Byline: Elaine Glusac

CHICAGO — To trim distribution costs and put new merchandise on the sales floor more quickly, retailers are making the floor-ready merchandise system a standard industry practice.
“We have to take the redundancies out of our business,” said Tom Cole, president of Federated Logistics, a Federated Department Stores division. “If [a manufacturer] has to put a hanger on [a garment], why do we?”
Calling it the “number one cost reduction process” at Federated, Cole predicted floor-ready merchandise would be as standard as today’s UPC label in three to four years.
Cole made his comments at last week’s IQ 1996 conference during the session “New Partnership Parameters: Floor-Ready Merchandise.” The three-day show here was devoted to exploring the benefits of Quick Response distribution systems.
Other participants on the floor-ready merchandise panel were Lisa Lichtenberg, a vice president of merchandise technology at Federated Logistics, and Andrew Miller, vice president and chief operating officer of Norton McNaughton.
Floor-ready merchandise, according to the panelists, eliminates the need for distribution centers to unpack shipments, retag and reprice goods and then replace the hangers before repacking and shipping them to stores. Instead, vendors tag and price the goods and use an industry-approved hanger.
Federated has invested more than $100 million in the floor-ready system, including installing more than 30,000 new point-of-sale terminals and reconfiguring distribution centers, Cole said. With the updates, floor-ready goods now pass through Federated distribution centers in one day, often in as little as 20 minutes.
Cole told the retailers and manufacturers at the session that if they ignore the floor-ready system, “and you’re a Federated vendor, you will not be a Federated vendor for long.”
Still, Lichtenberg said Federated buyers will continue to bring in “the new, funky stuff” from small vendors, particularly for New York’s Bloomingdale’s and Macy’s stores, and these smaller suppliers may not be able to afford the floor-ready program.
As a result, she said, incremental charges are passed back to the vendor for each element with which they fail to complay: for example, 5 cents per garment for not providing a retail price, 10 cents for failing to affix a bar code and 25 cents for not using the VICS hanger.
More than 90 percent of Federated’s apparel vendors deliver goods with a UPC ticket, 40 percent with a VICS hanger and more than 50 percent with a shipment notice, Lichtenberg said. Only about 20 percent comply fully with the program.
True floor-ready merchandise as outlined by the Voluntary Interindustry Communications Standards (VICS) Committee in November 1994 contains five elements: a universal product code (UPC), a retail price, the VICS floor-ready hanger, the UCC-128 label on each carton indicating contents and an EDI ship notice manifest, which arrives before the merchandise to alert the retailer the goods are on the way.
Lichtenberg said The VICS Committee is considering several floor-ready improvements, including universal security tags, hanger recycling and reinstituting direct shipments to stores. At moderate-price apparel manufacturer Norton McNaughton, a floor-ready system was launched in June 1995 for department store accounts, including Federated and Dayton Hudson Corp.
Miller said Norton added an entire division to implement the system, including MIS managers, analysts and programmers. He didn’t specify the costs to the manufacturer, noting they still were being refined and changed.
“It’s an investment we can’t afford not to make,” he noted.
However, Miller said Norton spends 10 to 12 cents more per unit just for hangers; the company uses 16 million each year. A industrywide hanger recycling program is expected to begin once more hangers are in circulation, he added. This could reduce the cost of hangers in the future.
The costs are currently borne internally or passed “down the pipeline” to contractors.
“We can’t pass it on to the customer in this retail climate,” Miller said. “We want to maintain our space on the [sales] floor.”
Though Norton may incrementally increase its prices to buyers when the retail economy rebounds, Miller said cutting internal costs was a more feasible way of financing the floor-ready merchandise — Fairchild News Service

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