The 10 BEST Operations Innovations

Jun 01, 1999 9:30 PM  By

Once upon a time, the Sears, Roebuck catalog was probably the best-read book in the American household-next to the Bible. Customers would page through the catalog, illustrated with black-and-white line drawings, place orders, and patiently wait weeks or months for the cataloger to deliver the goods.

The world has certainly changed since then, and the catalog industry has changed with it. Thousands of catalogs crowd the market today, bursting with colorful merchandise, ready to ship overnight, and competing with the malls, the TV shopping networks, and the Internet for consumers’ attention. The 20th century has brought incremental change to frenzied proportions: The farmer’s wife who kept the Sears, Roebuck catalog on a table in the parlor and wrote out her order with a fountain pen could never have dreamed of placing an order by telephone-and having it answered by a computer system equipped with voice-recognition technology.

In the past 100 years, the catalog industry has reinvented itself many times over. It’s hard to single out just a few of the most important operations innovations, but here are my picks:

THE TOP 10 1. The development of the microchip. For the modern catalog industry, no single innovation has been as important as the development of the microprocessor chipin the early 1970s. The first vacuum-tube computers of the 1940s-30-ton gargantuans-were technological marvels of their time, until they were outpaced by the circuit board technology of the 1960s. A decade later, the microchip made the circuit board obsolete, and successive generations of chips have become more powerful still. The first chips could perform some 60,000 calculations a second; 30 years later, the newest chips process hundreds of millions of calculations each second. Moreover, the microchip reduced the cost of the computer and, as a result, put its power within the reach of all sorts of businesses.

The microprocessor revolution has touched every aspect of catalog fulfillment; if you look at the rest of this list, there’s a chip lurking in every item, from advances in telephony to high-speed sortation to specialized software. Thanks to the cost-effective microchip, small catalogs can afford the power and capabilities that were once available only to big corporations. Catalog companies of all sizes can maintain the large databases that allow telephone service reps (TSRs) to process orders efficiently, while also providing customers with more information about products and availability.

2. The expansion of telephone use and enhancements to telephony. The evolution of the telephone from novelty to universal household tool and high-tech business device was another 20th-century revolution that changed the way catalogs do business. In the past few decades, significant reductions in long-distance rates, the introduction of toll-free phone numbers, and computerized telephony have made telephone orders the rule; some 85% of catalog orders are now placed by telephone.

Automatic call routers now direct incoming calls through call centers, either to specific TSRs or to an overflow call service. In recent years, fax machines and e-mail have made the exchange of data instantaneous. Electronic data interface (EDI) has simplified the task of sending large purchase orders and getting large up-to-date advance shipping notices. Manifesting and tracking between catalogers and carriers is likewise more efficient.

3. The growth of consumer credit and the use and acceptance of credit cards. Increased mobility, coupled with larger markets, has transformed the way society buys and sells goods and services. Universally accepted credit cards are the rule rather than the exception, and they have made catalog purchasing faster and easier. Near-instant authorization of credit card purchases helps regular and first-time catalog buyers alike; computer-to-computer credit, rather than manual searches for records, has made the process lightning fast. The mid-1980s saw the development of shared credit databases that pool credit records, another computerized innovation.

Advances in transportation, especially increased air traffic, and the rise of overnight shipping. The emergence of affordable air freight has given rise to the overnight shipping concept and an entire industry that services small-order shipping. The availability of fast service has encouraged new consumers to buy from catalogs items that they might otherwise have bought locally.

4. Specialized computer software. Sophisticated software has aimed the power of the computer at ever more specialized uses. Catalog management system (CMS) and warehouse management system (WMS) software packages offer hundreds of functions and reports tailored to the needs of mailers. These systems enable catalogers to expand from regional markets to national and international ones. And with package CMS and WMS applications that are supported by the vendor, companies need not have programmers on staff.

Materials-handling equipment and technology. Automation transformed not just the manufacture of goods, but also the transport of merchandise. Conveyors, forklifts, jacks, and racks created the modern warehouse, before being supplanted by chip-powered innovations. High-cube vertical storage with automatic retrieval systems, for instance, have increased efficiency while enabling catalogers to use vertical space that was once wasted in high-ceilinged warehouses.

5. Processes such as receiving, stocking, and picking, which once took days, now take just hours. High-speed online product sortation allows for more picking options for orders encompassing multiple product lines. Scanners make possible the bar-code verification of product, location, and tracking of labor, while radio frequency (RF) transmits scanned data instantaneously. At some catalogs, computers guide merchandise from the time it arrives on the truck to the time it is shipped out to consumers.

Improvements in fulfillment procedures. Warehouse management technology such as RF has helped catalogers improve fulfillment speed and accuracy, but many mailers have also revamped methods and procedures to make their operations more efficient.

6. For instance, most catalogers now sort customer orders into groups of single-product-line orders, multiline orders, backorders, method of shipment, carrier, customer location, order size, warehouse or section division, or other categories before picking. This enables mailers to design a “walkway,” or picking path, through the warehouse to reduce travel time.

Improved warehouse design. As the above example shows, improved fulfillment procedures go hand in hand with improved warehouse design. A few decades ago, catalog warehouses were about space, not science. But as mailers become increasingly squeezed to save time and money, and as space becomes a premium, warehouses have become a lot smarter. Layouts allow for maximum pick efficiency and minimum travel time, while mezzanines let mailers add another partial floor to a crowded warehouse. Flexibility for warehouse expansion has become key to avoid getting landlocked by a building’s design.

7. Enhanced inventory management. Computer chips have made it possible for catalogers to deal with hundreds of thousands of SKUs, which were formerly tracked in cumbersome black binders that held receipts, sales and transfer records, and inventory requirements. Now customer service reps have up-to-the-minute information on product availability at their fingertips and can allocate inventory to new orders or reserve backorders against future purchase orders.

8. Forecasting and just-in-time inventory management have allowed catalogers to lower their average inventory, dramatically increase product turnover, and reduce the need for product liquidation. These systems have also transformed the relationship between cataloger and vendor, who now share systems and data; often, the vendor is responsible for maintaining inventory levels. In addition, product sales forecasts can be used for selecting the most efficient product locations within the warehouse. Online inventory systems enable warehouse staff to continually relocate SKUs in response to changing sales performance and forecasts, placing the fast-moving items in high-traffic pick areas and moving slower sellers so that they don’t take up prime warehouse real estate. And online systems even allow catalogers to stagger the arrivals of merchandise in response to forecasts so that they take up no more space than necessary.

9. The Internet. The most recent effect of the computer chip revolution has been the opening of the Internet and the birth of e-commerce. Marketers are racing to develop Websites, or to improve them so that they are faster, more interactive, and more user-friendly. This could lead to major changes in the catalog industry in the next century, as catalogers continue to develop their own sites while dealing with increased competition from sellers with no direct mail experience that are jumping into the Web. The rise in online competition may at the same time provide catalogers with opportunities to sell their expertise in fulfillment.

10. As the 21st century dawns and we learn to surf the online marketplace, we’re a lot like the farmer’s wife ordering from Sears with her fountain pen. We can’t imagine how the coming century’s catalogs will market and deliver what they have to sell.