Magazine Article | March 1, 2003

Manage Merchandise, Salvage Sales

Source: Innovative Retail Technologies

Implementing merchandise management software caused $760 million Wilsons Leather a little pain, but the resulting $2 million in 'found' sales was a real painkiller.

Integrated Solutions For Retailers, March 2003

There was no time like the late 1990s to experiment with retail technology. Retail sales were up, IT spending was up, and the economy was generally strong. Retailers who tinkered with technology back then might have felt a little growing pain at the time, but those who got it right broke into the new millennium at full stride. Such was the case in the IT department at $760 million Wilsons Leather. Wilsons admits it wasn't easy moving away from its own proprietary merchandise management system and into a beta relationship with a large retail software vendor. Centralized, enterprise-wide merchandise management tools were just breaking over the horizon at the time, and Wilsons was about to become the testing ground for what has evolved into a flagship merchandise management product.

Wilsons was running an aging, homegrown merchandise management system in what the company admits was a doing-things-a-certain-way-because-that's-the-way-they-had always-been-done scenario. While in the mid- to late- 1990s the company was rapidly adding stores (at close to 100 per year) and stock keeping units (it now carries more than 10,000), its merchandise management systems were bogging down. Full replenishment cycles, for example, were taking nearly a full day to process, a problem that was compounded during the holiday shopping season. Wilsons jumped at the opportunity to partner with retail software vendor JDA to test and prepare its ODBMS (Open DataBase Merchandising System) product for market. But old habits die hard. While the project brought some immediate performance improvements like the ability to do stock replenishment more often, Wilsons continued to build work arounds and modifications to some elements of the software.

Work Arounds And Add-Ons Create Headaches
When building ODBMS, Wilsons failed to take full advantage of the software's SDI (standard data interface) tables. These tables are designed to set a framework for the merchandise management model by keeping static data, which makes upgrades and interfaces easier. Without utilizing the SDI tables, each time Wilsons made a program change or attempted to interface its merchandising management system to another program (such as accounting or inventory), it would have to write the interface from scratch. "When we first went live with the system, we simply didn't realize the importance of using the tables," says John Kondratuk, managing director of business systems at Wilsons. "Now, we keep the data in the SDI tables current, so when we upgrade, we don't need to completely rewrite the interface."

In addition to building each interface instead of using all the SDI tables, Wilsons was faced with the reality that ODBMS had no retail stock ledger. While the retailer was working with JDA to design one, it was forced to use its own homegrown stock ledger. Wilsons ended up with an application that took 16 hours to run and often never finished its job. "We got by with this monster we had created until we finished working with JDA to build a stock ledger into the system. Now we use it instead of the application we had created," says Kondratuk. As a result, it now takes between three and four hours for Wilsons to do a stock recalculation.

Merchandise Management In The New Millennium
Wilsons' modifications and work arounds to ODBMS were wreaking havoc with upgrade attempts. With its customizations and modifications removed, the retailer found itself ready for a merchandise management upgrade in 2000. The move to the Portfolio Merchandise Management System was actually several upgrades in one. Wilsons had to make the step-by-step transition from version 3.18 to 4.2. Data had to be converted version-by-version and tested for accuracy at the conclusion of each step. But in the end, the retailer was empowered with functionality it had never imagined back in 1997.

Today, the merchandise management process at Wilsons gives it the ability to run a complete replenishment cycle in eight hours, in addition to smaller, key-item replenishment orders throughout the week. Wilsons' business model includes several airport stores, and during the holiday peak, more than 200 seasonal satellite stores. The airport and seasonal locations don't enjoy the luxury of having large back rooms. The improvements to its merchandising system have allowed the retailer to run replenishment orders for these stores every night and ship inventory to them every day. The ability to replenish this often makes up for the lack of a back room at these locations.

Wilsons' internally developed stock transfer order software initially required a DC worker to physically dial into the system at 3 a.m. to begin transfer order generation. This was necessary for orders to be ready at 6 a.m. for the DC staff. With the current merchandise management system in place, the process is automated nightly. When DC workers come in to work at 6, their pick, pack, and ship orders are there waiting for them, and none of the employees are bleary-eyed from a sleepless night.

Network-Enabled, Enterprise-Wide Visibility
With merchandise management software in place, Wilsons turned to its network. Working with Cisco and AT&T, Wilsons implemented voice over IP (Internet protocol) technology on a WAN (wide area network) to connect its stores in 2000. This gave stores a register-level view of the enterprise. The new software and network enabled the company to realize the benefits of centralized fulfillment and merchandise lookups. In the event a customer is unable to find a certain style and size, an enterprise-wide merchandise lookup can happen at the store level. The customer then has the option to have the merchandise shipped and billed directly to their home, or to their local store. Kondratuk estimates that his company has found more than $2 million in sales that would have been lost without this ability. "Of course, you never know if those lost sales would have been replaced by another selection. But even if 50% of them weren't, it's a significant volume of sales," he says. Plus, the network has completely eliminated store-to-store long-distance phone bills.

Product shelf life isn't a concern of just grocers; it's a daily challenge in fashion sales as well. Nobody wants to buy last year's jacket, especially not at this year's prices. With the merchandise management system, Wilsons is equipped with an automated markdown feature that allows the retailer to time-sequence markdowns based on sales rates. If a predetermined turn rate on products Wilsons wants to move is not realized after so many days or weeks, the system will estimate how long the item will remain in stock at current sales rates and suggest a deeper markdown if the goal will not be met. "Some items, like gloves, don't change much, so it's not painful to hold them over for a season," says Kondratuk. "But, if it's a fringed, suede skirt and we still have a few thousand of them in the spring, we want to get them out the door as soon as possible. We might not be able to give them away the next season." Kondratuk says automated markdown has especially proven itself in the company's outlet stores.

Ration CPU With Servers And A SAN
With its merchandise under control and its network in place, the IT projects at Wilsons will now turn to servers and SANs (storage area networks). The company will upgrade its HP N-class servers and build a SAN this year, which will allow it to cluster its servers. With clustered servers, the merchandise management system will sit on one server of three in a cluster, but CPU (central processing unit) power from all three servers will be available to enhance merchandise management system performance during nightly processing periods. As for its merchandising management system, Kondratuk says Wilsons will upgrade the system at least every other year to take advantage of these software improvements.