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.

To pull it off, Gaffney says, Staples spent a lot of time integrating disparate technologies. It installed kiosks in all of its stores so employees can check inventory at other stores and at distribution centers. It established links with shipping companies so employees can schedule next-day deliveries electronically. An order goes to the closest warehouse and is packed and shipped that night. "In the past, each store did its own thing. Now all of our 1,200 stores in the U.S. use these tools in the same way, giving us an accurate view of what's in every store," Gaffney says.

Safeway Inc., which operates more than 1,800 grocery stores throughout the United States and Canada, is planning to test, with several of its suppliers, an application from One Network Enterprises Inc. that triggers replenishments whenever a point-of-sale system indicates a product has been sold. The grocer tested the software for three weeks in November at 127 supermarkets and a distribution center in Seattle. During the test, Safeway managed to cut in half the number of times four promotional items weren't in stock. Safeway says its inventory is out of stock about 8% of the time. "If you can get to 4%, we thought, it was excellent, although there's still room for improvement," says Roger Lekberg, senior VP of supply chain at Safeway.

If a shopper can't find an item in the store, Casual Male will ship it at no extra cost. -- Photo by Bob O'Connor

If a shopper can't find an item in the store, Casual Male will ship it at no extra cost.

Photo by Bob O'Connor
When Safeway expands the test, the application will be integrated directly with a number of stores' point-of-sale systems, and data feeds will be done every 15 to 20 minutes. It also will cull data from Safeway's forecasting software from i2 Technologies Inc. That way, Safeway can correlate forecasts with sales. "Many times it's difficult to forecast product requirements accurately at each store, but if you have the real-time data, you can react quickly to what's being sold, push products out to the shelf, and reduce stock-outs," Lekberg says. Suppliers also may be given access to the same data, allowing them a clearer picture of Safeway's inventory so they can replenish stocks as shelves are emptied.

Combating stock-outs is one of the primary drivers behind the move to radio-frequency identification technology. RFID initiatives at the world's largest retailers, including Wal-Mart Stores Inc. and Target Corp., are intended to track inventory more accurately. (Safeway also is testing RFID.) So far, these retailers are using RFID tags on pallets and cartons. Eventually, retailers hope to use item-level RFID tagging to signal replenishments the minute a store shelf is emptied.

All these technology efforts are intended to do one thing: serve the customer. Says Casual Male's Hernreich: "We want to impress upon our customers that they can expect consistency when they come into our store."

-- With Laurie Sullivan

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