Software supplies the fizz in home furnishings retailer Bombay Company’s distribution cocktail. Thanks to programs that allow better merchandise forecasting estimates as well as lead times, the Fort Worth, TX-based firm has reduced its merchandise carrying costs by $13.5 million while boosting its in-stock availability from 89.3% to 92.7%.
Roger Tyler, Bombay’s vice president of merchandising planning, wanted to clean up the company’s varied products across its warehouses and deploy an enterprise suite with the least possible business interruption. But Bombay is not your average retailer.
For starters, getting the right assortment to Bombay’s 400-plus stores is imperative. Most are located in upscale malls across the United States and Canada, occupying an average 2,800 square feet of selling space. They have around 6,000 SKUs of furniture, wall décor, and accessories ranging in price from $5 to $3,500.
To make matters more difficult, 95% of Bombay’s products are proprietary, so product sourcing is crucial. Add to that the marketer’s 135 manufacturers in 22 countries. On average, Bombay has 185 days of lead time with its vendors. By comparison, larger retailers such as Wal-Mart or Target can place an order with a vendor on Monday and have it delivered to a distribution center by Saturday.
According to Tyler, who came to Bombay in June 1999 after stints at Federated Department Stores and K-Mart, Bombay’s previous host system, JDA, was nothing more than an Excel spreadsheet. “You could reference the data, but no actionable decisions or processes could take place,” he says of JDA.
SCORE software from San Francisco-based Nonstop Solutions is a supply chain forecasting and inventory management package for wholesalers, retailers, and manufacturers. It grades top SKUs based on rules that the marketer assigns. The software has been a boon to Bombay Company, which has paid $300,000 for SCORE since implementing the system in December 2000.
The program is made up of five modules: demand planning, inventory replenishment planning, inventory optimization, investment buying, and a business intelligence tool. SCORE compiles the data into actionable statistics, and then carries out the direction,” Tyler says.
The beauty of SCORE, Tyler adds, is that the system breaks out SKU activity across Bombay’s five distribution centers and ranks them accordingly. The company has also designed an inventory transfer model to help juggle products among its warehouses, based on costs and regional demand. For example, Bombay’s Queen Anne’s Hope Chest, which sells for $500, may be a hot seller in the Northeast, but it doesn’t have the same appeal in the South. Therefore, the southeast DC, based in Atlanta, need not carry as many SKUs of the Hope Chest.
Bombay Company uses the STS Allocation package from Quebec-based NSB for store distribution from its warehouses. “It uses much more rudimentary calculations, but has great dynamic capabilities,” Tyler says.
Limited floor space and atypical dynamics posed a challenge for Bombay’s planning and allocation staff. “When I first started, our weeks of supply ranged from 4.8 to 33.6 — that’s a huge span,” says Tyler. “Up until then, the company was very much a pull-oriented retailer. Stores ordered what they wanted, when they wanted. The first thing I had to do was get the store operational groups on board. I had to show them what they could expect with more precise allocation planning.”
Tyler began by taking a snapshot of the system and identifying opportunities where he could reduce the pipeline to low-volume stores and divert merchandise to high-volume stores. The idea was not to buy more merchandise, but to allocate more accurately. “With Allocation, I could show them how this could be achieved,” he says.
Understanding merchandise assortment opportunity is the key to precision allocation, according to Tyler. “To be successful, we must make purchases designed for a group of stores,” he notes. “Buyers need to understand assortment opportunity, and should be shown that every store doesn’t necessarily need everything. Rather, purchases should match certain groups of stores.”
Tyler explains that STS Allocation enables the user to “see the dynamics of a store throughout each part of the season. For example, you can look at the last six weeks of sales, tie that in to a promotion you ran in, say, June last year, and use that information to load stores up for your upcoming ads. That’s an extremely valuable tool.”
Bombay, which paid $325,000 for the system, began implementation in March 2000, starting with the back-loading of information from the previous two and a half years, by individual SKU and individual store. Three months later Bombay was shipping product with STS Allocation. Within six weeks, stores that previously had 4.8 weeks of supply showed 10.2 weeks of supply, and those with 33.6 became stores with 22.7.
Tyler says that both the SCORE and STS Allocation packages paid for themselves in the first six months.
Bombay has come a long way in cleaning up its inventory. But that’s not the end of the story. Tyler has completed a markdown optimization program that links markdown budgets to current area trends, corporate margin objectives, and order base markup as well as “aged” inventory evaluations. He also plans to implement a vendor evaluation and capitalization analysis program, with “artificial intelligence” making purchase and price recommendations based on historical lead times, on-time evaluations, and country of origin.
Crescent City Raj
Bombay Company began in New Orleans in the late 1970s when founder Brad Harper began selling inexpensive reproductions of 18th- and 19th-century traditional English furniture. He advertised his mahogany-finished butlers’ tables and nightstands in magazines, then shipped the unassembled items to customers, who put them together in their homes. In 1978 Bombay was strictly a catalog company, with sales totaling $1.5 million. Bombay opened its first two stores in 1980, followed by a handful of additional stores to test various markets. A Canadian store opened in April 1980. In late 1983, Fort Worth, TX-based Tandy Brands merged the United States and Canadian operations. Today, Bombay Company is a $437.3 million marketer with 430-plus retail stores. Catalog sales, which include Web sales, account for about 4% of total revenue. Bombay also conducts wholesale operations through its subsidiary, Bailey Street Trading Company.
Headquarters: Fort Worth, TX
Annual sales: $437.3 million
Total employees: 4,000-plus
Phone: (817) 347-8200
Fax: (817) 332-7066
Web site: www.bombayco.com
Distribution Center Locations: Fort Worth; Atlanta; Mira Loma, CA; Philadelphia; Mississauga, Canada.
Average warehouse size: 160,000 sq. ft.
Average number of employees in each warehouse: 75-150
Material handling equipment: Pallet racks, floor stackers; travel by forklifts; no conveyor systems