May 15, 2012
Today’s New York Times article, Macy’s Regroups in Warehouse Wars, is an excellent example of the integration of business strategy, technology, information technology and ultimately Enterprise Architecture.
From a business strategy standpoint the key issue for Macy’s is how does it compete with Amazon.com’s uber efficient distribution system? A key strategic insight, from the chief stores officer Peter Sachse: “We’ve spent the last 153 years building warehouses. “We just called them stores.” Thus, in order to better manage inventory, Macy’s is fulfilling web site orders directly from “shipping centers” at its store locations. This will enable the firm to increase sales without buying more inventories. In addition, store shipments will reduce markdowns, improve margins and increase inventory turnover. This move reflects an industry-based, strategic shift from “multichannel” to “omnichannel” operations where web site operations are intensely integrated with brick and mortar stores.
From a technology perspective, robotic “pick and pack” machines are critical in high-volume, automated warehouse operations. Obviously, this would be cost prohibitive in most, traditional retail stores. Hence, Amazon has a huge margin advantage here.
From an IT viewpoint, advanced inventory and supply chain software (i.e., information technologies) would help to automate some of the new required functionality at the store levels.
Of course, what’s critical is a discipline such as Enterprise Architecture that helps to weave all of the above into a cohesive business capability.