Optimization of the business processes specifically the retail and warehousing operations, a detailed view of the inventory throughout the chain is critical. Furthermore, fluctuations in demand, speed of replenishment, effective movement of goods from the warehouse/distribution center to their respective destinations – be it the retail stores or the end consumer, are the critical pieces of information that should be made available to the decision makers in the quickest possible time. While most of the large scale retail chains have established processes, it is the small and medium retailer – be it a small four (4) store specialty retail chain or a complex multi-store environment, who struggle to piece together increasing amounts of information from different processes via disparate communication channels to make an informed, effective decision with the pressures from upper management to increase revenue. CitiXsys Technologies, a leading provider of Retail, Warehousing & Distribution applications and SAP have been working together to make this a distinct possibility. With the backend Enterprise Application provided by SAP, CitiXsys offers an application suite to the small & medium retailer to effectively and better manage their business operations. CitiXsys offers to its customers the power of an SAP powered business management suite encompassing financials, warehousing & distribution and retail. The application set is scalable and stackable to suit the growing demands of the small and medium retailer. iVend Retail, Optimized Inventory Management Solution and Inventory Pro are applications, tightly and seamlessly integrated with SAP Business One and can either be deployed all together or in phases as the organization grows.

1. Embracing the new
World: Challenges and
Options for Retailers
April 2010
Manish Chaturvedi
Paula Goncalves

2. In recent months a general sentiment of optimism has been shared by most. The turbulent
recessionary months appear to be almost behind us with a display of renewed confidence
amongst businesses as well as consumers. Government bailouts and the overhaul of economic
policies have boosted consumer confidence, the effects of which appear to be influencing
decision making amongst Small and Medium sized Enterprises. Small or medium as they may
be, they represent the lower segment of the pyramid. However, by virtue of their status they
also represent the foundation for their larger counterparts.
For the overall economy to eventually resemble a “V” shape in economic recession and recovery
charting (a sharp decline in economic measures followed by a sharp rise to its previous peak) or
for that matter a “U” shaped recovery, industry must perform at the highest level possible to
ignite the market. At the heart of all this is the consumer. All the good work by governments
will only sustain the economy if the consumer starts spending. Large-scale job losses and
reductions in incomes are still so vivid in the minds of consumers, affecting consumer
willingness to return to the same level of spending experienced prior to the Global Financial
Crisis. Consumer spending habits have changed in today’s markets. What we are seeing today
is a trend where consumers are generally positive and happy with a slightly lower quality
product simply because the price tag is attractive. Still consumers appear generally happy with
the alternative.
The economic downturn has led the customer to be far more demanding and retailers must be
ready to accept these pressures and meet customer expectations. Added competition today
provided by on-line retailers has also contributed to retailer’s challenges as numerous product
comparison sites – though enabling the customer to get their money’s worth, by the same
measure exerts enormous pressure on the retailer to have an optimized warehousing &
distribution system.
Inventory is the largest investment that a retailer is required to make and keeping the inventory
levels optimized to alleviate stock-out / over-stock situations is an area which can contribute
significantly to increase the bottom line - operational as well as profit margins. Retailers have
always been faced with the challenge of maximizing profits with lower margins. New retail
channels, unpredictable demands, poor visibility and control over supply chains have further
reduced margins. Nevertheless retailers must have the right merchandize available on hand
and the tools to forecast accurately the demand for a product in a particular location.
As retailers aim to cope with such pressures, they often struggle with how best to prioritize –
should one concentrate on reducing Cost of Goods Sold (COGS) by sourcing goods from more
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3. price competitive suppliers OR on optimizing the distribution functions of the business OR
simply investing in expanding the retail chain reach to more consumers through multi channel
retailing.
To improve on the process of ensuring sufficient product availability when and where it is most
needed which will minimize working capital and inventory holding costs. Most retailers have
invested in inventory management applications. Though such applications increase the
visibility of inventory, in isolation they do not provide complete visibility. Disparate systems
within an organization often leave the key decisions makers struggling to piece together the
necessary information important for more informed decision making.
With multichannel retailing growing with popularity amongst small retailers in an effort to
increase revenues and gain new customers, who in turn can be marketed to through alternative
channels. Managing stock replenishment demands from the traditional “Bricks & Mortar”
stores and order fulfillment from other channels like mail order catalogues and online
shopping. All of which places increased demands on the distribution center to effectively and
efficiently manage such centralized planning processes.
The answer to such business challenges in today’s re-emerging economies, is to have an
integrated business management solution seamlessly integrating the different aspects of
business operations – centralized finance, sales and procurement processes at headquarters,
inventory and warehousing functions spread across the distribution centers and in store,
customer facing retail operations across the entire retail chain.
This however, requires a substantial capital investment, notwithstanding the enormous change
management challenges such a transformation may bring along with it. A small retailer today
needs a well-defined step-by-step growth path to meet these challenges without exerting undue
pressures on upfront investment.
!"#$"%&'()%&*+#$",(&-&"%).#)//.$,)%$0"#1%),2#30(#(&%)$.&(1#
Optimization of the business processes specifically the retail and warehousing operations, a
detailed view of the inventory throughout the chain is critical. Furthermore, fluctuations in
demand, speed of replenishment, effective movement of goods from the warehouse/distribution
center to their respective destinations – be it the retail stores or the end consumer, are the critical
Page 3 of 8

4. pieces of information that should be made available to the decision makers in the quickest
possible time.
While most of the large scale retail chains have established processes, it is the small and
medium retailer – be it a small four (4) store specialty retail chain or a complex multi-store
environment, who struggle to piece together increasing amounts of information from different
processes via disparate communication channels to make an informed, effective decision with
the pressures from upper management to increase revenue.
CitiXsys Technologies, a leading provider of Retail, Warehousing & Distribution applications
and SAP have been working together to make this a distinct possibility. With the backend
Enterprise Application provided by SAP, CitiXsys offers an application suite to the small &
medium retailer to effectively and better manage their business operations.
CitiXsys offers to its customers the power of an SAP powered business management suite
encompassing financials, warehousing & distribution and retail. The application set is scalable
and stackable to suit the growing demands of the small and medium retailer.
iVend Retail, Optimized Inventory Management Solution and Inventory Pro are applications,
tightly and seamlessly integrated with SAP Business One and can either be deployed all
together or in phases as the organization grows.
The incumbent here could be a small retailer with a few stores OR a more complex multi store
retail chain with a distribution center catering to the replenishment demands of the stores.
On reflection a typical real life scenario in the world of small to medium retailers may sound
something like this… Upon not being able to locate the desired shade of trousers in the retail
store aisle, the customer enquires directly from the “May I help you” person in the store. The
assistant rushes to the back office store and unable to locate the specific shade proceeds to place
the same enquiry to the store manager. The store manager promptly calls the distribution center
to find out if relevant stock is available. And to their dismay, the distribution center neither has
the stock nor is aware of any such shipment in transit. A call is then place on the merchandizing
manager at head office, only to realize that the shipment was to be delivered directly to the
relevant store and should have already arrived. The merchandizing manager, by now seething
with anger, calls the Third Party Logistics (3PL) Company who informs that the shipment is yet
to be cleared from customs.
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5. The customer, in the mean time has left the store quite some time ago– with a promise of not
returning any time soon.
Sadly, many more similar scenarios are the norm in a completely disjointed business operation
and could have easily been avoided in an integrated environment. The store manager could
have looked up the availability of the requested item in the nearby store. A lookup in the
system could have also provided the necessary information on items in transit due to arrive by
what date in the warehouse. The customer could have been assured of the expected delivery
date and placed an order with a deposit. In an effort to improve on the customer experience and
ensure customer satisfaction, additional loyalty points for the inconvenience caused could have
Figure 1 iVend Retail – Deployment Diagram
been offered. A potential lost sale could have also been recorded, which would have provided
the organization with valuable information to allow for better stock forecasting and overall
planning on fast moving items. The customer would have left the store happy and suitably
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6. impressed. The store manager would not have been required to frantically call the distribution
center or the merchandizing manager at the head office. All this at 5 pm on a Saturday!
With iVend Retail implemented throughout the entire landscape the three (3) main business
functions – merchandizing, warehousing and retail can all work in tandem. The retail processes
which require high levels of coordination between the planning process at the head office and
its execution process at the retail stores are best achieved by implementing a seamlessly
integrated Retail Management Solution on top of an industry standard Enterprise Resources
Planning (ERP) solution from SAP.
The retail processes at the head office not only become more streamlined, but also allow such
industry best practices to influence and hence accelerate the growth path for the retail chain.
The merchandizing division can now carry out processes where operations receive complete
visibility of stock across the retail chain and can effectively push stock rather than relying on
store requisitions. Additionally, the merchandising department can raise purchase orders in
time to avoid stock out situations. With comprehensive Pricing & Promotions management,
head office can run targeted campaigns for specific stores, with period & volume discounts.
Promotions can also be based around buy-some-get-some, sale totals, and happy hour.
The integrated Loyalty Management module can achieve an improvement in customer
retention. It enables the setup and management of multiple loyalty schemes that allows the
assigning of points on customer purchases. With the added ability to define ageing criteria for
loyalty points, customers can redeem loyalty points across the entire network of stores.
Multiple gift card setups, up-sell / cross-sell and layaway management ensure that the customer
does not leave the store empty handed.
Information availability and hence the decision making is further improved with numerous
reports & enquiries in different categories of business operations including sales, collections,
inventory and fulfillment which can be exported to office Excel and Word.
Depending on the sales process, the application allows the user to configure different
replenishment policies and levels for items in a store. This combined with the ability to run
replenishment routines at the organization level churns out recommendations for either stock
transfers from the distribution centers to the stores OR across stores OR recommendations for
centralized procurement. This seemingly logical and simple routine drastically reduces the
capital investment in stock and inventory holding costs.
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7. In addition to the pre-season and in-season replenishment pressures, the
warehouse/distribution center has to cope with the ever-changing demand fluctuations exerting
pressures on the in-warehouse functions. Not only is the goal to ensure that over 70% of the
inventory flows through, it is equally important to ensure that routine operations like put away,
picks, creation of cartons and delivery are performed to absolute perfection. With the objective
of minimum inventory on hand, there is no scope for error in delayed or incorrect shipments. A
stock on hand report is no longer sufficient. The warehouse manager and eventually the
organization need to know where that stock is located, what has been allocated and what is
available to promise (ATP).
Inventory Pro is the warehousing and inventory management application to assist the
warehouse manager to effectively manage and control the warehouse and its operations.
Inventory Pro increases the automation and item tracking capabilities resulting in improved
inventory accuracy all enabling to better match the demands with current stock availabilities.
Extending the core inventory management capabilities of SAP Business One, Inventory Pro
offers inbuilt sophisticated engines to calculate ATP and allow head office or warehouse
managers to hard or soft allocate goods in the warehouse. In addition to this Inventory Pro
extends the unit of measure functions of core SAP Business One by allowing transactions in
alternate units of measure.
Further granulating a warehouse into logical partitions of zones & bins OR isles & racks,
enables the warehouse manager to effectively track inventory in different bins but also allows
different replenishment and consumption policies to manage the items across the warehouses.
The overall operations at the warehouse or the distribution center can be further optimized by
deploying Radio Frequency (RF) handheld devices extending the power of the application to
wireless handheld devices, further reducing the chance of errors.
Most of the small and mid-sized retailers today may not have the need (or the resources) to
manage the entire supply chain. Instead they rely heavily on third party logistics (3PLs)
providers to manage the movement of goods across the enterprise.
Employees from different departments enter the same information into different, and
sometimes incompatible, programs or systems, wasting time and increasing the chance of error.
Inventory Pro bridges this gap by providing seamless integration with applications from
shipping carriers such as UPS –World Ship.
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8. Figure 2 - Proposed Application Landscape
To conclude, despite constraints on additional spending in the current economic environment,
retailers are compelled to think beyond the traditional operating models and adopt new ways to
increase operational efficiencies and maintain competitive advantages. The Enterprise, the
warehouse and the retail processes have to work in a far more integrated and harmonious
fashion. They need to undergo a paradigm shift to align to the current economic reality,
escalating capital investments in inventory and increased customer service demands. And such
a paradigm shift can come only when the small and mid-sized retailers adopt a fully integrated
enterprise wide application set.
With over 12 years of experience in Consulting and Channel management, Manish Chaturvedi is VP Indirect Sales (Retail) at CitiXsys.
An avid blogger and a weekend baker, Manish is currently expanding the existing channel base of CitiXsys in the European market.
Paula Goncalves serves as the Business Development Director for CitiXsys Australia, with responsibility of expansion throughout the
Asia Pacific region including a large focus on revenue growth through direct and channel sales.
Paula has been instrumental for the accelerated revenue growth and improved profitability through a renewed focus on targeted
expansion.
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