Retailers Take Stock - InformationWeek
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07:45 PM

Retailers Take Stock

Casual Male revamps supply chain and inventory management to make good on promise that clothing will be in stock.

Here's an unlikely guarantee from a national retailer: If a shopper can't find the right size and color of five-pocket jeans on a store's shelves, the retailer will ship them to the customer's home at no extra charge within five days. Otherwise, they're free.

That's what Casual Male Retail Group Inc. will promise its customers this spring. Such a guarantee could be risky, considering that out-of-stocks have plagued the retail industry for years and, by some estimates, cost billions of dollars in lost sales annually. In a recent survey of more than 300 retailers, only a third say regularly priced products are in stock 91% of the time; the other two-thirds say out-of-stocks are more frequent, some considerably so. Retailers completing the survey, which was sponsored by the National Retail Federation and BearingPoint Inc., included apparel, department, grocery, home-center, and specialty stores.

Casual Male's supply chain is ''dynamic, it's interfaced, it's streamlined, and it's seamless,'' Hernreich says. -- Photo by Bob O'Connor

Casual Male's supply chain is "dynamic, it's interfaced, it's streamlined, and it's seamless," Hernreich says.

Photo by Bob O'Connor
But Dennis Hernreich, Casual Male's executive VP, chief operating officer, and CFO, isn't worried. Six months ago, Casual Male finished replacing a 15-year-old inventory-management application, written in Cobol, with IT systems that analyze and share supply-chain, inventory, and item-level sales data on a daily, and sometimes hourly, basis. The new systems include Manhattan Associates Inc.'s warehouse-management software, which works with an inventory-replenishment application from JDA Software Group Inc. that's integrated with point-of-sale systems at all of Casual Male's nearly 500 Big and Tall stores in 44 states. Casual Male communicates with its suppliers via EDI and has an electronic link to United Parcel Service Inc. so the retailer can ship items to customers directly from its warehouse.

"When you know what your inventory is down to the SKU level, you know what you're selling, and all of that gets updated on a daily basis," Hernreich says. "It's fairly dynamic, it's interfaced, it's streamlined, and it's seamless--every system talks to each other."

When items are shipped out of Casual Male's 600,000-square-foot distribution center in Canton, Mass., the warehouse-management software updates the replenishment software in near real time. When stores receive those items, the location of that inventory also is updated automatically in the replenishment system. Point-of-sale systems at the stores upload daily sales information every night to the replenishment system, which generates inventory forecasts based on that data. Those forecasts are then checked against inventory levels at each store. If inventory drops too low, the replenishment system kicks out purchase orders that are sent to suppliers via EDI.

"This is advanced retail planning," says Alexi Sarnevitz, research director of retail at AMR Research. "Having these merchandising systems in place allows [Casual Male] to more accurately match consumer demand with the inventory."

The applications help the $429 million-a-year specialty retailer keep track of as many as 48 sizes of any one style of clothing in each of its stores. Casual Male is so confident that its IT infrastructure won't disappoint Father's Day shoppers that it will send them a gift card equal to the value of the out-of-stock item if it can't fulfill their orders on the spot or within five days. "But this is highly unlikely," Hernreich says. The IT team tested the systems for six months at 69 of its stores. All together, Casual Male dedicated two years to the project, working closely with JDA Software and Manhattan Associates, and even holding lunches every Friday to reward the IT team for its hard work.

In addition to improving in-stock inventory at its stores, the supply-chain system could cut costs in its distribution center by up to 70% and potentially save the retailer $20 million to $25 million a year, Hernreich predicts.

Few retailers guarantee that goods will be in stock on a regular basis. Staples Inc. has an in-stock guarantee, but only for fast-selling ink-jet and toner cartridges, which the office-products retailer heavily stocks, says Paul Gaffney, executive VP of supply chain. Staples promises those items will be available, or they will be shipped to the customer with no shipping fee the next day, along with a $10 coupon for the same product.

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