Best Buy Bolsters Supply Chain

Best Buy Co. is revamping processes and IT systems to improve the flow of goods through its Asian purchasing office and to import more products directly to its U.S. distribution centers and stores. The initiative follows a recent business-technology overhaul to replace the retailer's legacy mainframes with Unix systems and install new enterprise applications.

The business-process initiative should go a long way toward improving supply-chain visibility, a top concern for Best Buy and many other retailers. Over the years, Best Buy has accumulated a number of disparate systems, including mainframes, Excel spreadsheets, and other aging technologies.

During the past three years, Best Buy has replaced its mainframes with Unix systems to support its more than 780 stores in the United States and Canada, says Chuck Dow, the retailer's director of logistics. It also integrated with its core IT systems Retek's transaction-processing system, Oracle's financial package, and i2 Technologies' demand-planning, replenish- ment-planning, transportation-management, and supply-chain-management software.

Each of these plays an essential role in achieving end-to-end supply-chain visibility at Best Buy, Dow says. The Retek system lets the retailer process purchase orders and manage inventory. The Oracle financial system tracks all of Best Buy's finances, and i2 Technologies' software supports inbound freight operations, carrier load rating, network analysis, carrier bids, and optimization of inbound freight movement.

Best Buy's efforts have earned it recognition in supply-chain efficiency. The retailer ranked 18th among the top 25 industry supply-chain performers in a November report published by AMR Research. Best Buy has achieved what AMR calls the "demand-driven supply network" principle by reducing its inventory and improving in-stock positions.

Best Buy is fine-tuning its systems and processes to improve visibility of its international supply chain. "We need to make sure that we can track all of our EDI documents from international carriers, transport authorities, and customs compliance," Dow says.

The retailer is working with its global-sourcing and direct-import group, which has a purchasing office in Asia, to plan imports based on feedback from Best Buy's customers. In the past, Best Buy relied on a cookie-cutter approach, where the same amount and type of product was sent to all of its stores, Dow says. That no longer works because the demographics and the demand are different for each location. Increased visibility into the type of inventory Best Buy carries and sells has helped the retailer create a more optimized assortment for each store, Dow says.

Best Buy's direct-import strategy involves sharing this demographic and forecasting information with suppliers overseas and working with them to develop products and track them through various channels. The Retek purchase-order and inventory system helps Best Buy more closely monitor its assortment and replenishment processes so it can reroute products to prevent running out of an item or take advantage of a spike in demand. "It's all about collaboration among the different pieces of software that we've implemented over the last four to five years," Dow says.

I2 Technologies' supply-chain management international component will replace Best Buy's visibility software from BridgePoint Inc. in September, Dow says. "The supply-chain event-management system now tracks our orders, shipments, and inventory positions down to the [distribution center] level," Dow says. "Our next phase is to achieve this same visibility down to the store and SKU level."