GRAPEVINE, Tex. — Retailers and manufacturers are working to cut costs, speed deliveries and help the environment by skipping a key stop in a product’s journey from overseas to shelf display — the vendor’s distribution center.
“Many companies want to move goods fewer miles as all of us become concerned about carbon footprint, driver supply and infrastructure,” said Eric Sexauer, vice president, transportation and supply chain services at Macy’s Inc. “We started looking at this in the summer of ’07 — even before gas prices started rising.”
Sexauer spoke about distribution center bypass last month at U-Connect ’08, a technology conference at the Gaylord Texan Resort Hotel and Convention Center here. He chairs a subcommittee of a nonprofit association of retailers and manufacturers called Voluntary Interindustry Commerce Solutions, or VICS, which sets retail industry standards and was a sponsor of the four-day conference.
“Clearly, this reduces freight costs and handling costs,” Sexauer said. “It reduces miles, which is green, and addresses the concern that there will be a lack of drivers when the economy picks up. It can improve speed to market — you can probably take a couple of weeks or more out of the supply chain.”
Macy’s tested the process with home textiles, holiday decor and some clothing last fall and this spring, and wants to enroll more vendors in the program, he said. Macy’s has 14 U.S. distribution centers.
“We’re starting to collaborate with key resources now — Jones Apparel Group, Liz Claiborne, Polo Ralph Lauren,” Sexauer said. “We thought it would be more about sustainability and cost, and what I found surprising is I have merchants calling me and asking to do this to get the product on the floor quicker.”
Cost effectiveness is major motivation.
“The savings are astonishing,” said Joseph Andraski, president and chief executive officer of VICS. “It is a significant opportunity to change the way we do business.”
The strategy requires tight coordination between store and supplier, particularly regarding packing and marking the cartons overseas. However, some of those tasks can be handled near the domestic port by a third party, Sexauer noted.
Fashion collections sourced in multiple places that hang together on the floor aren’t good candidates because of the difficulty of getting coordinated pieces into the store at the same time, he said.
At another session, executives from Dillard’s and Liz Claiborne asked members of the audience to picture a world where retailers share weekly sales by stockkeeping unit per store, and apparel manufacturers crunch the data to project future orders right down to the size scale per style per door.
The concept of collaborative planning, forecasting and replenishment, or CPFR, has worked for commodities. But it has met resistance in fashion, where the task is complicated by the constant introduction of new products with short shelf lives and the reluctance of some retailers to divulge sales data.
But the concept works, said Anita Spence, director of vendor relations at Dillard’s, along with Melissa Breen, e-commerce project manager, and Christine Laing, e-commerce business analyst, both of Claiborne.
CPFR improves assortments, raises margins, cuts markdowns and charge backs and reduces the cycle time, Breen and Laing said. It also keeps everyone better informed. With the system at Claiborne, buyers can even see pictures of styles by clicking on the purchase order.
Claiborne transmits product images to buyers and collaborates on the assortments before presenting the line in person. This gives the staff more time to focus on product in the showroom. Liz Claiborne-brand apparel and handbags and Lizgolf use the system. Breen said Juicy Couture is next up and, possibly, Lucky Brand and Kate Spade.
Claiborne uses a third party Web site, 7thonline.com, to coordinate the data exchange with accounts, but there are other ways to do it, she said. Companies can also choose only select aspects of the process and still get benefits.
Spence said the number of fashion vendors working this way is “still pretty small” because the return on investment is hard to measure.
“[The VICS subcommittee] agenda is to gain more participants and to produce an ROI model,” Spence said.