New Tools For The Retail TradeNew Tools For The Retail Trade
Specialty retailers deploy a range of technology to fuel growth and keep their shelves stocked.
September 16, 2005
For a company with an iconic brand and more than 160 years of history steeped in craftsmanship, global expansion has to be handled with care so neither product quality nor customer service slip. That's why Tiffany & Co. increasingly turns to IT.
The jewelry and luxury-goods maker spends about 4% of its revenue on IT, and last year it used some of that to upgrade its customer-relationship-management, supply-chain, and warehouse-management systems, as well as build out Web services and a service-oriented architecture.
INSIDE SPECIALTY RETAIL
Average portion of 2005 revenue spent on IT
Companies spending more on IT this year than last
Buying directly from foreign suppliers
Centralizing control of IT operations in past 12 months
Bringing outsourced functions in-house in past 12 months
Tiffany began a steady expansion of its domestic and international retail operations in the early '90s and launched an effort to strengthen its supply-chain operations, says Len Greendyk, VP of business systems development at Tiffany, which had $2.2 billion in sales last year, a 10% jump from the year before. To support that growth, "there was a willingness to invest in more technology," he says. This year Tiffany will launch its Japanese E-commerce site. To improve efficiencies in its Japanese warehouse, which serves about 50 stores and the upcoming site, Tiffany has consolidated several receiving and replenishing processes. A warehouse-management system has employees pick and pack shipments headed for stores as soon as inventory lands on the dock, rather than moving the inventory into the warehouse and then packing shipments. Tiffany has cut the time it takes to ship products from the U.S. to Japanese stores from 23 days to nine. It also has cut processing time: Employees at the Japanese warehouse can process 240 units per hour, as opposed to 145 units prior to the initiative. Saving time and money is fundamental at CDW Corp., too. The high-tech retailer, with $5.7 billion in sales last year, has made driving costs out of its IT-server infrastructure, which have increased 30% to 40% each year, a top priority, says K.C. Tomsheck, senior director of IT operations. CDW has 400 to 500 servers in eight data centers, "and most of them are sitting idle at any point in time," Tomsheck says. Early this year, CDW began deploying EMC's VMware server-virtualization software. "For the first time in many years, we've actually seen the deployment rate of physical servers drop," he says. About 20% of CDW's servers are virtual. "It takes us minutes to configure a new virtual server, compared to hours for a physical server," Tomsheck says. The company also is testing wireless voice over IP. Managers that move between CDW's IT center in its Vernon Hills, Ill., headquarters and a nearby warehouse use Hewlett-Packard iPaqs with headphones that run an IP-telephony application so they can receive calls to their desk phone regardless of where they are. The iPaqs connect to a voice-over-IP gateway via Wi-Fi. Staples Inc., the $14.4 billion-a-year retailer that operates 1,462 retail stores in the United States and Canada, has given radio-frequency readers to store associates so they can easily check shelf stock. The readers collect data from bar-code tags and track product quantities. That information is combined with sell-through rates, inventory data, and store-shelf capacities to direct associates on what needs restocking. Since making these changes last year, Staples has reduced store-shelf stockouts by 3%--a reduction that's boosting sales, says Scott Floeck, senior VP and CIO. Staples reported in mid-August a 3% growth in sales for its second quarter compared with a year ago and has had 11 consecutive quarters of positive growth. "It's been huge," Floeck says. "It's all about making it easy for the customer."
I.T. BUDGET BREAKDOWN
IT services or outsourcing
Research and development 22%
Salaries and benefits
Everything else 21% 22% 25%
Data: InformationWeek Research
Illustration By Paul Watson Return to the 2005 InformationWeek 500 homepage
Advance Auto Parts Bed Bath & Beyond Inc. CDW Corp. CompUSA Inc. Gap Inc. J.C. Penney Co. Inc. * Lands' End Inc. Rent-A-Center Inc. * Staples Inc. The Sherwin-Williams Co. Tiffany & Co.
* denotes a top 100 company
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