A Step Toward Collaboration

Communication is key in any relationship. Retailers interact with their customers and suppliers on a daily basis, and if information is not passed freely, there are bound to be problems somewhere. Looking at the sales and product information for a particular Saks Incorporated store helped the company determine shopping patterns of customers in a particular store, for particular products. The results can be seen in the increase in average sales in each store and better inventory turns overall. By sharing its sales, inventory, and forecasting data with suppliers, the $6.5 billion company believes it will be able to better stock its 354 stores.

The Merchandise Effects Of Forecasts
Saks operates 10 different retail chains across the country, many of which were purchased over the last decade. With store acquisitions came different technology solutions, making it difficult to see a company-wide view of information. One particular disparate area was the company's merchandising systems. The company wants to use only one of its four homegrown merchandising systems. But no matter which system is eventually chosen, Saks knew it was missing one key piece - a forecasting solution. "We want to use forecasts to build our inventory levels in the store, then we can feed that target inventory back into a common merchandising system," said Marty Abercrombie, VP of replenishment, Saks department stores.

The company investigated various vendors, but found that it would need more than a stand-alone replenishment system. It needed something that could manage the B2B (business-to-business) aspect of inventory management as well. Saks found that without detailed supplier/retailer communication, it was very difficult to come up with accurate forecasts. On occasion, Saks has problems with receiving incomplete orders from its suppliers. "It becomes difficult for us, because we have to keep more inventory on hand or end up with stock outs. Customers looking for size 8 white pants can't find them because over 10% of our locations had zero on hand," Abercrombie said. The retailer thought better sales forecasting and communication with suppliers would alleviate stock problems. Saks chose to implement Demand Planning, Inventory Planning, and Voyager XPS from Logility (Atlanta) in 2000 as its first steps toward a full CPFR (collaborative planning, forecasting, and replenishment) solution.

Information Communication Proves Effective
After working with the Logility solution since fall 2000, Saks has seen a 9.4% in-stock merchandise increase at its Proffitts stores and a 4.1% increase at Parisian stores. This provides customers with what Saks considers a higher level of service by consistently offering what they want, more often. With some adjustments to its store assortments, as well as working with inventory forecasts, Proffitts realized a 19% increase in average sales per SKU (stock keeping unit) and an 11% increase at Parisian stores compared to 1999 sales figures.

As Saks moves forward with unification of its merchandising systems, the company is aware that e-business will be a valuable part of efficiently managing its supply chain. The collaborative link between retailers and suppliers will provide a better view of product demand to benefit the entire supply chain. The opportunity to make better use of POS (point of sale) and inventory data will help both Saks and its suppliers manage supply and demand. Logility's Voyager tool allows Saks to put its forecasts on the Internet so suppliers can view them and make appropriate adjustments. This will help a supplier determine whether it should change its manufacturing levels based on projected and actual sales data. Sharing forecasts and POS information will help Saks' suppliers know the stores' inventory needs in advance. In turn, the retailer will receive feedback from the supplier. "They might tell us that we are forecasting too high or low based on product cannibalization or advertising promotions. This is an advantage we could only get through collaboration," Abercrombie said.