IT Management of retail industry requires a constant balancing act between always up POS (point of sale) systems while helping back-office operations run smoothly to ensure overall consumer experience. Lets listen to Jef to learn about the unique challenges faced and corresponding strategies implemented to effectively address them.

Contributor

• • John E. (Jef) Fite, Jr., Senior VP & CIO, Family Christian Store

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Transcript

Sanjog Aul [00:00:02]:
Welcome to the show.It needs careful planning and flawless execution to make technology work for us. So how many times do we succeed? On this show we invite business leaders and subject matter experts with extensive experience in technology management. The intent here is to learn from their experience and discuss better ways to manage technology. To learn more about the show, please visit thoughtshow.avval.com that is thoughtshow.avval.com Today’s topic Is IT Challenges of Retail Industry. Our guest for today’s show is Jef Fite. Jef is the Senior Vice President and Chief Information Officer with Family Christian Stores, a leading retailer in the growing Christian product market with over 320 stores in 39 states. Jeff is responsible for all systems and technology at FCF and is also responsible for company’s Internet Business channel. Jeff joined Family Christian stores again in November 2000 after serving as the President of iBelive.com, a sister company to FCS from its startup in May 1999.

Sanjog Aul [00:01:04]:
Prior to joining FCS, Jef worked at Anderson Consulting, now Trencher, for over nine years, assisting clients in technology strategy development, business process design, software development and project and program management activities for Family Christian Stores, Meyer Quality Stores, Ford Motor Company, Steel Cave, Caterpillar Manual and the United States Department of New France. Good morning Jef. Welcome to the show.

Jef Fite [00:01:29]:
Good morning.

Sanjog Aul [00:01:31]:
Yeah, just before we started the show listeners, we were talking about the weather and I guess he’s enjoying a great weather where we are almost touching 50 degrees here. So of course I know what the weather is all about. He has. So okay, let’s jump into the retail organization challenges. And as we see for any retail, unlike typical B2B or other type of businesses where the size of one transaction might be bigger but not there, they’re not that many transactions. Unlike a retail organization where the biggest challenge is how to manage detail and to indect what’s volume. And this is referring to the large number of products as to use customers, store locations, suppliers and there’s so many things here and that have to be managed at a daily basis for you to be able to have a good tab on what’s going on. So over the years, how do you think has technology evolved to help manage these details for the retail industry?

Jef Fite [00:02:27]:
Yes, certainly I’m monitoring the retail industry is retail is retail and it certainly is a key issue for us as technology managers. In the past, retailers only captured department level or category level information. If you think way back to the old brass gas registers, they certainly didn’t capture any type of item level information for people to try to use. I think some primary advancements that have enabled the necessary detail in the retail enterprise fairly just the increased capability, increased computing processing power that we’ve seen advance over the last 10 to 20 years. Storage facilities and cost from just the way the cost has dropped dramatically for storage requirements, item identification and barcode capabilities. And then also obviously the telecommunications bandwidth and the ability to move information has been huge. Even though retailers a bunch of SKU store level details, customer specific data in their system, the ability to do something meaningful with that data is oftentimes a differentiator sort of competing retailers. Few store level combinations.

Jef Fite [00:03:33]:
At Family Christian stores, we have about 1.5 million store combinations that are processed at least weekly through our automated replenishment system to ensure we’re in stock from those core inventories. But I think that the advancements in computing power, storage costs, item identification and telecommunications capabilities are the things that will continue to advance from a technology infrastructure standpoint and make this kind of detail, detailed analysis possible for us.

Sanjog Aul [00:04:01]:
So when you talk about technology and all that with proliferation of Internet, we know that you got stores, 220 stores and sometime back, even for some cases now, people have leased lines that they use for communication. But have you been able to leverage the Internet and have some kind of a global VPN infrastructure that would allow you to really bring the cost almost to zero in terms of the communication cost that you might have?

Jef Fite [00:04:25]:
Yeah, we have begun that process. We, we had some stores frankly that are still using more, I guess, traditional dial up communications and other stores that are using frame relay networks. And you know, we work with our telecommunication providers that are actually taking advantage of the Internet. So you know, I would say we’re in box at this point. But certainly those, those advancements give us the ability to drive costs down while increasing our service levels and really providing us the opportunity. You know, a lot of what we’re trying to do is make our stores feel better connected. It just reduces a lot of the paperwork that has to be shuffled between the locations. Then again, it’s a lot of disruption.

Jef Fite [00:05:04]:
Fortunately in this day and age is not rocket science. And it really depends on how the retailer takes advantage of the technology advancements. But certainly connectivity, network connectivity across all the various locations is one of the keys for a retailer in say in current East Asia.

Sanjog Aul [00:05:22]:
So when you mentioned about the dial up and also you mentioned that you let these people go and connect to the corporate network, Are they dialing in to the corporate network? So for example, if I go to another bookstore, I would not name a specific One, but then when we show we don’t have, we’re not carrying it right now, but we do carry it, it’s possible that it might be in another store. So they do a lookup right away.

Jef Fite [00:05:44]:
Exactly. We’re taking more advantage of centralized data and the ability to do that from all the look, we have the ability to come up to our corporate office and customer information. If we have a customer standing in front of us that perhaps, you know, made a purchase in one store, but they’re standing in a different store wanting to make a return, then we can scan a barcode on their, on the customer’s receipt, come up to the home office and get the transaction information and be able to process that return much more quickly and accurately than we would have in the past. So that’s one example. And the example you provided provide with being able to look at inventory across the enterprise is a key advancement that we’ve been able to put in place over the last year or so.

Sanjog Aul [00:06:25]:
So now whatever things that you mentioned was that have related to technology that have evolved to manage the retail industry, now that is the core. The answer was specific to your particular type of business or would you say across the board? Are those the common issues across the board or there are some more or some less?

Jef Fite [00:06:44]:
I think I’ve had working with several different retailers. I think a lot of times those issues are pretty common across different segments of retail. I think certainly the ability to get enterprise wide inventory information is critical to most any retailers. Any retailer that’s really trying to be somewhat customer intimate. Being able to get at customer information across your enterprise is important. I think for us as a specialty retailer, for example, I think some of that customer information may be more important than it is to a mass merchant. You know, one of the ways that we feel like we we’re going to win against the mass merchants and other general market retailers is we have to know our customers better. We have to provide assortments that are more tailored to their interests.

Jef Fite [00:07:34]:
We have to provide better service for them when they’re in our stores or when they’re ordering online. So I think a lot of that customer information becomes even more important to a specialty retailer like ourselves that’s focused on a particular customer segment and is trying to market and sell a specific product assortment to them.

Sanjog Aul [00:07:54]:
And then I think what you said definitely makes sense because if you pick up book retailer or general purpose book retailer, they go breadthwise. They would actually carry a lot of different things with a lot of different subjects. What you’re doing is you’re going lisp wise stick to one specialty and you go just go deep into what all different you can capture within the same specialized focus. And in that I also see while it’s a great thing and it gives you the market leadership, it does take away the thunder. And of course you can’t eat the cake and have it too at a person. Like, like suppose if I am going and trying to get some self help books or some religious books or something of special interest, which is basically falling under your segment, how many of those books would we buy? So it’s not only books. Maybe there would be other things which would be you can say attached to buying a book or being of that mindset that you potentially could be selling or you might already be doing that. So how are you using technology to mine that data or to gain some insight into the consumer’s mind and say okay, if he bought this then he should be also be able to buy this book and also some other articles or something else.

Sanjog Aul [00:09:04]:
Your overall revenue stream increases, you cross and up shell.

Jef Fite [00:09:08]:
Sure, I, I think many would be surprised by the, by the breadth of merchandise that’s available in this marketplace. But your point is, is certainly well taken that we are a specialty retailer focusing on a particular consumer niche, focusing on particular products. But we, we have diversified the product rigs into various. We certainly sell books and Bibles, but we also carry a pretty wide assortment of Christian music for many folks would be surprised to know that there’s Christian music in almost every genre, that there is general market or what some would call mainstream music. We’ve got contemporary, alternative, country, urban, instrumental, etc. All those things with Christian themed lyrics and so on. We also carry videos and software, green cards and stationary, jewelry, home decor items, apparel, so on, and a bunch of products for kids as well. You know, in one sense it is focused.

Jef Fite [00:10:01]:
In another, we’re still talking about well over 100,000 SKUs in our assortment across, across our chain. And any given store would have 25 to 40,000 items in them depending on the size of the store. And technology certainly plays a key role in a number of different areas here. You know, one of the issues quite honestly is that many of our consumers don’t understand the variety of products that are available. You know, if you go to a Barnes and Noble or Walmart, you see a rather limited assort of products that are, that are actually available in our marketplace. So part of it is an education issue and actually technology plays a part in that as well. We have sampling capabilities in our stores where people can come in and scan, you know, the barcodes on PDs and sample pretty much any music CD we have available in our stores. We have sampling capabilities that we’re just beginning with our DVDs and videos so that people can sample our customers can sample the videos in the stores.

Jef Fite [00:10:59]:
We’re even looking at our books ability to work with our publishers to create some materials whereby for example, an author might have an author video talking about, you know, why did the author write this book? Why do I care? What does the author hope that reader gets from the book? Those types of things. So sampling technology and just other ways that we can try to educate our consumers both in store and on the Internet is something that we’re spending quite a bit of time on. The good news is this is also a way that we can help with product knowledge transfer in our stores. With our store associates, we can use those same technologies to ensure that our store associates are kept well with new release folks, music, videos and other entertainment products at least. Certainly our future vision, like many retailers, involves also more interactive things with our consumers. The ability to look at kiosks and other ways for consumers to identify the products they’re looking for and purchase them. So you know, I think there’s still a lot of things that we’re trying to identify the way technology can help in those areas, but there are plenty of things to keep us busy I think.

Sanjog Aul [00:12:07]:
that’s wonderful. Let’s take a quick break listeners. We’ll be right back after these messages. And let’s start quickly about While the technology is helping in further fine tuning what a customer wants, how do we further specify which store should carry what? Depending on the kind of interest that a local community has shown that. Let’s pick up that topic once we come back from the break, so please stay tuned.

Sanjog Aul [00:15:31]:
Welcome back to the show folks. For listeners who just tuned in, today’s topic is IT Channel challenges for Retail industry. And our guest for today’s show is Jef Fite . Jef is the senior Vice president and CIO with Family Christian Stores, a leading retailer in the growing Christian product market with over 320 stores in 39 states. Before the break, we were discussing about the different ways we can understand what the consumer pattern is and accordingly leverage the technology to get more insight and accordingly carry the different assortments of things that we sell. Especially being like in the case of Family Christian Store, which is a specialty retailer, it makes all the more sense because they cannot undercut on the cross. The follow up question I had which we are going to pick up now is that while all the stores are carrying the things which are needed and that’s based on the data mine, a second level of data mining or business intelligence is where you actually look at the mindset of buying patterns of people in a touchwick community and maybe there would be some special events going on in a special location which would call for people to go and buy a specific type of books or that would change their mind.

Sanjog Aul [00:16:38]:
So they would go to that particular store, say, accordingly, you change your inventory pattern in there. So when the people come in, there’s something. What they would like to see is not out of stock. So are we doing something similar in your case?

Jef Fite [00:16:51]:
Yeah, we are. You would find in our stores, typically, probably depending on the stores in the market, 70 to 80, maybe 85% of the items are what we would call core. Those are items that are pretty much in every store we operate but then the other,15 to 25, 30% of the items are tailored to local market conditions and we capture we have a program that we call the family coach program, which is our frequent shopper program and we have about 80% of our transactions, our sales transactions at the point of sale that have a customer attached to those transactions.So we, for the most part is.

Jef Fite [00:17:29]:
Own what customers are buying, what in what market, in which individual source. We use this to marry up with our automated replenishment system and some of our assortment planning systems to really try to marry together. What are the items that are selling in those local markets? In our case, it may be certain denominations of churches that are represented in certain markets. You know, whether it’s a primarily Protestant or primarily atholic market, some of its demographic related as to, you know, what type of African American representation do we have that are in that market? What kind of Hispanic representation do we have in that market? And I think there’s always going to be ways to get better at that. That is certainly one of the key ways that we’re using our technology and the way we eat, the transactions that come up from our point of sale systems to ensure we’re doing a pretty decent job of tailoring our assortments to what the local market needs.

Sanjog Aul [00:18:25]:
In fact, there are two types of business intelligence mechanisms that are used and in fact, there’s reactive and there’s proactive. The reactive would be definitely where we know what the sales are doing in a specific area and accordingly, we make some patterns and work with that data to take care of our inventory. The other one is a proactive pattern, which is institute of demographic and sales data. It goes from event. It takes care of the events that something is going to happen here in, say, two months. So how are people going to behave and how do you spread the message at the right time to the people saying right now Family Christian stores is doing that and you have a specific event going on and then automatically this becomes like a pull marketing show instead of a push marketing.

Sanjog Aul [00:19:09]:
So that’s another plate of how you can say potential enhancement of your capabilities from the data mining standpoint. This is just a thought, but you have any suggestions regarding that or any thoughts about this?

Jef Fite [00:19:20]:
Yeah, and I, I’d say that’s certainly kind of a good way to look at it reactive versus proactive. In our market, music artists that are creating products in these markets are doing store events and there’s concerts and speaking engagements and so on and we work with music labels and the publishers to ensure that at least for the higher profile authors and artists, we know where they’re going to be and what they’re doing. And we have been able to and take it, you know, our reasonably good shape and how we attack that side of it. I think the proactive side is one where I think we’ve made some progress. But that is one that certainly your internal technology has to be working well, but it also requires pretty good connection to external parties, at least in our case where we’ve got other entities that are really driving a lot of the excitement, if you will, in the marketplace because those are typically driven by new releases, video product.

Sanjog Aul [00:20:22]:
Great. And now there’s another thing which we say about retail organizations that, you know, since it’s been around forever, since the very time when people started buying things, retail has been there. So of course technology started catching up and they have come to a point where I’m almost optimized to the maximum, which theoretical maximum or maybe say practical maximum, they’ve optimized business processes, the supply chain, the business intelligence functions. So given that and with all the competitors that you might have in the specialty market as well as general purpose retailers, where do you see there’s any potential improvement left which you can use as a competitive advantage?

Jef Fite [00:21:03]:
I think there’s plenty of opportunity for improvement left. I mean certainly there are some retailers that invest, have invested heavily on the supply chain, died in on the demand that died did have really used technology effectively to grow their businesses. But you know, there are tons of retailers, especially on the specialty side, a lot of smaller retailers, you know, I’d say even though even the larger guys still have a lot of room to go, I think certainly internally there’s still opportunity. But I think one of the things that will continue to advance is the collaboration area, ways that retailers can work more effectively up the supply chain. With their supplier partners to get more efficient with their supply chain information flow, product flow, but then also really taking it to the next level. It gets talked about a lot, but I’m just aware of a lot of retailers and their supplier partners that really do a good job in collaborating on the forecasting side of the business or, you know, as we were talking about a moment ago in forecasting as it relates to marketing activities. So I think there’s really still going to be a lot of opportunity from an integration perspective. And how do I look at some of those supply chain collaboration tools that are available now and how do I get the appropriate level of marketing information? What am I doing with events and promotions and other things that are going to drive business that have impacts up and down the supply chain.

Jef Fite [00:22:31]:
So I think that’s certainly going to be there. And as long as we have marketing people, we’re always going to have new and interesting ideas and concepts that we have to try to react to from a technology perspective. And I think there’s always going to be ways. I mean, the one thing you have to remember with retailers is retailers typically operate on very skinny margins. I mean, oftentimes when you get down to the bottom line, typical retailer is lucky if they’re taking a nickel to the bank for every dollar they sell. The margins are slim. So, improving your inventory Turnover by 1/10 of 1% if you have a number of stores across the country can generate real benefits. So I think there’s still going to be some opportunity, some areas that are still getting quite a bit of attention.

Jef Fite [00:23:14]:
Retailers have really gotten into space lately trying to make sure that they lay out their stores and present their products in a way that optimizes their sales per square foot and optimizes their inventory investment. So I think if you look at kind of the next level of collaboration in the supply chain, if you look at the next level of interactive technologies, consumer facing technologies, you know, consumers are getting. One of the things the Internet has done is given ensuring that we put all the technologies in place that can really optimize the enterprise that we’re trying to run here in retail. And while there’s certainly been a lot of advancements, I think there’s still many opportunities to continue to optimize our business.

Sanjog Aul [00:23:54]:
And in fact, what you just gave an answer from my last question, it brings back the point about how do we bring together the online and the click and mortar experience basically for people and there’s one more concept that is catching up is the local fulfillment where people would not want to wait, they would not want to pay the premium of going to a store and they want all the rebates and all the discounts. But then when it comes down to getting the book, they would rather go to a store and pick it up and that’s local fulfillment. So that automatically brings from challenges because earlier we know used to happen where a store, a specific retailer would say whatever you have done online, we do not honor it and then slowly they started honoring those coupons and now they have to even deal with fulfillment which is happening across online and the brick and mortar. So let’s pick up these challenges that we have from logistics standpoint, supply chain and corresponding technology which needs to support it before after we come back from the break. So please stay tuned listeners.

Sanjog Aul [00:24:54]:
We’ll be right back.

Sanjog Aul [00:28:21]:
Welcome back to the show folks. For listeners who just tuned in, today’s topic is IT Challenges Of Retail Industry. Our guest for today’s show is Jeff Fite. Jeff is the Senior Vice President and Chief Information Officer with Family Christian Stores, a leading retailer in the growing Christian product market with over 320 stores in 39 states. For the break we were discussing about the different challenges that we always have in terms of how to make the consumer experience better and we looked at the idea of local fulfillment which is catching up where consumers actually want to get their best deals online or wherever possible and then when it comes down to delivery they don’t want to be waiting for 10 days for a UPS ground or some other caveat sending them their stuff. They would rather go to the local retailer or like corresponding retail store and let them just pick up the articles that they have bought. Now that being said, it does bring some challenges from all different angles. Maybe logistics, maybe customer service and or and actually most importantly from the technology standpoint.

Sanjog Aul [00:29:26]:
So what have been the challenges? First of all is local fulfillment approach being carried out in APS and how what kind of challenges are you facing from technology standpoint?

Jef Fite [00:29:38]:
Yeah, we are not doing that today. However we are moving rapidly towards it. I know we probably want to get for the technology discussion but you know my experience here at family and experience with other retailers has been there really has to be a management priority to make this multi channel capability go. As you mentioned there are many different business functions within within the companies that have to be on board with this approach and supportive of it. Everything from store operations to the logistics function and marketing and merchandising for that matter. So it really to make it work, you’ve got to have management buy in because it requires many different functions to make it happen but for us at least, the most significant challenge to date has been inventory accuracy. Entire world.

Jef Fite [00:30:24]:
If you think about a bookstore, oftentimes for any particular title of folk we’re using for video, something like that, you’re typically only talking about having a few of those items on the shelf at any given point in time. So if a consumer is going to go online and search and identify and across the enterprise to ensure that physical item is in fact in stock and available when the customer comes in to pick it up, you know, these capabilities require a whole new level of, I would say system interoperability. You’ve got to certainly have your corporate systems talking to your store level systems, talking to your web based systems. You’ve got to have data sharing going on at a whole new level and one of the issues that we’ve had as well has just been in our case and the other retailers work oftentimes the web based systems are typically newer generation technology trying to talk to older legacy systems that do the enterprise wide image also required. We talked a little bit about network connectivity, certainly the ability to in near real time talk between web based systems, corporate systems and source. So this is really an enterprise wide business issue and it certainly is an enterprise wide technology issue. But I certainly think these capabilities will be a condition of doing business going forward.

Jef Fite [00:31:43]:
Consumers are going to expect it from everyone and no one in my opinion is going to be exempt from that. I think in our business is probably not as critical as it is in larger ticket items, electronics, appliances, those types of things. I think there’s going to be faster take up on this local fulfillment aspect at least but certainly even for our business, we’re already seeing the need through customer feedback and other things to do a better job of integrating our channels and that is really a key priority for us over the next 12 months.

Sanjog Aul [00:32:16]:
So why could any book retailer. The key to your profitability is actually going to be that how much and what are the customers asking? And definitely you’re investing in that. And also to some extent, as you mentioned, like since your margins are so low, so the inventory management, how quickly can you turn around your inventory would be the key to success. So you would want to ideally reach the JIT model just in time, inventory model and how well are you able to get into that? And the other thing which you also mentioned is a chronic problem is that how much does your supplier know that you are towards the reorder level? How much of insight has been given to these suppliers so that at the time when you are just reaching the point where you cannot sustain the customer specific question anymore, so those guys come to know right at that moment and they send it instead of sending you a boss set of books or whatever other articles that you’re selling and then it sits there and increases the inventory maintenance cost. So where are you in that whole approach of reaching the JIT model?

Jef Fite [00:33:19]:
Yeah, we are, I would say within our core walls, if you will. Within our organization, I would say we’re in reasonably good shape. We certainly have some improvement opportunities but as you mentioned, I think the win for us is better collaboration with our supply chain partners. We have the good news in the retail industry is there’s pretty commonly accepted practices, commonly accepted applications for handling automated replenishment and so on. The algorithms should that are used and a lot of the statistics that are used to try to optimize your inventory. A lot of those things have been worked out to the point that there’s pretty commonly accepted models and commonly accepted technology that’s pretty widely deployed in that area. We’re able to keep our in stocks, you know, in the high 90s.

Jef Fite [00:34:05]:
We’re able to move purchase orders and invoices, you know, EDI and other electronic means back and forth. You know, I think the, the nut to crack, if you will, in, in retail and, and some, some segments of retail have gotten much further in this than others. And I would say our segment in Christian retail is probably a bit behind and that is on the collaboration side. I think the win for us is when we can more effectively integrate both the suppliers marketing programs as well as our marketing programs to be more effective at forecasting especially new relations for us. If you look at new, it’s similar to the way it is in mainstream music or mainstream books. When Harry Potter hits the marketplace, there’s obviously huge demand for that product in the first, usually the first few hours, even material in the first few days and weeks. So the ability to be able to get a, you know, to do a good job of forecasting demand, but then also to be able to react quickly in certain markets, certain stores that are selling at rates that were unanticipated and as you mentioned that that requires coordination and collaboration with your supply chain partners so that you don’t have to kind of bear that entire inventory burden and inventory risk to stock up for those situations. A lot of our suppliers are Our divisions of general market parent companies, a lot of our publishers are part of New York publishing houses.

Jef Fite [00:35:36]:
Many of our music distributors are part of, you know, general market music companies like emi. So we pretty decent capabilities with those larger suppliers because you know, we also deal with suppliers that are very small but manufacture products that are in high demand by our customer base. So we really have to have some varied capabilities there. But the key for us in the future to really be able to advance where we are today is going to be able to take demand forecast that we’re generating, demand forecasts that are suppliers are generating and more efficiently bring that to a point that we can, you know, kind of in, in the electronic world, agree on what the right forecast is and then be able to efficiently react to local market needs again as, as the products release. And that I think is a common issue across all segments of retail. I think the, the challenge for us in, in some of these entertainment products is just that when they break, they sell at such a rapid pace. You really have to be prepared for that.

Sanjog Aul [00:36:46]:
See, one of the issues that we have seen in technology management, and this is more an approach the way technology leader might take or the team might take that one is that if in broke, don’t fix it. Other thing is that I want the best and a purest approach. So it has to be a good balance there because many times we’ll see that if a company has been around and they have been focusing, like in your case if you’re a specialty retailer, you know your focus. So there would be some core functions, technology functions also, which may not need tweaking after a certain point and they can be left as is and any money saved from that could be put into the new initiatives so that management is also going to appreciate and overall the value will also be created. However, there are times when you know it’s that the same funds are used to keep on tweaking something which could very well work as is and the actual value, the net value is not created as it could have been. So what are your thoughts about this?

Jef Fite [00:37:44]:
That’s certainly true. Retail is probably definitely an industry where that mindset kind of those two different mindsets are very prevalent. There certainly is one mindset that would say we’ve been ringing sales on that register for 10 years. I bet I can ring a sale on it next week. So let’s just leave it out there. But then you see some of the advancements that are being made in capabilities again for getting customer information down to the point of sale. So that suggests that selling is something that can be a reality. I think you definitely just get factual management persistence too.

Jef Fite [00:38:22]:
I think in our company we have a balance. We do have certain components of our technology that we look don’t see significant return on investment in investing heavily in that area. And I can’t put those dollars towards more advancements in other areas. And I think historically with a lot of retailers, point of sale has been an area that they’ve neglected because they basically said if I can ring a sale today, I can ring a sale tomorrow and I can ring a sale the next day. But I think software providers have made some significant advancements in some value added functions that can happen at the point of sale that involve more than just ringing a tail. So staying on top of those advancements is critical. But in our world, again with the margins being what they are, return on investment calculations and following up on those to ensure that you are in fact getting some tangible benefits out of your technology deployments are critical because we just can’t afford to spend money without a return coming back.

Sanjog Aul [00:39:18]:
That’s great. Let’s take a quick break listeners and we’ll be back after these messages and we will talk about things like outsourcing, web services, business process management related issues that are to be dealt with from the technology standpoint and technology management standpoint. So please stay tuned. We’ll be right back.

Sanjog Aul [00:42:51]:
Welcome back to the show, folks. For listeners who just tuned in, today’s topic is IT Challenges Of Retail Industry and our guest for today’s show, Jef Fite. Jef is the Senior Vice President and she a CIO with Family Christian Stores, a leading retailer in the growing Christian product market with over 320 stores in 39 states. We wanted to discuss and rather touch topics related to outsourcing and web services and VPN. So let’s start with outsourcing a little bit and understand that what has been your thoughts regarding the what are your thoughts about the technology functions, outsourcing and the business process outsourcing?

Jef Fite [00:43:26]:
Yeah, I have on both sides of the table of that. I’ve worked for a consulting organization that was pretty active in the outsourcing space and then I’ve been on the other side of the table being a CIO dealing with outsourced. At least it functions. We have really not gotten into other business processes from an outsourcing perspective. But from 1994 to 2001 we did have an outsourced IT shop here at Family and it really in our case it was somewhat situational. In 1994, the company had just gone through a management buyout. The Parent company had provided a lot of the IT services and support at that point and the company was really in desperate need of IT systems upgrades. So we worked with an outsourcing consulting shop that performed a lot of the system replacements.

Jef Fite [00:44:14]:
We literally replaced all the systems for the company at that time. Every piece of software was swapped out, most of the hardware was swapped out, and then we ran the systems for seven years and even to the benefit of Family, that net upfront systems cost was amortized over the life of the seven year contract. So in essence they got millions of dollars worth of new systems that didn’t have to pay for it at that time and pay for it over the life of the outsourcing agreement. And that was a huge benefit to them. So I think a lot of times, at least my experience with outsourcing is someone and situational to the company’s current objectives as well as their current strategy. And it worked out well. I also, you know, at that time in 94, I was actually working for that consulting organization.

Jef Fite [00:45:02]:
And then in 2001 when that contract expired, I was a CIO at Family and had the pleasure of unraveling the outsourcing agreement and bringing the IT shop back in house. But again, that was the right decision at the time and the consulting organization we were working with worked with us to make that happen. So it wasn’t one of those contentious situations at the end of a contract practices, but certainly helped us through a time in the company’s history when the company was growing. We tripled in size during that time. It allowed the management of the company to focus on the growth and allowed kind of an experienced IT consultancy to focus on ensuring that we had the technology capabilities we needed during that heavy growth period. But for us, as we looked at other business processes, we’ve looked at a couple accounts payable, we’ve looked at payroll, we’ve looked at a lot of different things and really haven’t found other business processes that seem to make sense for us from an outsourcing perspective. And nowadays as we look at outsourcing in our IT world, you know, I carry a staff that, that really is capable of operating and managing the current systems and current business as well as through some incremental enhancements or small projects. Anytime we look at a large project, we do have to work with outside firm to do large system development projects, package implementations, that type of thing.

Jef Fite [00:46:19]:
So, you know, I guess I have a perspective, having been a consultant and now working as a CIO that there certainly is an appropriate role for consultants in The IT space and we certainly work with outside firms on a regular basis, so.

Sanjog Aul [00:46:33]:
Wonderful. Now there’s another hype. I would say hype because the fact is like people do not understand it completely, but still they want to jump on the bandwagon in the business process management. You know, this is a generic term. Yes, we want to manage the business processes and then people want to come back with tools which would further help you manage the processes which have been already automated. So instead of human beings managing them, a system would manage it. So have you had a chance to look into this avenue for you to be able to increase any kind of, you can say efficiency in your organization, especially from technology management standpoint and business management standpoint?

Jef Fite [00:47:14]:
Yeah, frankly Sanjog, this is not an area that we have at least initially found much value in. We’re certainly a very process driven company, but we have not been able to identify tools that we feel like are worth the investment in this area. I guess I would say you also have to remember that we, you know, on a relative basis they’re still a relatively small company. Our corporate office has about 250 employees. So I, I, as I have looked at some of those tools, I think for larger organizations that are trying to manage more people conducting similar functions, I think there may be more value there. But for us and the size organization that we are, we just have not been able to look at those tools and we’ve not even gotten to the point of frankly running any kind of return numbers or anything. It just seems way outside the bounds of what we feel like we can get in terms of reasonable return and reasonable value from them.

Sanjog Aul [00:48:19]:
And what do you think about the rep services? You know, while there are, there is value in there so that you can create a common plug and play module or a plug and play like interface with other your suppliers and everything. But would you not have to rip apart your existing systems which you spend millions of dollars setting up and then putting these web services in? I mean there are schools of thought either way. So what are your thoughts about this?

Jef Fite [00:48:43]:
Yeah, we are taking good advantage of web services. We are upgrading applications and upgrading other infrastructure. We typically are ripping out the functions and other things within legacy systems to make that happen. As we are looking and we are in the process of deploying new point of sale systems. For example, we are definitely using web services heavily again to, you know, to come up to our corporate office and get customer information, get inventory information and so on and so forth there. And we are using web services to communicate more and more with our supplier partners. So that I think certainly does have value for us. So we’re approaching it more taking advantage of that technology in the.

Jef Fite [00:49:23]:
context of other projects. We’re not kind of doing that in and of itself to upgrade particular functions within legacy systems.

Sanjog Aul [00:49:33]:
So what do you think to those are, you know, technology enhancement or you can say technology evolution. With respect to retail organizations, what is, what’s going to happen to the technology for regional organizations in future?

Jef Fite [00:49:50]:
I think we touched on a lot of this today. I think it’s probably going to come down to four or five main areas. I think there’s going to be much more advancement in the consumer facing or interactive capabilities. Certainly as the Internet continues to proliferate and consumers get more comfortable with the level of control they have over the shopping experience, I think you’re going to see much more of that that get integrated into what goes on in stores. You’re starting to see it more and more everywhere. Certainly kiosks are all over the place. You’ve got certain technology showing up in Starbucks stores. You’ve got just a lot of things happening in terms of consumers ability to interact with technology within stores and shops and so on.

Jef Fite [00:50:37]:
So I think that is going to continue to advance. I think channel integration similarly is going to continue to become the norm Consumer. They’re good at least the ability to search and identify and reserve in order and pick up their purchases and merchandise in whatever way it’s most convenient. You may have a consumer that wants to come into the store this time, but next time they want to go or just have the product shipped to their home. So a lot of that channel integration is going to have to be there for retailers to be competitive in the future. We talked about collaboration. I think the next wave of collaboration, some of supply chain partners will continue to be a heavy emphasis for retailers and their supply chain partners web services.

Jef Fite [00:51:20]:
I think the Internet is going to play a critical role in how those supply chain partners communicate with each other effectively. I would call it an absterial identification of merchandise. RFIB is the term that’s thrown around quite a bit. The ability to. To identify, especially in ticket item retailers, the ability to identify a particular refrigerator, not just the fact that it’s a given item number. I think that’s going to become much more relevant in a lot of retail segments going forward. We talked a little bit about business intelligence and again the other birth word I guess would be CRM or customer relationship management. That technology will continue to advance.

Jef Fite [00:52:03]:
Retailers will get much better at serving individual customers rather than the masses, if you will. I think retailers have made a lot of progress in that really even in the last 12 to 24 months. But certainly for a specialty retailer like us, it really is going to win based on service and selection and knowing our customer very well. Those type of tools and the ability to really understand our customers who are buying patterns with us, but then also a lot of just their general lifestyle preferences is going to become incredibly important to feed on a long term business. So those are some of the at least the four or five things that I really think from a technology standpoint are going to continue to advance and continue to move the retail industry forward.

Sanjog Aul [00:52:46]:
Great. On behalf of the show and our listeners, I would like to thank you Jeff for sharing your views about how to make the best use of technology for a retail organization.

Jef Fite [00:52:55]:
My pleasure. Thanks for the opportunity.

Sanjog Aul [00:52:58]:
Thanks again. To be successful in a retail industry takes impeccable customer service, highly optimized supply chain management and scalable technology strategy and related infrastructure that would support the above functions that we mentioned and that would allow us to satisfy the customers who come in so that they don’t stop coming back. Again, thank you again for listening to Managing Technology the Right Way. This is Sanjog Aul your talk show host till next Friday. Take care and God bless.