CHICAGO — Kmart Corp. is working with its suppliers to unclog the distribution pipeline, according to Jim Glime, director of retail development.
Speaking to crowd of nearly 1,000 at Quick Response ’94 here recently, Glime prodded manufacturers to invest in technology to help move goods through the pipeline more efficiently.
Glime said the investments vendors make in technology to support Quick Response can improve their relationships with many of the major retailers they supply. He added that a real commitment to Quick Response requires a change of philosophy on the part of the supplier. “Vendors must be dedicated to selling through products, not selling in products,” he said.
The problem had, in recent years, been pervasive. Glime said nearly every time inventory levels were analyzed against point-of-sale data, Kmart found too much product in the pipeline. “When we share our mutual numbers with manufacturers, we always find too much inventory,” he said.
He said that when Kmart put one supplier’s products under the microscope two years ago, he found 10 weeks of inventory in the stores, six weeks in the Kmart warehouse and eight weeks in the supplier’s warehouse. “That’s 24 weeks of inventory clogging up the supply chain,” he said.
Kmart has taken a proactive role in improving the situation. Glime said Kmart has entered into Quick Response relationships with more than 30 percent of its suppliers. In many of those relationships, the supplier manages the inventory replenishment based on timely point-of-sale data from Kmart’s stores.
“Our POS data gets back into our forecast planning the next day,” he said. “We have vendor-managed inventory with 67 suppliers, and we hope to have over 100 suppliers by the end of the year.”
The results of the Quick Response initiative have been impressive. Glime said lead times between supplier warehouses and Kmart stores now range from three to 10 days. They were 14 to 21 days before Quick Response relationships were implemented. Carrying costs have plummeted even further. Glime said inventory ownership has been reduced between 20 and 100 percent, depending on supplier. And that drop in inventory was accomplished without increasing out of stocks. Glime said Kmart’s in-stock ratio hovered around 92 percent in 1991. It stands at 97 percent today.
A fluid sharing of information with suppliers has made those numbers possible. But before that exchange can take place, Glime said Kmart personnel meet with suppliers to work out goals and technical guidelines for Quick Response relationships.
“The best way to communicate is electronically,” Glime said. He said Kmart uses several electronic data interchange transaction sets to pass item movement and inventory information back and forth between itself and its suppliers. They include 850 for purchase orders, 855 for purchase-order acknowledgment, 856 for advanced ship notices, 810 for invoices and 830 for forecasting. The retailer uses the UCC/EAN-128 bar code for carton marking.
Kmart is prodding suppliers to get up to speed on electronic advanced ship notices and the 128 code. ASNs let the retailer know exactly what’s contained in a specific shipment before that shipment reaches its loading dock.
“ASNs let you plan your distribution center off-loads, and they also let you know exactly what’s in those loads,” Glime said. “Resolution stops at the DC. You take the store out of the loop.”
Ninety percent of the merchandise Kmart sells moves through its 13 distribution centers. Only 10 percent is delivered direct to stores.
Glime said the 128 code is also very useful at the distribution center. Retailer personnel can scan the 128 code and capture information on all the goods contained in a carton. That information is then correlated with the ASN to insure shipment accuracy.
“We want to have 100 percent shipment accuracy, and we want suppliers to have a shipment out the door three days after they get our purchase order,” Glime said. “Most of our suppliers should be working with ASNs and 128 by the end of this year.”
Unlike the Universal Product Code, the 128 code can incorporate a potentially endless stream of information. The code can be as lengthy as required to handle the information the user wants to capture.
Despite the benefits of Quick Response, Glime said Kmart is moving forward methodically on its QR initiative. “We’re working with suppliers one by one,” he said. “We can’t support 1,250 suppliers at one time.”
Glime said suppliers are eager to join Kmart’s Quick Response program. He added that Kmart hopes to expand Quick Response to its offshore suppliers soon.
“We are putting in the framework to apply these strategies in our overseas network,” he said.