Sears' Five-Year Upgrade Plan

Struggling retailer will use Manugistics software to reducee inventory levels, cut costs, and increase sales
Sears, Roebuck & Co. is beginning a project to implement new supply-chain software as part of a five-year revamp of its merchandising systems. The goal is to reduce inventory stock levels on both general and promotional merchandise while cutting carrying costs and driving sales and margins higher.

Manugistics' applications will augment a homegrown system, says Jeff Roesch, IT director for merchandising, marketing, and customer-relationship-management systems.

Manugistics' applications will augment a homegrown system, Roesch says.
The retailer chose Manugistics Group Inc.'s demand-planning and replenishment software to replace existing custom applications, some of them decades old. The new applications will interact with Sears' Merchandising Planning system and a homegrown legacy-marketing system built on Cobol and Java technology, as well as with operational inventory systems that primarily run on mainframe CICS, says Jeff Roesch, IT director for merchandising, marketing, and customer-relationship-management systems.

The project began in mid-2003 with a yearlong assessment of the company's IT system, during which senior management identified inadequacies and inefficiencies in demand-planning, replenishment, item- and vendor-management, and purchase-order-management software.

Sears plans to begin testing the Manugistics software in the first quarter of 2005 and roll it out across more than 870 Sears stores within two years. The project also entails consolidating multiple reporting systems to make it easier for Sears' buyers, replenishment analysts, and inventory planners to gain access to pertinent information, including material forecasts and available inventory in distribution centers and stores.

Sears highlighted the aggressive action it's taking to reorganize its supply chain in a 10K report filed with the Securities and Exchange Commission earlier this month. The push comes as Sears struggles with what has been five years of virtually flat sales. Revenue for the second quarter this year, ended July 3, was $8.8 billion, down 14% from $10.2 billion in the year-ago period. Profits plunged 83% to $53 million in the quarter.

The new software should come in handy as the retailer builds out its business. It plans to take possession of 54 stores from Kmart Holding Corp. and sublease seven stores from Wal-Mart Stores Inc. It will convert the stores to new supersize centers called Sears Grand.

The Manugistics software also will augment an internally developed perpetual-inventory system that lets customers order online and pick up the merchandise in stores, Roesch says. That system was rolled out to stores two months ago.