The intelligent application of the logistics concept represents one of the last remaining frontiers for retail enterprises to improve sales, profits, and customer service. The retail industry is caught in a highly competitive market with low prices and reduced margins and the constant pressure to meet sales and profit goals. The reality is that some retailers are losing the battle because they do not have a strategy to break away from the pack.
The logistics concept has proven to be an effective strategy for some leading-edge retailers. The improvement can be readily quantified in several key areas:
- Increased sales and profits
- Reduced operating expense
- Improved stock turn
- Enhanced customer service
- Reduced inventory investment, space requirements, distribution costs, and product lead times in the entire merchandise pipeline
LakeWest Group has worked with many of the leading-edge retailers and consumer products companies, helping accomplish corporate goals with results-oriented projects from developing or refining an overall logistics strategy to improving one or more of the functions within the logistics cycle. Our staff of professional consultants has many years of practical, line-management experience in retail logistics and supply chain improvement projects.
Collaborative Planning, Forecasting, and Replenishment
Merchandise Planning and Inventory Management
RFID
Supply Chain Strategy and Planning
Collaborative Planning, Forecasting, and Replenishment
CPFR is the first business-to-business supply-chain initiative with established guidelines sponsored by industry leaders. Pilots initiated by prominent retailers and consumer product companies have demonstrated significant supply chain improvement. CPFR encourages trading partners to work from a common forecast resulting in a more complete view of their product cycles. CPFR can generate 1) revenue improvement 2) inventory reduction 3) improved technology ROI and 4) improved overall ROI.
Importantly, the traditional barriers of capital requirements, technology start-up and lack of industry-wide standards have been eliminated. This permits organizations to focus on the change management efforts, process design and management, and trading partner interface that can generate increased revenue and cost reduction for both retailer and supplier. However, developing and implementing a scalable CPFR strategy and infrastructure between two separate organizations with historically divergent ways of doing business is not an easy task. An outside point of view with unsurpassed industry expertise is truly needed to assist trading partners align, organize, and define the business rules around their collaborative relationship.
LakeWest Group has over fifteen years' experience working with retailers and consumer product companies to create strategic, operational and financial competitive advantage. Our in-depth knowledge of the supply chain and relevant engagements involving the retailer and supplier interface qualify us to make CPFR a successful reality for your organization. Our service offerings include
- Readiness Assessment
- Business Case Development
- Business Strategy
- Business Pilot and Rollout
- Project Planning
- Change Management
- Process Design and Management
- Technology Assessment and Implementation
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Merchandise Planning and Inventory Management
A critical component in the execution of a retailer's business strategy is the development and maintenance of an effective Merchandise Plan. Utilization of this plan, coordinated with the process of directing, monitoring, and reporting on the flow of merchandise through the Supply Chain, is characterized as Inventory Management. Typically one of the largest assets a retailer owns, effective management of that inventory through intelligent planning and deployment across the chain must be a key focus in the business.
LakeWest Group professionals have worked with numerous retailers to optimize these functions–establishing processes, selecting and implementing appropriate systems for their specific environment, recommending the organizational structure required to carry out the process, defining measures of performance and success, fine-tuning methodologies and algorithms, defining necessary controls.
- Assessing the existing merchandise planning and inventory management systems and processes
- Articulating overall inventory management strategy
- Defining the merchandise planning process
- Developing high-level inventory management and replenishment goals
- Analyzing and designing optimized distribution approaches
- Evaluating and enhancing allocation methodologies
- Designing and implementing purchase order management and open-to-buy functions
- Developing automated replenishment capabilities
- Determining major systems requirements and/or enhancements that need to be incorporated into the overall environment
- Defining current performance measures and metrics to serve as guidelines in designing systems requirements
- Assessing and designing inventory controls
- Establishing benchmarks for key performance criteria like dollar inventory investment, stock-turn by various categories, sales and gross margin comparisons, average days in inventory, markdowns, average sellthrough, etc., in comparison to leading competitors by retail segment
- Developing the measurement criteria for managing and monitoring the inventory (inventory investment, stock-turn ratio, gross margin %, GMROI, average days in inventory, markdown %, etc.)
- Defining exception performance criteria and management tools
- Creating a master plan for systems development to support the long-term logistics strategy
- Evaluating the systems resources and capabilities of key supply chain partners: vendors, carriers, warehouse operators, third-party outsourcers, etc.
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RFID
Perpetual inventory systems down to the item/store level are the norm in retail today. The dirty little secret in retail inventory management today, however, is that often times perpetual inventory is largely incorrect. Consequently, retailers find themselves losing money due to out-of stocks while also pumping inventory into their systems to compensate for the inaccuracies. Costly cycle counts and periodic inventories are only temporary solutions, and CFOs lay awake worrying about real vs. “paper” shrink. This is all about to change because a solution is within reach.
We stand at the forefront of the next generation of truly transforming retail technology, Radio Frequency Identification (RFID), where real-time visibility of product availability and movement is possible, enabling quantum leaps in operational efficiency and customer service. At last retailers can know precisely the quantity and location of each item in their supply chain. Not since the introduction of UPC technology has retailing witnessed a technology capable of significantly transforming daily business operations and materially improving efficiency and profitability.
Radio Frequency Identification is a system in which pallet, case, or item level data stored on radio frequency tags is accessed at predetermined points along the supply chain to capture information necessary to fulfill critical business needs. The technology will propel product identification and tracking to levels most retailers have never considered possible with UPC, thereby creating opportunities for significant profitability improvement.
What makes RFID more efficient, and thus more attractive, than its UPC predecessor is its ability to identify product in real-time, absent a direct line of sight. RFID technology relies on radio frequency tags that can be read through a variety of substances and surfaces such as cardboard, plastic, and paint, among others, making them more universal than barcodes. And, as the cost of tags continues to drop due to the economies tag manufacturers will achieve through mass production, the universal applicability of RFID technology will become increasingly affordable for all retailers.
Most pressing among the critical retail business needs satisfied by RFID is comprehensive visibility of products at all points along the supply chain. Such visibility allows retailers to better avoid stock-outs, a major contributor to lost sales and, importantly, a common customer inconvenience to which customers are becoming increasingly intolerant. And, in a largely mature retail market in which opportunities for growth are becoming ever more elusive, maintaining sufficient in-stock positions that adequately satisfy existing and potential consumer demand remains a cornerstone of retail success.
In addition to better in-stock positions, RFID will likely yield
- Distribution Efficiencies
- Improved Inventory Management
- Improved Shrink
- Streamlined Backroom Operations
- Enhanced Point-of-Sale Operation
- Decreased Return Fraud
All indices suggest that RFID technology will be mainstreamed in the relatively near future and LakeWest Group believes that early adopters will leap-frog their competition. Contact LakeWest Group today to assess the impact RFID technology can have on your business.
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Supply Chain Strategy and Planning
Achieving effective supply chain strategy and planning incorporates a few key, common aspects:
- Developing an overall logistics strategy
- Performing competitive analysis
- Conducting gap analyses of identified opportunities and determining realistic improvement expectations
- Developing a supply chain needs assessment by function
- Creating standards and metrics to serve as goals
- Assessing supply chain partners to identify opportunities and challenges
- Developing realistic and comprehensive implementation plans
LakeWest Group's extensive knowledge of the retail supply chain and experience developing successful strategies means we are ideally positioned to assist through both planning and execution. We can help address such important areas as:
Distribution Management
- Assess internal and external distribution resources and capabilities
- Develop baseline average distribution, transportation, warehousing and processing costs, and throughput
- Develop benchmarks and best-practice comparisons
- Evaluate performance measures and costs by functional area
- Develop detailed diagrams depicting merchandise flow
- Highlight the cost and time components of each step, identifying value-added from wait-time activities
- Evaluate facilities, equipment, and management processes
- Develop conceptual plans for new facilities, equipment, or processing enhancements
- Establish continuous improvement programs
Store Operations Management
- Assess store operations and backroom resources and capabilities
- Develop baseline store-level statistics on average processing times and costs to handle merchandise
- Evaluate store backroom, reserve stock, and sales floor inventory management
- Evaluate inventory management practices used to control, count, handle, or reorder merchandise
- Evaluate return and damaged goods handling costs and processes
- Identify opportunities to improve cost and throughput
Systems Integration
- Assess systems' capabilities to report and monitor sales and inventory status
- Develop detailed diagrams depicting inventory flow
- Develop high-level systems integration plans
- Manage design, development, and implementation of the systems changes and enhancements
- Assess the capabilities of systems to monitor and report inventory status
- Develop systems-testing and evaluation criteria
- Develop systems-training and indoctrination programs
Organizational Resource Planning
- Evaluate current organizational structure relative to supply chain
- Compare current organizational structure to leading retailers
- Determine changes needed in the organizational structure
- Assess need for quantitative and qualitative goals by function and individual
- Develop training programs to support the changes
Vendor and Supply Chain Partner Integration
(see also CPFR)
- Identify key supply chain partners and create communication on logistics integration
- Establish common goals with the key supply chain partners
- Assess supply chain partners' compliance requirements
- Determine integration issues in overall strategy and implementation process, including systems needs and integration, distribution processes, facility planning, order handling and processing guidelines, ticket making and marking requirements, communication protocol, etc.
- Define and implement mutually agreed-upon vendor scorecards
- Develop commitment on performance measures, standards, and communication guidelines
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