By Alan Joch
Nahdi Medical Co. became the Kingdom of Saudi Arabia’s leading retail pharmacy chain with a simple but potent business model: it made shopping for prescriptions and personal-care products convenient. 90 percent of the Saudi population lives within a short walk of one of Nahdi’s huge extended network of stores, and by staffing those stores with experienced pharmacists and other employees, the company ensures an optimal customer experience. But recently, dark clouds of business disruption have swirled around market leaders across all industries, and in 2015 Nahdi’s managers realized their successful business model ran the risk of being upended unless they acted quickly. So in 2016, they launched a transformation strategy that addressed a chief vulnerability—Nahdi’s minimal ecommerce presence.
Headquarters: Jeddah, Kingdom of Saudi Arabia
Industry: Retail pharmaceuticals and personal-care products
Oracle products: Oracle Transportation Management Cloud Service, Oracle Retail Advanced Science Cloud Service, the Oracle Retail Merchandising software suite, Oracle Retail Category Management Planning and Optimization, Oracle Retail Order Broker, Oracle CX, Oracle Retail Xstore Point of Service, Oracle E-Business Suite, Oracle’s Siebel Customer Relationship Management software, Oracle RightNow Service Experience Platform, Oracle SOA Suite, Oracle Hyperion Planning
“More and more customers, especially younger ones, are buying online, so we decided to invest heavily in this area,” says Dr. Khalid Tadlaoui, vice president of information technology at Nahdi.
It turns out that Nahdi’s leaders put their ecommerce plan in motion just in time. In the spring of 2016, in a move that opened up a new front in the battle for retail customers in the Middle East, online giant Amazon announced its acquisition of souq.com, a large ecommerce marketplace serving the region. The move introduced new competitive pressures that could dramatically change the market.
Consumers get a complete view of what’s available in our physical and ecommerce stores. They can use their smartphones, tablets, or desktop computers to see this information anywhere and anytime.”–Aiman Ali Al-Saggaf, Retail Applications Manager, Nahdi
Tadlaoui expects Nahdi to prevail because the transformation plan that’s been rolling out since 2016 isn’t simply a defensive move against online competitors. “We wanted an omnichannel solution that leveraged all of our existing assets, and the biggest one we have today is our network of stores and the people who operate them,” Tadlaoui says.
The Nahdi staff is working with Oracle to merge the company’s digital and physical worlds using cloud services that manage a wide range of retail and transportation management activities. This approach addresses a problem that has confounded other bricks-and-mortar retailers trying to transition to ecommerce. In their rush to act, established retailers often launch online operations as an island apart from their traditional businesses—with separate systems running shipping and inventory management, outbound marketing, customer service, and data sharing. This approach makes a well-integrated omnichannel company more of a dream than a reality.
Length of tenure: Eight years
Education: Engineering degree and PhD in computer science, Institut National des Sciences Appliquées in Toulouse, France
Nahdi executives believe that by combining their network of physical stores with the right online strategy, they can avoid the omnichannel problems seen by others. Even Amazon’s executives seem to agree. The company opened a retail bookstore in New York City last spring, and this summer paid an estimated US$13.7 billion for the Whole Foods grocery chain and its roughly 430 physical stores throughout the US. A new lesson appears to be emerging in the industry: consumers aren’t choosing online versus bricks and mortar. They want both options, so they can choose the one that’s most convenient at any given moment.
With the omnichannel foundation now in place, and a clear roadmap for expanding it through 2018, Nahdi is solidifying its leadership in a market that’s being rocked by outside forces.
A Shake-Up in Retail
Maintaining economic viability isn’t an idle concern for market leaders. New players with better business models and innovative products regularly overtake once-dominant companies. This reality is driven home by a recent American Enterprise Institute analysis that determined nearly half the firms in the Standard & Poor’s 500 could be replaced in the next 10 years because of “creative destruction.”
Pharmacists in our stores are better able to plan for the next scheduled delivery. . . That results in enhanced experiences for our customers.”–Sayed Al-Sayed, Supply Chain Applications Manager, Nahdi
The rise of online shopping is bringing disruption to the entire retail industry. For more than three years, revenue gains in that sector have come primarily from online channels, according to a report by the management consulting firm PwC. The sales gap was especially stark in 2016, when online sales rose more than 10 percent, while in-store sales grew less than 2 percent, the report says.
But retailers that have invested heavily in physical stores are still struggling with this new reality. PwC analysts found that many omnichannel strategies are costly because they require stores to maintain multiple supply chains and inventory pools.
Nahdi’s executives found success with a different formula: using a range of Oracle cloud applications, they’re creating back-end operations that blend the online and physical worlds to better serve customers and capitalize on the efficiencies of a central distribution system.
To support customer-facing operations, Nahdi is building business processes with Oracle Retail Advanced Science Cloud Service, the Oracle Retail Merchandising software suite, Oracle Retail Category Management Planning and Optimization, Oracle Retail Order Broker, Oracle Customer Experience (Oracle CX), and Oracle Retail Xstore Point of Service at the IT core. Together these applications give the Nahdi staff accurate views of current inventory levels in stores and distribution centers and determine the best fulfillment options for each transaction. The cloud environment also provides business processes designed for a consistent customer experience across sales channels.
The company is already seeing early rewards from this assembly of cloud services. For example, customers can go online to see accurate inventory levels in each store. If an item isn’t available locally, shoppers will see the nearest alternative location, or they may choose to order online and pick up the product at a store of their choice. “Consumers get a complete view of what’s available in our physical and ecommerce stores,” says Aiman Ali Al-Saggaf, retail applications manager at Nahdi. “They can use their smartphones, tablets, or desktop computers to see this information anywhere and anytime.”
To further achieve the omnichannel goal, the company is now launching new customer engagement services that will enable Nahdi’s marketing staff to segment customer demographic data and information gathered from point-of-sale systems and loyalty programs. With the help of predictive analytics from Oracle, marketers can then craft communications and promotions that will resonate with individual shoppers.
This consolidated information for physical stores and online purchasing wasn’t available to customers in the past. In addition, the in-depth product information gives consumers the option to comparison shop and read product reviews, Tadlaoui adds.
Transportation Management’s Vital Role It’s not enough for customers to shop online; they also need to receive their purchases as quickly as possible. For now, Nahdi’s digital shoppers “click and collect”—they fill shopping baskets online and then go to their store of choice to pick up the completed orders. But the company’s staff is working to introduce delivery options. A pilot project is currently testing home deliveries in Jeddah, Riyadh, and Dammam, and Nahdi executives plan to eventually roll out home delivery to other large cities throughout the Kingdom in 2018.
Oracle cloud services have already helped move products more nimbly between Nahdi’s distribution centers and stores, says Sayed Al-Sayed, supply chain applications manager at Nahdi. Until recently, the supply chain staff relied on spreadsheets to help get the right products to the right retail outlets at the right time. That was difficult because of Nahdi’s size and available resources. The company uses multiple distribution centers and a mix of dry and refrigerated delivery trucks to handle more than 10,000 products. Many stores are restocked weekly, although high-volume locations in major cities and those close to holy mosques near Medina and Mecca can be replenished daily.
Percentage of Nahdi’s delivery truck utilization, up from about 85 percent since implementing Oracle Transportation Management Cloud Service
Percentage of the Saudi population that lives within a short walk of one of Nahdi’s huge extended network of stores, which includes 1,000 different locations across the Kingdom of Saudi Arabia
The Kingdom’s physical characteristics add delivery challenges. The Kingdom spans 1.6 million square miles and, until recently, all medicines shipped from a main distribution center in Jeddah, the largest port on the Red Sea and the location of Nahdi’s headquarters. A new center in the capital city of Riyadh has shortened the trips of some delivery trucks, but even so, some still travel more than 300 miles to reach outlying cities and towns. During the summer months, drivers battle temperatures that can spike to 122 degrees Fahrenheit.
This combination of factors makes accurate delivery scheduling and route planning essential. But in recent years, spreadsheets have become an outdated method for consolidating shipments, reducing cycle times, and better managing costs. Logistics managers also needed more-detailed information about the status of deliveries. “Tracking shipments and knowing where drivers are at all times was a huge challenge,” Al-Sayed says.
The Nahdi staff had those needs in mind when they looked for a modern alternative to spreadsheets. Al-Sayed says Nahdi’s top requirement was an application that was recognized as a leader for transportation management and that already had a large global customer base. Nahdi was already using a number of on-premises and cloud offerings from Oracle, so any new application also had to work well within that environment. He and his staff also wanted to avoid time-consuming and hard-to-maintain customizations, so the standard services available in the application had to meet most of Nahdi’s needs at the outset.
Cloud was another requirement. “We conducted an ROI assessment and concluded that the best way to address our cost requirements and adhere to industry best practices was with a cloud solution,” Al-Sayed says.
Oracle Transportation Management Cloud Service met all those requirements, with a clear additional benefit. Oracle has an established track record in transportation management and provided valuable expertise during and after the implementation process. “Whenever we reached a challenging step, we received excellent support from the Oracle team,” Al-Sayed adds.
In the months since Oracle Transportation Management Cloud Service went live, Nahdi’s planning and execution operations have logged significant improvements. “We now have greater visibility into shipment demands and delivery status, which means we have the flexibility to quickly redo plans as new requirements arise,” Al-Sayed says. “The accuracy of Oracle Transportation Management Cloud Service’s recommended plans and route optimizations enables us to consolidate shipments more effectively, which increases truck utilization rates.”
Prior to implementing Oracle Transportation Management Cloud Service, truck utilization hovered around 85 percent; today it shows a significant improvement ranging from 5 to 10 percent, he reports.
We wanted an omnichannel solution that leveraged all of our existing assets, and the biggest one we have today is our network of stores and the people who operate them.”–Dr. Khalid Tadlaoui, Vice President of Information Technology, Nahdi
To ensure the quality of medicines in transit, Al-Sayed’s team is now integrating Oracle Transportation Management Cloud Service with data collected from sensors installed in trucks. The sensors relay data about temperatures in shipping compartments, as well as the geographic locations and speeds of vehicles. A software program gathers and analyzes this sensor information and sounds an alarm if temperatures or vehicle speeds surpass thresholds set by Nahdi.
“By integrating all this data with Oracle Transportation Management Cloud Service, we get a central view of all shipments, their status, and the prevailing environmental factors,” Al-Sayed says. “Pharmacists in our stores are better able to plan for the next scheduled delivery, and at the end of the day, that results in enhanced experiences for our consumers.”
Nahdi’s leaders are now blending the behind-the-scenes optimizations of cloud-based transportation management with a new suite of retail applications and the larger ecommerce strategy. “We’re working hard to ensure shoppers experience high levels of customer service whether they’re in our stores or online,” Tadlaoui says. “Together, our complementary cloud services are helping us achieve this full-fledged omnichannel presence.”
Action ItemsEmpowered Workforce: Oracle Retail Merchandise Operations Learning Subscription
Photography by Abdulrahman Bayashout/The Verbatim Agency