Innovation Interruptus in retailing
Although IT departments throughout corporate America have been hobbled by budget cuts, some companies are still investing in IT to achieve competitive advantage. Wal-Mart, for example, recently announced that it’s requiring its top 100 suppliers to begin tracking their shipping pallets using radio frequency identification tags by early 2005. Analysts say this kind of bold IT project can help the company squeeze another half-point of profit margin from its revenue. That’s a big deal in the retail industry, where 1% to 3% profit margins are the norm. Many companies that invested heavily in IT during the late 1990s are now de-emphasizing new IT investments, focusing instead on making existing technologies more effective. RadioShack just completed the first year of a multiyear effort to further optimize its supply chain, including assortment planning, inventory management, distribution and logistics, and store operations. One reform: aligning corporate strategies with how workers and managers are actually compensated—something that’s out of alignment at many companies. For instance, inventory managers typically want to minimize product inventories to hold down costs, but merchandising managers want to offer the greatest selection of goods at each store. Now both sets of RadioShack executives have bonus incentives to keep store inventories as lean as possible.
Computerworld 29 Sept 2003