AI and Mobility to Power the Retail Workforce

Mobile device strategy is a key driver of workforce efficiency in many industries. But in retail, it is paramount. Mobile devices are used to achieve several key functions in the retail supply chain, and are designed to improve operational KPI's by:

• Decreasing the labor time involved in inventory-related activities

• Reducing the overall cost through better process organization

• Decreasing training time

• Improving communications to suppliers

• Enhancing data accuracy and trust.

Despite the promise and benefit of using ERP, POS, and inventory-management software deployed to the workforce through mobile devices, many retailers' have exhausted the benefit of mobile devices and are seeing stagnant or decreasing returns. Several retailers now cite mobile strategy as an operational drag on productivity, while others have seen benefit by adopting more radical technologies to standardize inventory activity.

Why Mobile Inventory Management Strategy is Failing many Retailers

The inventory management software space is a maturing market, that has exhibited a low CAGR (3-5%) over the past 5 years, and is forecast to maintain this slow growth through 2032. This is particularly true in North America, where inventory management software growth has been somewhat stagnant, and largely attributed to pricing increases from vendors on user-based subscription models.

While slow market growth isn't always an indicator of declining R&D and innovation, it implies that firms are not seeing radical benefit from deployed software in this space.

Three areas where inventory management is evolving are:

• Manually Managed Inventory Systems

• Barcode Scanning Systems

• Radio Frequency System (RFID) Implementation

Slower Pace of Change

By the nature of the business, most retailers are averse to making significant changes that can threaten ongoing financial results and incur additional training costs. Every change has significant risk and cost implications. For example, transitioning from manual inventory to automated inventory means adjustment at the point-of-implementation (personnel in store), which means changes to process, management activities, operating metric measurement, as well as IT infrastructure and security. When scaled across a large regional, national, or even just a store, any change involves substantial management cost, training, and overhead.

Even a large-scale investment in replacing manual activity with RFID-based data capture means that operating units have to factor in entirely new modes of measuring and managing their business. It is safer and less costly to "go with the status quo", and rather than seeking increased return from software, firms aim to promote better results through management and management incentives.

Growth of Omni-channel and Channel Offload to eCommerce

Retail firms have aimed to improve results by channel offload, or shifting traditional in-store volume to eCommerce channels. Or they've explored in-store service differentiation, by adding in store services that have traditionally not been associated with retailers (e.g. in-store dining options, premier "grab-and-go" offerings).

Many corporate executive teams wrestle with a vision of how to enhance their financial results between these two options, and the result is lukewarm budgeting for in-store inventory management, as they opt to shift capex spending into channel offload and eCommerce initiatives, in-store differentiation, or both. Since the transformative growth drivers are clearly not in in-store operational efficiency, executives opt to chase growth through programs outside of the store's core operations.

Implications on Mobile Device Inventory Management Strategy

With omni-channel and eCommerce, and in-store differentiation as shiny-objects that gobble up capex that could be allocated to improve in-store inventory management, many firms opt to stick with their current inventory management approaches. In some cases, this is manageable. Firms have done a decent job of deploying semi-effective ERP-based mobile offerings to their workforce, and have seen a moderate benefit. Some have leveraged the power and implemented successful BYOD (bring your own device) programs that account for turnover and security considerations.

In other cases, poor implementations, or uncoordinated purchasing decisions between corporate, regional, or BUs, have left retailers with inefficient, redundant and ambigious mobile device strategies. Some retailers leave their workforce with multiple applications to manage inventory, multiple databases, and in some case, multiple data warehouses, compounding managerial and systems costs daily, with no hope in the next two fiscal years to substantially improve.

The Problems are Clear - What's the Solution?

Firms left with a poor or ineffective mobile device implementation across their regional or national footprint can take some steps to improve through an outcomes-based leadership approach that assesses the drivers of ROI, operating and financial results, and highlights gaps. The gaps that are identified are opportunities for innovation in process, management, and systems. Several leading firms in the consumer discretionary and consumer staples space have taken this outcomes-based approach across their enterprise to align stakeholders around current problems and potential solutions.

How does an Outcomes-based Approach Work in Inventory Management?

By starting by assessing common KPIs used by both their firms and competitors, firms can start highlighting operating gaps. There are 16 KPIs commonly associated with inventory management in retail:

• Deadstock/Spoilage

• Lead Time

• Customer Satisfaction Score

• Order Cycle

• Inventory Carrying Costs

• Perfect Order Rate

• Inventory Carrying Cost

• WMS Efficiency

• Fill Rate

• Inventory Holding Cost

• Lost Sales Ratio

• Gross Margin Return on Investment (GMROI)

• Available Inventory Accuracy

• Average Inventory

• Stockouts

• Inventory Shrinkage Rate

Each of these metric focal points can be tied to operational and financial performance. They can also be incorporated into a gap assessment approach and competitive analysis that highlights gaps in a firms current approach. When applied to mobile strategy, the firm's mobile device strategy can then be authentically measured and critiqued on how well it is contributing or detracting from the firms desired results.

Overhead and allocated budget can be broken down into capex/opex efficiency measures to help assess how well the technology, process, and management investment has performed, and will perform in the future. This is an activity well suited to an AI-based analysis. Fortunately, much of this data is already effectively captured, and can be readily deployed into an AI-analysis framework. This AI framework can then simulate results, highlight correlations, and project financial and operating results over time.

Why an Outcomes-Based Approach is Effective

Effective results in low growth environments come from optimizing existing assets and resources. In order to optimize assets, firms need to understand how these assets are linked to current results, and other assets within the firm. For example, a firm can excel in inventory management measures, but struggle in forecasting and supplier management. Therefore, the positive return from mobility-based inventory solutions is negated by upstream and organizational factors outside of the control of retail operations.

Until these stakeholders are brought together to understand and align their interdependencies and goals, firms are unlikely to generate return from software-based investments. The figure below highlights key Sales and Demand metrics, and where in the organization they are typically influenced.

Other concerns include the labor cost variances in regional markets and operating discretion given to regions and stores. If cost adjustment becomes a struggle between finance and human resources, stores are left powerless to adjust to changing market conditions, and can experience recruiting delays and higher turnover, again negating the benefit of effective mobility solutions.

Increasing Security Challenges, IT management, and sunk cost

Mobile device administration is a complex challenge and a significant cost for a business. Endpoint management platforms are required, but also carry the cost of the platform and its administration. Increasing security threats both virtual and physical represent substantial new costs to retailers struggling to eke out profitability in a low margin, high transactional environment, especially as materials and wholesale costs have increased substantially since 2020.

Some retailers, like the #4 grocery outfit in the US, have shifted towards bring-your-own device strategies, only to realize that they have introduced a new threat vector to their security teams, introducing the exposure of vital customer and operational data. These strategy pivots have created embarrassing revelations on company earnings calls, and severe brand perception challenges, hurting trust and eroding returning business. Amidst this environment, many retailers opt to go with "the devil they know", and maintain ineffective, redundant, and morale-draining mobile-based inventory processes that exacerbate turnover and create massive re-training costs.

Where to Turn

While there is clearly no single answer to the complex challenges that face retailers, today's retail firms can benefit by understanding how their competitors are viewing topics like mobile device strategy and endpoint management. Workforce solutions firms like GDH

have over 20 years of experience in the retail sector and can provide competitive analysis, strategy whiteboarding and roadmap workshops, and can translate complex knowledge into actionable programs and initiatives that move results over a fiscal year.

From mobile strategy and endpoint management to fiscal budgeting, to balancing sunk cost versus R&D, to how to deploy AI effectively to solve real business problems, these types of solution providers are increasingly necessary to align departments, highlight gaps in a neutral and safe way, and rally business leaders behind meaningful initiatives.

A reasonable starting point is a compare-and-contrast of a firm's mobile strategy against its strategic vision and budgeting, paired with an industry competitive analysis that highlights what market leaders and disruptors are doing in the space. Armed with this knowledge, firms can then plan on how to create an outcomes-based approach that aims to align key stakeholders around critical strategic goals.