Statistics and forecasts are all very well, but you want to know what your peers are really doing to keep their operations afloat in straitened economic conditions. This new quarterly section brings you unique ideas and insights from logistics managers on how to ride out hard times, position your business to benefit from a turnaround, and use resources in ways that you may never have considered before. This month, eight influential executives describe practices that have worked for them or that they recommend using in a depressed economy.
We are in the direct response channel against three other key players in the marketplace — CDW, PC Connection, Mac Warehouse. To cope [with the current economy], we’re getting better, tighter, more focused; we’re putting our attention where we believe the best ROI is going to come from. We absolutely, positively squeeze all the value out of all the channels, both inbound and outbound. We have a fulfillment center that’s in Memphis, right near FedEx, so when it’s time to ship overnight, we’re good to go. We’ve turned up and turned down promotional activities; a competitive environment sometimes causes you to offer free shipping or do a little bit of discounting.
Michael Ousley, president,
Mall Marketing, PC Mall
We basically took a good look at all our costs operationally to make sure that the dollars we’re spending are the dollars that we want and need to be spending. We reviewed component costs, starting from the package level — not the actual product packaging, but the package we’re sending to the customer, everything from the box, the tissue, the labels, the tape, and we went out and researched everything to see if we were getting the best bang for the buck. In most cases we were; in other cases we changed some of our purchasing strategies. Instead of purchasing on an as-needed basis, we found it more beneficial to do some bulk purchasing, which we hadn’t done before for a couple of reasons. We didn’t have the bulk that we have today, and then we found that it really paid to buy six to nine months’ or in some cases a year’s worth of material. The price differential was phenomenal.
We backed into it, from packaging on up to procedures, and in some cases we found more efficient procedures and we got better prices because of the different procedures. One of the surprising things I found when I went to re-source is that because we’re much bigger in Europe than we are here, I actually can buy boxes there that are custom-made, and have them shipped here cheaper than I can in this country. I have an enormous amount of buying power in Europe that I don’t have here.
Kevin Donohue, director of operations,
Basically, what we’ve done is just continue to be consistent with our core values. For instance, we continue to give to environmental organizations, because that resonates with our customers, who continue to support the brand.
We continue to use organically grown cotton, even though the price is more expensive than that of conventional [cotton]. Again, if we didn’t do that, we really wouldn’t be consistent with our core values. We really need to be authentic, to walk the talk, so to speak, and be true to what we perceive as the core values of the company.
We’re always watching the expense line and are very focused on what’s going on in the economy. If sales aren’t trending to meet our projections, then we will adjust costs, but not at the expense of the two things I’ve already mentioned.
Mike Busch, director of information services, Patagonia
In the beginning of 2000, we moved to a new facility, a larger warehouse, and we put in a completely automated system with a new WMS. We developed the WMS ourselves, and the automated equipment, backed up with the WMS, took out a lot of touches in the material handling process. We’re saving a lot of labor, and the savings are definitely helping the bottom line. We’re able to fill orders a little faster. We had pretty good speed of order processing before, but it was just too labor-intensive, and we did improve throughput on orders somewhat.
The services that you provide — we do a lot of value-added services and fulfillment of orders — are key to being successful when you’re supplying to the retail market nowadays.
John B. Forbes, senior VP, operations and administration, Citizen Watch Company of America Inc.
For us, in the fashion business, we have to understand what’s going in the marketplace. We do it by listening to what people have to say, and especially our associates that are in the stores. We take a lot of input from people in the stores. Hot Topic allows people to go to concerts and reimburses them for their tickets if they do a report on what they saw and what new fashions are out there.
We don’t follow the traditional model. Most of our product is local and we can get quick turnarounds, anywhere from two weeks to six weeks, on most of the products we have in the stores. We have IP phones in all of our stores, and an associate can pick up and call a buyer without having to dial long-distance. We have real-time e-mail, so our associates can type an e-mail to a buyer and say, “Hey, I just saw this at this concert and it may be worthwhile for us to look at,” or “I just talked to these four customers and they really want to see another version of the Led Zeppelin rock T-shirt.” We can react a lot quicker to that. Our analysts and our buyers demand information as current as they can get.
John Horwath, VP, information technology, Hot Topic Inc.
In trying to align IT with business strategy, retailers must try to tackle some of the easy stuff like integration. XML and BizTalk® can extend some of the stuff they already have. Mobility applications increase the productivity factor. For example, tablet PCs can be used in three different environments — headquarters (knowledge workers), asset management (store to store), and associate empowerment. Associates will have all the business intelligence they need to inform customers. Broadband is going to be huge. Get wireless implemented. That’s an enabling technology you’re going to have to have.
Over time, you’ve got to have a single view of the customer. BizTalk provides one view of the data and can route it to whoever needs it. [One retailer who uses BizTalk] now provides digital receipts to customers. Previously, two warehouses full of paper receipts were being kept. Now customers can look them up on a Web browser.
Windows® XP Embedded is replacing proprietary systems. There is no longer an 18- to 24-month development cycle.
Retailers have to get on the Web services bandwagon — understand their power, get the infrastructure fixed. On the operations side, I would say, demand knowledge, and make IT deliver knowledge.
Tom Litchford, director of marketing and channels, ISG Retail & Hospitality, Microsoft Corporation
I’ve put in what is to me the number-one warehouse management system, Manhattan Associates’ PkMS; I’ve also put in [in the Columbus DC] the whole concept of order explosion and order reassembly using a tilt tray sorter.
This is the end of our second year of using the tilt tray. We also use a tilt tray for sorting outbound packages by different ship methods, to give our clients the lowest-cost transportation delivery that we can. So I’ve got one tray that does two different functions, and that really sets us apart. It really looks like catalog fulfillment. If you walk into an Eddie Bauer/Spiegel, or if you walk into a Hanover Direct, of if you walk into a Lands’ End or an L.L. Bean, you’re basically seeing that we’re doing it the way that they’ve done it.
[Making that kind of] investment in that type of equipment gives you the throughput to handle the high peak volumes, and it also gives you the efficiencies of not having to put 200 pickers out there. My biggest day I think was last year — 69,000 orders over almost 300,000 units — and I probably had 45 pickers for two shifts.
We’ve integrated our PkMS system from Manhattan with a Mantissa tilt tray sorter. We’ve integrated everything within the facility to work with PkMS, and then we have a couple of order management systems — actually we have three of them. We’re kind of refining [the operation] to different markets, but as far as changing anything, we haven’t, really, since we went live in March 2001. The model’s a proven model.
Henry Belcher, solution delivery officer, ClientLogic, and manager of its Columbus, OH, and Dover, DE, distribution centers
In our recent study [“Retail Horizons,” conducted with the NRF Foundation], we found that 13% of retailers now have automated item maintenance; 25% plan to do it next year, then 13% the following year, but 49% have no plans to do it at all. If you’re looking for a seamless supply chain, how could you not synchronize it? Automated item maintenance is very costly to do and it’s very difficult to get ROI from it, but I think it has implications for RFID and supply chain synchronization.
With CRM, we’ll experience a redefinition. We’re moving from, “You’ve got to be bigger” to “You’ve got to be big but personal.” CRM has allocation, replenishment, and supply chain implications, and retailers will redefine it. Strategically, the focus has to be laser-sharp. Some retailers will have to make big bets.
Renee Speicher, senior manager,
BearingPoint (formerly KPMG Consulting)