Put the right stuff on the shelves

Collaborative planning, forecasting, and replenishment brings retailers and suppliers together to streamline inventory procedures.
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Saks Inc.

The company: Saks Inc. is a Birmingham, Ala.-based conglomerate of department stores, including such chains as Parisian (in the Southeast and Ohio), Herberger's (in St. Cloud, Minn.), McRae's (in Jackson, Miss.), and Saks Fifth Ave.

The problem: Growth through expansion put pressure on Saks to move to a common system for product replenishment.

The goal: Saks wanted to drive reordering of basic products, aiming for 95% in-stock availability.

The solution: Logility's Voyager XPS will enable department stores under the Saks umbrella to automate replenishment and ordering and do more accurate forecasting via collaborative planning, forecasting, and replenishment (CPFR) practices over the Web.
Here's an experience we've all shared: You go to a store to pick up a standard item, say diapers or dog biscuits, and the merchandise you want is out of stock. What do you do? You either buy an alternative or head out to another store that's more likely to have your preferred brand.

What's a common annoyance for customers, however, turns out to be one of retail suppliers' biggest nightmares, especially in today's highly competitive shopping climate. If a customer goes to another retailer for one product, he may well never come back to the store that came up short.

But relief is on the horizon. As the area of supply chain management automation heats up, a new category of Web-based software is emerging to help retailers and their partners collaborate more effectively on planning and inventory management. These Web applications--from companies like Logility Inc. of Atlanta, Manugistics Group Inc. of Rockville, Md., and Syncra Systems Inc. of Cambridge, Mass.--build on the efforts of the collaborative planning, forecasting, and replenishment (CPFR) initiative.

CPFR aims to improve the supplier/retailer partnership by sharing and co-managing forecast information, initially via e-mail or the manual exchange of spreadsheets. By leveraging the Web as a real-time exchange mechanism, companies can inexpensively and quickly share critical CPFR information via a browser interface, without having to make a costly investment in proprietary software like electronic data interchange (EDI) or dedicated communications lines.

"The Web is playing a key role in CPFR because of the need to deal with forecasts and exceptions instantaneously rather than waiting for batch processing of other communications systems like EDI," explains Andrew Love, secretariat for the CPFR committee, a group of leading retailers, high-tech vendors, and universities based in Princeton, N.J. "With systems like EDI, you're also talking about a limited set of partners, and the Web can really open that up."

According to Jim Uchneat, research director at Benchmarking Partners Inc., a Cambridge, Mass., consulting company and one of the pioneers of CPFR. Under the CPFR concept, there are three elements to collaboration:

First, establish the trading partner relationship by setting common goals and metrics.

Second, develop specific pricing and promotion plans for bringing products to market.

Third, create systems that let partners automate how they monitor and react to market changes as they occur.

Once in place, CPFR processes can help companies and partners maintain lower inventory levels overall, while keeping in-stock levels of core products high, Love says.

Web-based or otherwise, CPFR is still in the pilot stage at most companies. But a handful of market leaders, including Kimberly-Clark Corp., Kmart Corp., Nabisco Brands Co., Saks Inc., and Wal-Mart Stores Inc. are leading the way with production systems linking to some of their key suppliers.

Better proportions

At Saks, an umbrella company that operates more than 350 department stores in 38 states, moving to CPFR is a way to bring sophistication and efficiency to forecasting. In addition, Saks' participation in the merger mania sweeping the retail industry over the last five or six years has spawned a conglomerate of diverse department stores that lack common systems, according to Marty Abercrombie, vice president of replenishment for the Birmingham, Ala., firm. "The way we came together, separate retailers had separate systems," he explains. "Now, we're taking the time to move toward one common system, and we hope to get there completely on the merchandising side in 2001-2002."


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