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Harnessing Chaos New killer app battles the Godzilla of multi-channel merchandising; everybody wins!

Every once in a while a system comes along that is so stunning in its conceptual structure, so profound in its philosophical foundation, and so massive in power that it redefines the business it is intended to support. Pardon the cliches, but it’s what happens when a killer app creates a paradigm shift.

Such a juggernaut is the Integrated Brand Management System (IBMS) from New York-based Connectrix Systems. The brainchild of Will Foster, Neal Rosenblatt, John Fiduccia, and Chris Tselebis, IBMS grew out of their experience with brand management at J. Crew, where Foster, as director of merchandise information, was in charge of developing a system to manage the merchandising process.

Foster agonized over the amount of time brand managers spent on repetitive tasks and in collecting and disseminating the information required to make analytical decisions. Worse still was the difficulty in keeping everyone up to speed on brand development. The challenge was essentially to tame the merchandising beast.

Multi-channel madness By 1994, however, the team’s years of work were challenged from without and from within. With the addition of the Internet as a potentially viable sales and marketing channel, compromises that had apparently worked in trying to balance merchandise management across retail and catalog now appeared to be inadequate, even useless or counterproductive. The margins for error had narrowed, while the likelihood of miscommunications and miscues increased dramatically.

The challenge from within resulted from a change of ownership at J. Crew. The new owners decided not to invest the resources required to reengineer the brand management system that Foster’s team had built. Knowing they were on the verge of a breakthrough, Foster and company decided to finish the job they had started. They formed Connectrix Systems (with J. Crew as a client), and pushed forward.

Brand leads IBMS harnesses the conceptual merchandise line planning process as a single source of information to manage the brand’s product assortment. The system has the ability to communicate changes in assortment planning immediately to everyone affected by those changes throughout the supply chain and distribution chain, including third-party agents, vendors, mills, factories, and inventory managers. All these players need the tools to analyze the impact of those changes on their own plans and assumptions. The system must also be fully integrated with transaction and operational systems.

Sound easy? Foster calls it “the equivalent of harnessing chaos.” It is also what makes this system so extraordinary. Connectrix calls IBMS “ERP for the front office.” In other words, this system is designed to help organize and manage what’s happening in the brand manager’s mind as much as it is to manage what’s happening to the brand itself.

IBMS is a proactive tool that operates in three dimensions. The first embraces total brand management, from design and development through planning, forecasting, and inventory management across four distribution channels: wholesale, retail, catalog, and the Internet. To harness the chaos, Foster recognized the need to have the brand drive the channels, not the other way around.

Consider the brilliance of that single insight. When a brand manager develops a line, she doesn’t think, “This would be a great thing for the Web.” A merchandiser might do that, but not a brand manager. Yet all other merchandise systems are channel-biased.

This is not to say that the channels don’t have their own individual requirements. They absolutely do. IBMS just puts them at the bottom of a brand pyramid, not the top. This pyramid, consisting of 25 nested layers, they call the “comprehensive multi-tiered SKU,” and it is at the heart of Connectrix’s patent-pending Brand Management Engine (BME).

The BME provides continuity to a brand’s image and consistency in its message throughout its life cycle and across distribution channels. It also leverages the brand’s purchasing to reduce overstock exposure across all four channels.

The line evolution process starts with the design and development team. The results of their efforts – the product line assortments – spill across all distribution channels. The line evolution process, in turn, drives the rest of the brand’s organization, and that evolution is inherently a process of change. Without the ability to manage constant change, the brand will perform poorly, and everyone in the value chain will suffer, including the sales organization and the customer.

The BME tracks which products are in the brand’s line, which have been added, which have been dropped, and which are intended to run in each of the channels across the supply chain and throughout the brand’s management team. Does the polo shirt have a three-button or a four-button placket? Is it for the spring or summer assortment? Is the fabric 100% cotton or a cotton-Lycra blend? Does the label reflect the change – or will U.S. customs impound it because the label is wrong? Will there be enough fabric to cut a petite version, too? Was the photo shot with a blue product? We’ve cancelled blue – change the shot!

Forget about managing this with spreadsheets, faxes, e-mail, and frantic phone calls. You will be buried under a mountain of sticky notes.

Seasons are out The second dimension of IBMS is product life-cycle management. The breakthrough here is a new concept of “seasons,” the fundamental organizing concept for traditional open-to-buy brand management. Most products debut in one season, but sell into the next. Other merchandise management systems require multiple sets of plans to accommodate that, which not only interrupts the fluidity of the merchandising process but also is a major reason why products go “stale.” And managers are reluctant to invest the effort to set up a product twice in two seasons – so they don’t!

In addition to fiscal and media-based calendars, IBMS adds a Design Calendar for the planning and inventory management process. The focus of brand management becomes coordinating groups of products through their entire life cycle, from the beginning of the buying process to optimizing the customer’s experience. Once the consumer sees that new products are constantly arriving, return purchases are more likely. In-stock positions of a wider assortment of sizes and colors are more likely, as well.

Supply chain sanity The third aspect of IBMS unifies the supply chain. With life-cycle brand management, you don’t contact the manufacturer to cancel a production run (for spring), then call back to increase the run (for summer).

Thus, the Brand Management Engine manages the brand’s line-building process by providing a multi-dimensional collaborative environment where the brand’s merchandisers, designers, and product developers work together in fleshing out the line details. As the product line coalesces, the engine builds the comprehensive, multi-tiered SKUs that become the foundation for IBMS brand management application suites.

In sum, IBMS coordinates product development, line development, brand and channel planning, and inventory planning under the umbrella of brand management. It has product data interfaces for interactive integration with warehouse, distribution, and stocking systems. It has sales plan data interfaces to set up and drive order entry and POS applications, and it has an Internet data interface to drive the brand’s Web site.

In addition, there is a supply chain data interface (with a Product Component Inventory Logistics Module), a purchase order data interface, and a product image database interface (which tracks photo shoot, shoot location, shot, shot select number, product, color, and model).

Of course, IBMS also has the demand curve forecasting tools that drive the traditional catalog merchandise forecasting systems, with elaborate media and circulation planning, tracking, and segmentation options for building daily demand curves. These are in turn integrated with the Finished Goods Inventory Logistics Module to plan and manage each brand’s inventory position and strategy within and across each of the four distribution channels. The system even offers a way to factor in projected catalog back-order cancellations (by catalog).

Even IBMS cannot assure perfection. That’s why there is an Excess Inventory Liquidation Planning Module. And of course there is a Brand Management Report Writer and a Product Contribution Analysis Module.

How it works Let’s conclude with a peek at the delivery group product level of the brand pyramid, deep inside the Brand Management Engine, where the merchants use a checkbox interface to determine which products will be presented in which catalogs for the horizon of catalogs being addressed at any one time. The checkboxes are linked to the merchandising assistants’ planning screens. As the senior merchants determine the product assortment for each catalog, their assistants’ planning screens highlight those products that need to have plans established for each catalog. Should the senior merchant change her mind and remove a product from a catalog after a plan had been established, the plan that now needs to be zeroed out is highlighted as well.

The system never undoes the work of another – it simply communicates the senior merchant’s directives. This way, should the assistant have information that the merchant is unaware of, he has the opportunity to discuss a liquidation strategy before committing to the drop.

The merchandise assistants’ screens are integrated with one another, and all feature the same grid of products down the vertical axis and catalogs across the planning horizon. Each of these screens supports the planning process, and some are based on formulas that the Brand Management Engine prefers.

Standard planning screens include catalog product retail; catalog product units; catalog product dollars; requested catalog page space; paginated catalog page space; requested feature color; and paginated feature color. Other screens might include average product index (removes season and catalog size from consideration), demand ratio (a means to plan using catalog space cost as a percentage of demand), and other brand-specific formulas.

In the case of the standard screens, the retail price screen is linked to the units and dollars screens, which in turn are linked so that the assistant can plan either way. Likewise, any additional planning screens that the brand manager decides to include would be linked to these standard screens in the same way.

The first page-space screen is the requested amount of page space the merchandising department wants dedicated to each product. The second screen, for paginated catalog page space, reflects what is actually happening in the catalog editorial and art departments. In addition to allocating page space to the products, the catalog editorial and art departments can reserve page space for editorial and brand positioning statements. Eventually, page space is converted to “millions of square inches circulated,” which removes the inconsistency of catalog cut size, and more accurately allocates presentation costs back to the individual products.

By automatically comparing and contrasting the catalog art department’s efforts against the merchandising department’s requests, the system eliminates the daily necessity of “walking” each catalog wall and reviewing every page to identify what changed since yesterday (for several catalogs).

With product units planned for each catalog, and requested versus actual page space and feature color under continuous review, the last aspect of planning is color, size, and dimension percentages. This is a separate set of screens that allows the user to plan for one catalog, copy to the others, and then modify based on presentation changes. Once this has been done, catalog assortment planning has been completed.

An additional feature of IBMS that encapsulates its flexibility as an enterprise inventory management tool is its ability to support unlimited classification hierarchies of the line assortment. This provides each department integral to the brand its own perspective on the product. Merchandisers want to see classifications based on lifestyles, such as durable, classic, and intimate. Manufacturing would rather see knit vs. woven, top vs. bottom. In addition, IBMS supports reclassification at any time to accommodate demand and sell-through histories and changes in perspective as the brand evolves.

Many platforms IBMS is currently available in a “fat client” (one-tier) and “thin-client” (two-tier) version on any ODBC-compliant database (it was developed on Oracle with application code in Microsoft Visual Studio). Next year it will be available in an N-tier architecture for a Web-based extranet environment. However, as comprehensive as IBMS is, it is still a work in progress. Will Foster feels that he has realized only 50% of the system’s potential, and he believes it is imperative to work with users to tailor the system to their specific requirements.

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