After implementing a merchandise management and warehouse management system, a specialty shoe retailer expects to cut lost revenue due to out-of-stock shoes by 50%.
Before you give in to a district sales manager's request to run things his way, consider the predicament The Walking Company (Chatsworth, CA) was in. Because of a manual system for capturing invoices and receipts, The Walking Company's data became outdated. Over time, its Island Pacific (Irvine, CA) Merchandise Management system was not replenished with data, leading to many of the branch stores' inventories getting out of sync. "There is no way to manually monitor every single SKU [stock keeping unit] in the store," says Greg Milne, CEO of The Walking Company. "Furthermore, Merchandise Management needs data to effectively enable demand planning and forecasting." How much was manually processing data costing the company? "Out-of-stocks were costing us upwards of $600,000 per month," says Milne. "Up to 30% of our basic range of shoes, apparel, and accessories could be out of stock at any given time." Shortly after Milne took over as CEO in March 2002, he began taking action to get things back on track.
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One of the problems Milne noticed with The Walking Company's system was that its POS was not integrated with its back end system. Thus, the inventory replenishment algorithms weren't being used. "After contacting Island Pacific, our merchandise management vendor, I discovered that our company had neglected to install the latest upgrade to the software," says Milne. "Also, our legacy warehouse management system [WMS] was not integrated with Merchandise Management." Island Pacific examined The Walking Company's systems and determined that, in addition to upgrading its merchandise management system and installing a new WMS, the retailer needed to add a demand forecasting module to its application.
The timetable for the integrated solution is on track to be completed by the end of September 2002. The company's buyers and merchandising teams were given refresher courses on how to use the system, and already the out-of-stock merchandise problem has begun correcting itself. "Within the first few months of implementation, we noticed a 50% reduction in lost revenue opportunities due to out-of-stock merchandise," says Milne. "After we capture several more months' of data, our demand planning and forecasting will help us save even more."
Right now, the system stores sales data entered at the branch stores and uploads daily sales activity to headquarters at night. In the future, all inventory information will be sent to headquarters on a daily basis, providing a near real-time view of data. Eventually, The Walking Company envisions transmitting vendor reorder data via EDI (electronic data interchange) on a more frequent basis. Not only will EDI enable the company to more quickly turn around customer orders and react to trends, it will also allow The Walking Company to move toward such initiatives as VMI (vendor managed inventory). When this occurs, it will become the responsibility of The Walking Company's suppliers to make sure all of the shoe retailer's branch stores are properly stocked with shoes and apparel.