Food retailers embrace the electronic age
with their use of new technologies and demonstrating the importance
of IT within their operations, according to the latest research
from CIES - The Food Business Forum.
Companies across the food retailing sector are making good progress with their use of new technologies and demonstrating the importance of IT within their operations, according to the latest research from CIES, the retail market analysts.
The research was unveiled at the CIES' IT conference in Lisbon last week, and resulted from a survey carried out by KPMG International and CIES. The main findings showed that while there have been significant advances made in the past six years, there are still several areas in which the sector could improve its performance.
The survey is the fourth of its kind with previous surveys having taken place in 1991, 1993 and 1996.
Jean-Luc Galzi, CIO of Casino, and August Harder, CIO of Coop in Switzerland, both members of CIES International Committee on Information Technology, stressed the importance of the survey in continuing with the committee's mission to anticipate trends and improve company performance through the use of IT.
Gerry Penfold, a partner with KPMG's Information Risk Management practice in the UK, commented: "Over the last six years, leading food retailers have succeeded in exploiting new technologies - such as the Internet, e-marketplaces, storage area networks and radio frequency data transmission - and have delivered real business benefits in areas such as customer service, supply chain efficiency and the cost of IT.
"Rather than being carried away with these successes though, there are still a few issues to be addressed. For example, our survey responses point to the majority of IT spending being directed at achieving short-term benefits during 2003. Many companies are adopting defensive, cost-driven strategies and taking a tougher stance with suppliers in areas such as the cost and frequency of software upgrades.
"However, I believe too great a short-term IT focus will actually create higher overall costs as opportunities to use IT to improve business efficiency are deferred or missed."
On the issue of IT spending, the survey showed that 2001 was the boom year for expenditures. IT spending as a percentage of total sales was reasonably static between 1997 and 2000, at around 0.75 per cent, most probably due to the freeze on new projects in the run up to the Y2K milestone, the CIES report showed. After that, spending escalated noticeably, only to fall back again last year due to fears over the global economic downturn.
The results also show that European and Asia-Pacific retailers spend less than their North American counterparts which suggests that an upward trend in IT spend may resume on this side of the Atlantic if investment can be clearly linked to business benefits.
When asked what priority their IT function should place on a number of IT-related issues, the fact that maintenance and operation of existing IT systems was ranked as the top priority clearly shows the importance of IT to retail operations. However, future surveys are expected to show a reduction in its importance in favour of managing third party service providers because of the trend towards outsourcing and externalising of IT services. Respondents indicated that the level of outsourced IT services would increase steadily over the next five years, CIES said.
The report also showed that food retailers are increasing their use of packaged systems across all areas of the business, although specialist retail solutions are still preferred in many areas to integrated ERP packages which have yet to deliver the functionality that food retailers require.
Gerry Penfold of KPMG concluded: "On the positive side of this survey, the advances in adopting new technologies since 1996 is testament to the value of IT and its importance to food retailing. Furthermore, despite the uncertain economic conditions, those food retailers still prepared to invest in this area to improve business processes and better manage information will build a vital competitive edge for the future."
CIES - The Food Business Forum is the independent global food business network. Members include more than two thirds of the world's largest food retailers and their suppliers. In total, more than 200 retailer and 200 supplier companies in over 50 countries are part of the international CIES network.
