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Retailer To Suppliers: Track Inventory, Restock Shelves

Canadian home-improvement store extends inventory-management software to cut labor
Rona Inc. is turning to IT in its battle to remain No. 1 against Home Depot Inc. in the Canadian home-improvement market.

The Montreal retailer last week disclosed plans to make suppliers more responsible for keeping its store shelves stocked. Starting in September, Rona's 15 major suppliers, which account for as much as 30% of its inventory, will access its inventory-management system through the Internet and determine when to ship more products based on parameters Rona sets. The software will give each supplier an ID and password to access information pertaining only to its products.

Rona, a privately held company, has relied on software from E3 Corp. for five years to manage inventory levels in its warehouse-size stores and Montreal distribution center, which supplies Rona's smaller outlets. Inventory data is fed daily to Rona's 19 buyers, who access E3's inventory-management software from their Windows desktops.

Each warehouse store carries as many as 45,000 products; the distribution center holds 35,000 items. Without the software, says Pierre Pelletier, Rona's VP of distribution and logistics, "no one could handle this many SKUs [stock-keeping units] for each store and the distribution center." The software's preset parameters, such as acceptable inventory levels based on sales projections and how fast a product moves, notify buyers when to call suppliers for more products.

By giving suppliers access to that information, Rona expects to save labor costs by having fewer buyers. "The buyers are still going to be looking over their shoulders, but it's mainly the suppliers that will be doing the work," Pelletier says. Suppliers also can gather data on promotions. A supplier "is going to be able to do a much better job than we do because he knows his own production [requirements]," Pelletier says.

Rona is following in the footsteps of its archrival Home Depot, an early adopter of supplier-collaboration technology that trails Rona in Canadian market share by 10% to 13%. E3 is charging Rona and each of its suppliers $50,000 for deployment, training, and the software license, and it's charging the suppliers $12,000 in each subsequent year for licenses only.

Pelletier says suppliers should see a payback on the initial cost in three to four months.