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Retail organization structure: Welcome

This QuickView addresses these questions: What are the types of Retail organization structures? What are the structural elements of a Retail organization? Why is understanding organization structure important? Click a link to any of the topics in the table of contents to learn more about that topic.

Table of contents

Welcome page Basicspage What steps do you take to understand your customer's organization structure? What are the next steps after you understand your customers organization structure? What questions should you know the answers to before talking with LOB executives? What mistakes can you make if you don't understand your customer's organization structure? What is the greatest benefit to understanding my customers organization structure? Organizationpage What are the types of retail organization structures? What are the structural elements of a retail organization? Why is understanding organization structure

Did you know?

Find below some interesting facts about the Retail organization structure: Understanding your customer's organization structure enables you to develop a tailored business strategy that will improve your customer's performance. A company's organization structure is not only a chart with the departments of that company; it also contains roles, relationships, a control and a budget structure. A Retailers organization structure is one of the most important factors in terms of defining the priorities for the company as a whole, as well as for individuals in different roles within the company. Frequently, there are tensions between priorities as defined for people in different roles in the organization, such as between Merchandising and Supply Chain roles. These tensions are often the unavoidable byproduct of the fact that Retailers are always attempting to balance various goals against each other, such as the need to make sure that merchandise is in stock so as to capture the highest number of sales possible, while managing inventories so as not to incur excessive costs or get stuck with obsolete goods. Understanding where these tensions lie, why they exist, and how a given Retailer is dealing with them, is a key to evaluating how successful the Retailer is in its approach at the overall enterprise level Beyond a Retailers internal organizational structure, it has become increasingly common for Retailers to have critical

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partnership relationships with outside firms who may provide a range of services to the Retailer on an ongoing basis, even to the point of having permanent full-time employees working onsite with the Retailer. This is common in a number of functions such as IT, Marketing and other areas. Its important to find out about these relationships, and the ongoing roles that outside organizations may play for the Retailer, in order to understand fully how the Retailer does business. See the discussion of outsourcing below, in the discussion of organizational structures



Resourcespage External resources Internal resources Contact information

Retail organization structure: Basics

What steps do I take to understand my customers organization structure? Once I understand my customers organization structure, what are my next steps? What questions should I know the answers to before talking with LOB executives? What mistakes can I make if I don't understand my customer's organization structure? What is the greatest benefit to understanding my customers organization structure?

What steps do I take to understand my customers organization structure?

1. Obtain an organization chart. 2. Evaluate the overall organizational structure, in terms of its primary business units and functional structure. 3. Understand the existing business process and systems. (For a view of Retail business process maps, click here.) 4. Determine who controls each department's budget. 5. Gather information to understand what metrics and incentives are used to drive performance by players in different parts of the organization, and whether these are effective in delivering optimal results at the overall enterprise level. 6. Understand what roles and functions are being executed by outside organizations, through partnerships or outsourcing arrangement. Back to top

Once I understand my customers organization structure, what are my next steps?

1. Research the current IBM relationships with your customer at all levels. 2. Contact the individuals with the purse strings. 3. Develop relationships with the decision-makers (line of business or LOB executives) (To view C-Level Executives' Advice to IBM, click here.)

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What questions should I know the answers to before talking with LOB executives?

What is the executive's role? Which departments does the executive interact with? Who reports to the executive? Which departments do these direct reports control? What are the key challenges he/she faces? What are his/her priorities, given these challenges and the executives defined incentives? Are there any upcoming structural changes planned? Use your knowledge to ask the executive what business challenges the answers present. For example, through your research you may find out that Merchandising does not talk to IT. You can then ask the executive, "What business challenges this presents?"

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What mistakes can I make if I don't understand my customer's organization structure?

You could: Pursue an incorrect decision-maker. Don't assume that the senior executive for each department is the final decision-maker. Often, departments do not stand alone -- they report through another business function. Be clear on the reporting structures. For example, if budgets are centralized, but you are working with a local store, you are not building your relationship with the correct decision-makers. Partner with the IT department before knowing how the organization views its IT department. Organizations usually regard their IT departments favorably as a core competency. But some organizations view IT as a stumbling block due to complicated, disconnected legacy systems or a history of difficult IT/business relations. Clarify the IT department's status before developing your selling strategy. Understanding a customers organization structure is key to the efficient use of your time.

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What is the greatest benefit to understanding my customers organization structure?

Knowing how your customers organization structure helps you: Develop an enterprise-wide business strategy. Provide the ideal products and services for executing the strategy. Back to top

Retail organization structure: Organization

What are the types of retail organization structures? What are the structural elements of a retail organization? Why is understanding organization structure important?

What are the types of retail organization structures?

Retail organizations most commonly choose to centralize key strategic processes like merchandising, marketing and IT to exercise consistent control and to gain scale economies. They also usually centralize back office processes like HR and accounting to make them efficient and consistent, while they may choose to decentralize certain decision-making within Store Operations to allow flexibility to respond to local market conditions. In addition, over the past ten years retailers have increasingly chosen to outsource -- contract with an external service provider -- to perform certain functions and processes, in order to take advantage of even greater economies of scale and the lower costs available through offshore labor resources. It can be attractive for a Retailer to outsource relatively standardized processes that do not involve issues of competitive advantage; these typically include processes within the accounting, HR and IT functions, among others. The illustration below shows a typical Retail structure.

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Remember, different organizational departments may follow different structural strategies -- there are no set rules. Be sure to learn the departmental structure of your customer's organization, so you can understand its needs and recommend proper solutions. Back to top

What are the structural elements of a retail organization?

Most retail organizations (centralized or decentralized) consist of 8 departments: Merchandising/Buying Distribution and Logistics Finance and Accounting Human Resources Information Technology (IT) Marketing Merchandise Planning Store Operations Each department has defined responsibilities and adds value to the retail organization. Understanding its significance is critical for you as a sales professional.
Merchandising/Buying Department

The Merchandising departments primary role is to select the merchandise that will be offered to customers, negotiate the best possible terms with supplies for procurement of these goods, and determine how this merchandise will be presented to customers in a way so as to drive the highest possible sales and profit. Responsibilities: Achieving planned sales, gross margin and inventory turnover objectives. Attending trade shows and using other methods to keep on top of current trends and the merchandise that should be considered for inclusion in the assortment Performing market research on products. Developing strong vendor relationships. Developing and maintaining a working relationship with the merchandiser. Developing product assortment plans. Managing the open-to-buy fund. Managing advertising and pricing plans to optimize turnover and profitability. Performing market research on products. Placing purchase orders with vendors. Setting buying and pricing plans. Recommending or initiating markdowns.

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Distribution and Logistics

The distribution and logistics department is charged with managing the movement of goods from receipt from vendors, through distribution centers and warehouses, to the stores, as well as the processing of returns to vendors. Its goal is to achieve the most efficient and low-cost product movement through the supply chain, while balancing this with the need to avoid lost sales due to out-of-inventory situations and supply disruptions. By working with this department, IBM can help improve the efficiency of the movement of goods throughout the supply chain management process. Responsibilities: Ensuring that goods match the purchase order and shipping requirements. Flowing goods to stores. -->Managing distribution centers (DCs). Managing relationships with logistics and transportation companies. Receiving merchandise from vendors. Taking returns for return to vendors.
Finance and Accounting

Finance and Accounting monitors ongoing operational accounting and the integrity of financial controls, maintains accounting records, prepares financial statements, sets long-range organizational financial goals, monitors budgets, prepares tax returns, conducts real estate planning, disburses cash and provides credit services. The leadership of the finance and accounting department is responsible for evaluating the potential viability and return promised by the various projects that a Retailer may consider making capital investments on. The CFO is also responsible for managing the Retailers overall capital structure, including, if the Retailer is a public company, the issuance of stock and reporting of results and analysis to Wall Street and the community of financial analysts. Responsibilities: Developing capital and operating budgets. Establishing leasing and buying policies. Financing purchases and monitoring inventory levels. Managing cash flow and cash accounting for stores. Managing credit by researching and establishing financing sources. Monitoring corporate targets such as sales, gross, net and pretax profit. Performing controller functions/internal financial controls and accountability. Valuating and managing assets.
Human Resources

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Advances in technology eliminated many jobs in other industries, but store-based Retailing remains a laborintensive business that places emphasis on human interaction. From merchandise buying and displaying to customer service, people are an important factor in Retail, and the industry is a leading source of entry-level jobs in most national economies. The human resources department manages all matters related to the companys employee workforce, including recruitment, compensation and incentive plans, benefits, workers compensation, and compliance with legal obligations and regulations related to employment. Responsibilities: Developing human resources policies. Ensuring that the organization understands and works within legislative requirements. (For more information, follow directions to access Hoover's from Worldwide Competitive Portal). Managing the human resources functions -- for example, recruitment, training, career path identification, salary management, payroll, employee benefits and employee evaluations. Participating in or monitoring labor relations.
Information Technology (IT)

The IT department plans, implements and maintains the infrastructure of the organization and the business applications that execute the various processes and functions within the organization. It is ITs responsibility to work with the business personnel to understand how the business needs to be supported in doing their work, and how to provide such technology support so as to make the enterprise as efficient and profitable as possible. As the range and sophistication of available information technology has proliferated over the past several decades, the role of IT and of the IT department has become a critical source of competitive advantage for Retailers. Working with IT departments is a core competency of IBM and is usually the foundation of our Retail executive relationships. Responsible for establishing and maintaining: Databases Operating systems New and existing business applications Reporting capabilities Hardware systems: Point-of-sale Servers In-store processors

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The marketing department publicizes a positive image of the Retailer to its consumers, stakeholders and competition. This has traditionally taken the form of advertising, whether on TV, in newspaper ads and inserts and on the internet, but the advent of sophisticated Customer Analytics has dramatically expanded the range of possibilities that must be considered as ways for Retailers to market themselves, and to tailor such marketing and offers to different sets of consumers, so as to maximize sales and the return on marketing spend. Likewise, the rise of online social media and networks in the past few years has greatly expanded the ability of consumers to communicate with each other and share opinions and ratings of Retailers and the products they carry -and being able to monitor and respond to whats being said about them online is another area that Retailers are just now (2010-2012) beginning to recognize and grapple with. IBM can assist this department by providing a range of services and products around marketing processes, customer analytics, and social media analytics. Responsibilities: Conducting customer analytics to understand how to target different types of consumers. Building advertising and promotional activities. Designing and producing advertising and circulars. Developing the market plan and performing market research, such as focus groups. Increasing market share through customer loyalty programs. Working to deliver the highest possible incremental return of sales and profits from marketing spend
Merchandise Planning

The merchandise planning department establishes item-specific goals, such as sales and profitability, and works closely with other supply-chain related functions in order to achieve the smooth and efficient flow of goods through the supply chain. This activity builds upon the Merchandising / Buying departments work, in defining the merchandise assortments. At some Retailers, the merch planning function constitutes its own department, answering directly to the operational executives. At other Retailers, the merchandise planning function may organizationally fall within the Merchandising department, i.e., merchandise planners may report to the Merchants/Buyers. IBM offers many system capabilities for merchandise planning, within the broader context of supply chain solutions. Responsibilities: Analyzing sales and inventory results on a weekly, monthly and seasonal basis. Creating the visual merchandising environment. Developing and maintaining a working relationship with buyers. Developing seasonal merchandise plans. Ensuring that promotional inventory requirements are forecasted and met. Establishing corporate targets, like sales, gross, net and pretax profit. Formulating allocation models.

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Managing inventory levels for maximum productivity. Managing the open-to-buy fund. Reforecasting in-season. Recommending and initiating markdowns.
Store Operations

The store operations department is responsible for running the stores -- getting received merchandise onto the shelves, making sure that merchandise as well as the store as a whole reflects the design and image the Retailer wants to project, employing store associates to interact with customers, perform checkout and accept returns. Store Ops is the one major Retail function that by its nature has to be largely decentralized, simply because it involves a large number of people performing many tasks at a large number of diverse geographic locations. While policies and processes as defined for store ops may be standardized and intended to be followed closely at all stores, actual execution of these processes may vary widely depending on the training and experience of the individual store associates and managers. Most Retailers experience relatively high turnover amongst these employees, which also contributes to the problem of inconsistent execution. And since customers interact with stores and store associates in an on-site, in-person way, lapses and inconsistencies in store execution can be very damaging to the Retailers image and reputation. Information technology is used widely in store operations to standardize processes so as to make their execution as consistent as possible, and also to create accountability and to incentivize/reward consistent and successful behaviors. And with the widespread adoption of smart phones and mobile technology by consumers, Retailers are beginning to explore ways to enhance the customers store experience by providing tailored information and offerings to their smart phone based on the identity of the customer and our pre-existing data about their interests and buying patterns, and also based on where exactly the shopper may be physically in or near a store. The development and deployment of these mobility technologies will be a key area of growth in coming years (2010-2015). IBM is the in-store technology and professional services leader. We have dominant market share with point-of-sale hardware and software and have a number of products available and under development around mobility and the enhancement of the shopping experience through technology.

Responsibilities: Maintaining safe and inviting store facilities by efficiently using space and visual merchandising. Meeting the sales budget. Providing customer service. Controlling the security of assets. Communicating customer needs to merchandising and buying departments. Recruiting, hiring, training, retaining and scheduling staff. Participating in the local community. Back to top

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Why is understanding organization structure important?

Understanding your customers organization structure allows you to: Focus on their specific product and service needs. By knowing how departments interact (or don't interact) within an organization, you can develop an end-to-end business strategy and craft solutions to improve communications between departments. Determine the appropriate offering for your customer's structure. For example, you would offer different business process systems to a centralized organization versus a decentralized organization. You may also find additional offerings to recommend. Back to top

Retail organization structure: Terminology

Definitions for terms found in this QuickView:

Allocation models

The process of determining the quantity assigned to each store either initially or as replenishment. Allocation models are applied to groups, categories and individual items.

Flowing goods to stores

The movement of goods from the manufacturing plant to the stores with or without an interim distribution center and/or broker.

Managing distribution centers

The distribution center consists of 5 steps: 1. Store Ordering: Orders are generally placed in the morning. A store department supervisor examines the store shelves to determine which items need to be ordered. The supervisor then creates the order by filling in a preprinted order sheet or by scanning a bar-coded shelf label with a handheld terminal. The order is then sent to the distribution center. 2. Order Processing: Orders usually come into the distribution center in the afternoon. They are processed online against a perpetual file that contains the latest on-hand and on-order item information. This process also identifies warehouse selection locations with low inventory levels and produces a list of assignments telling forklift operators which pallets to let down from storage to their selection slots. 3. Let Downs: Forklift operators let down the pallets from the storage spaces into the selection slots. 4. Selection: Selectors pick the ordered items, apply case or unit labels and place items on pallets. 5. Loading: The palletized orders are staged at the loading bay, loaded onto a truck and sent to their store destinations.

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The difference between planned and estimated end-of-the-month (EOM) inventory. This reflects the dollar amount still to be purchased (if negative) or that was overspent (if positive).

Product assortment plans

A product assortment is a cross-section of merchandise that enables customers to choose from a selection of brands, designs, sizes and price. Assortment management is the development of a plan to tailor merchandise to individual store demographics. It remains a critical element of success for most retailers. Assortment plans are the retailer's equivalent of mass customization, which is putting the right mix of the right products in the right store at the right time. For an additional listing of additional Retail terms, see the complete list via the Retail Snapshot Quickview . Back to top

Retail organization structure: Resources

Additional resources to learn more about retail organization structure:

Internal resources

Visit IBM Customer Reference Materials Database This link contains customer solution details for use in sales situations. The content is not approved for public distribution outside of one-on-one sales situations. You should always contact the person named in the reference prior to discussing with your customer. Access Market Intelligence Resources resources. to view a complete list of market intelligence

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External resources

These key industry news publications provide industry insights from the customers perspective. Explore these sources online or order hardcopy subscriptions. Chain Store Age contains a monthly online news magazine for retail executives. The Web site also offers a weekly fax newsletter (Executive Fax) and a twice-monthly newsletter (Inside Retailing). National Retail Federation offers programs and services in research, education, training, information technology and government affairs to protect and advance the interests of the retail industry. NRF represents more than 100 state, national and international trade

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organizations. Stores contains information for chain store retail executives. Other features include: news, management and merchandising information and monthly reporting for chain sales and profits. About covers 50,000+ subjects with over 1 million links to the best resources on the Internet. Each site is run by a professional guide with a comprehensive knowledge of the specific topic. Guides provide interactive experiences. Woman's Wear Daily provides timely, credible business news and women's fashion trends for retailers, designers, manufacturers, analysts, ad agencies, etc. Supermarket News offers a weekly trade magazine, daily news briefs and e-mail alerts for the food distribution industry. It is an information source for industry news, trends and product features. Back to top

Contact information

If you have questions or comments about this QuickView, please contact: the Industry Learning team , ( Back to top



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