily integrated to existing inventory systems that adding sensor technologies even after the fact, after your warehouse was established, is much easier than many retailers envision.

Companies that have undergone a digital transformation process and make use of industry 4.0 concepts already are typically much better prepared to meet sudden challenges like we see today. From visibility into their supply chain and inventory, to being able to offer multiple sales channels to their customers, digitizing their business is often a vital foundation to not only managing the business effectively, but also to responding and adapting to sudden changes and demands. Retailers who offer their consumers safe ways of receiving goods according to social distancing best practices are open for business. Businesses that have reliable insight into their inventory and supply chain are reliable partners to their customers.

While the COVID-19 challenge arrived at our doorsteps rather suddenly, the requirements it brought with it could last. Shareholders will be watching a company’s ability to deal with change more closely as well as its level of preparedness to operate under difficult circumstances. Investors will look at a company’s capabilities to deal with disruption and limit their exposure to such risks.

Change is a constant, perhaps the only constant we see in business. It might come suddenly at times, but it surely will come. Businesses that are prepared for change can adapt quickly. These are the businesses that survive difficult times and succeed.
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