Data Silos’ Prolific Impact, From Inventory To AP

Inventory management and procurement processes can be tricky enough for a retailer selling on a single platform. But once their operations expand to include a multichannel sales model, a lack of transparency and efficiency can cause bottlenecks at processes from warehousing up through accounts payable.

The hurdles begin with struggling to gain real-time visibility into inventory levels, which snowballs into friction in sourcing, procurement, invoice payments and supplier management. At the heart of that catalyst, explained Simon Evetts, managing director at retail solutions software firm itim, is data locked away in silos, preventing effective communication and collaboration across platforms, and between trading partners.

“Effective supplier management and collaboration [are] increasingly important for multichannel retailers,” Evetts told PYMNTS in a recent interview, adding that he has seen a “re-emergence” of buyers and suppliers embracing integration to maintain a competitive advantage against online retail giants like Amazon. “But for many retailer-supplier relationships, there are challenges to be overcome before this can be achieved,” he warned. “The biggest hurdle is efficient sharing of key data.”

That hurdle spans throughout the procure-to-pay process, he noted, highlighting key challenges like product information. Real-time inventory into stock levels is, of course, one of the most significant points of friction. But there is also the challenge of using that information on inventory to guide sales forecasts, said Evetts, leading retailers to miss out on opportunities like drop-shipping, in which a retailer does not have to keep a product in its inventory, instead allowing for a more affordable and efficient method of shipping a product straight from a supplier to the consumer.

And often, retailers have to re-enter that information from the supplier, increasing time-to-market, added Evetts.

Data Silos’ Prolific Impact

Data silos can impact retailers’ internal, back-office operations in processes before any purchases are made. Without real-time visibility into inventory and sales data, retailers cannot accurately or efficiently maintain appropriate stock levels, forecast sales or gauge procurement needs.

But those data silos can cause friction in post-purchasing processes like invoice payments, as well as cases in which data exchange outside of the enterprise is required, too.

“Many retailers still have a long tail of electronic suppliers,” said Evetts. “Even where files are exchanged electronically, for example by EDI [electronic data interchange], there is still a lot of ad hoc phone [and] email communications to resolve issues and check invoice status that take up time for both parties.”

The retail industry’s reliance on EDI for buyer-supplier information exchange is key to moving documents like purchase orders and invoices between trading partners. There are many advantages to EDI, said Evetts, pointing to its proliferation in the industry, and the speed and accuracy with which the technology can move information.

Its drawbacks, however, include high costs, a rigidity of data formatting and the complexities of implementation, all of which can be particularly painful to smaller retailers, leading these businesses to continue to rely on paper. Many retail suppliers, Evetts added, are also reliant on paper to submit invoices and other documents, forcing retailers to implement optical character recognition (OCR) technology that is not always the most reliable way of extracting and digitizing data out of paper.

That point of friction becomes yet another catalyst of inefficiencies in the invoice-to-pay process, causing a lack of automation in matching receipts from stores and warehouses with their corresponding invoices.

“But by far, the most complex challenge is identifying and dealing with invoice discrepancies,” Evetts said. “For example, the supplier gets the price wrong or doesn’t deliver the quantity you ordered. In our experience, retailers are paying, on average, an additional 3 percent in unnecessary supplier overcharges.”

Even if a retailer can manually identify a discrepancy, submitting queries and collaborating with a vendor to address it is a process bogged down by digging into past emails and product catalogs, he added.

Digital Collaboration

Considering its ubiquity, EDI is likely not going away anytime soon, according to Evetts. But particularly among smaller retailers, the industry is beginning to show interest in emerging data sharing and integration technologies that can address some of the pain points EDI has historically failed to tackle.

The rise of cloud-based collaboration platforms means the omnichannel retail market can not only exchange data between buyers and suppliers, but it can also more easily adopt electronic documents like invoices to make that exchange of information digital from the get-go.

“Looking beyond EDI,” noted Evetts, “we predict a shift to more real-time exchange of data between suppliers and retailers with digital collaboration platforms enabling a more unified supply chain.”

This means shifting away from EDI to real-time communications, he continued, both across internal enterprise platforms and externally between business partners.

This shift can also support the demand for digital, automated accounts payable processes, enabling retailers to take advantage of cost savings like early payment discounts, while also supporting the faster recovery of overcharges.

Solving the digital data problem in omnichannel retail isn’t only about enabling accurate visibility into inventory levels, though that benefit is a major one. It’s an opportunity to address friction pre-, during and post-procurement activity, with widespread potential benefits.

“Where the relationship between the retailer and supplier can be unified through the use of technology, there are many opportunities for increased collaboration, efficiency and cost reduction,” said Evetts.