FORT LAUDERDALE (FNS) — In a business climate where today’s technology could mean tomorrow’s returns, retailers are striving to automate distribution and inventory management.
Representatives of Saks Fifth Avenue, Talbots and Stern’s discussed their progress on those fronts at the National Retail Federation’s Logistics and Inventory Management Conference here recently. Regarding transit time and Quick Response, all three said the benchmark is moving up.
“Quick Response is definitely where we’re headed,” said Bruce Soderholm, senior vice president at Talbots. “We now have 85 percent of our merchandise on a three-day [replenishment] standard and hope to be on a two-day standard in 1995.
“We are already pre-notifying the stores when shipments will arrive and what inventory they’ll be receiving, and we’ve also begun to track shipments via electronic data interchange,” he added.
Russ LoCurto, senior vice president of operations at Saks Fifth Avenue, said the chain is also putting distribution under the microscope. “We’re really concerned about everything from the time the carrier has the goods to the time it takes to get them to the selling floor,” he said.
Greg Owens, an Andersen Consulting partner who moderated the panel discussion, said that kind of scrutiny could help retailers succeed in a competitive retail marketplace.
“We’re nearing the point of retail saturation,” Owens said. “Good logistics can provide differentiated service, and a well structured, cost-effective format can also provide value to the shopper.”
The changes in replenishment scheduling and tracking are affecting the way retailers allocate space in their distribution centers.
“I see two things happening regarding distribution centers,” Saks’ LoCurto said. “First, the size of the different components — processing and receiving areas for instance — are really changing.”
He said Saks’ Westchester County, New York, DC, which was designed in 1979, is typical of those built before Quick Response started changing the rules of distribution.
“Now, we’re going to need less processing space,” LoCurto said. “However, the activity that occurs in inbound/outbound receiving is much greater today than it was back in the ’80s. The test is how to reconfigure that space to make it cost-effective.”
“Transportation of freight is a prime concern for Federated,” said Harold Schroeder, senior vice president at Stern’s, a Federated subsidiary. “Transit time is of the utmost importance. To really accomplish and expand the Quick Response program, [vendor] shipments to our distribution centers will have to be smaller and more frequent.”
Catalogs and specialty formats are also complicating the picture for the distribution centers of conventional retailers who’ve expanded in those areas. Soderholm said 25% of Talbots business is done through catalogs. LoCurto said Saks’ in-store specialty formats such as A/X and Nancy Heller boutiques manage their inventories differently than Saks proper. He said the company is “trying to bring all of this into one system whereby a logistics professional can oversee the entire process.”
LoCurto feels the solution is to work closely with systems people to establish benchmarks. “Besides overseeing the entire process, these people will also need to focus on which areas are not in keeping with benchmark performance,” he said.
Saks hopes to have such logistics architecture in place in each phase of distribution. “We want to have it in everything from our in-bound receiving through receiving in our branch stores,” LoCurto said.
Logistics has become so important to Stern’s that Schroeder was asked to handle logistics full time last April. Schroeder said he currently spends about 60 percent of his time managing Sterns’ distribution center and the other 40 percent working on a consolidation project involving UPC bar codes.
“Other industries, the grocery industry, for example, took advantage of this technology years ago,” he said. “Retail stores are just now catching up.”
Schroeder also said that Sterns expects to be 100% UPC marked by vendors by the end of 95. According to Schroeder: “The UPC technology will support Federated systems. Currently we’re at 60 percent, and by the end of the year we expect to be at 80 percent.”
Both LoCurto and Soderholm said they see UPC technology as essential to the future of logistics. Neither was unaware of how strange the usage of UPC may seem to those in an industry unaccustomed to it. But, as LoCurto pointed out: “What we’re talking about here isn’t Star Wars. It’s information that already exists that just hasn’t been put together yet.”