Technology helps cut warehouse costs
By Gary Evans -- Furniture Today, May 26, 2008
High Point — With sales on most retail floors having slowed to a crawl, executives are turning to the back of the store to cut costs. That's putting a lot of pressure on warehouse and distribution center managers to operate smarter and more efficiently. Here's an overview of what some of the leading software companies are doing to help.
Escalate Retail
The No. 1 issue in warehousing and distribution centers "is how to do more with less," said Roy Martin, director of product management for Escalate Retail. "In today's rough economy, sales are generally less and profits are smaller. ... The warehouse and distribution side has also been hit with necessary cost reductions, meaning fewer resources (are available) to implement new processes or hardware."
Martin said "it is more critical than ever to track goods coming in so the appropriate number of staff can be scheduled to receive and get the product out to the customer's home."
Martin added that his clients have been using Escalate's inventory control capabilities for years.
"Those who have added the ability to get updates on arrival dates are able to better manage the warehouse," he said. "The upgrade from a manual to a barcode system also, for most, took place years ago. Those who have already implemented a RF (radio frequency) system have benefited from even tighter inventory control and a faster process in the warehouse. Moving from manual to batch typically takes half the time — and RF cuts it in half again."
Profitsystems
David McMahon, a senior consultant at Profitsystems, said a key challenge to warehouse and distribution center managers is one word — speed.
"The speed of receiving merchandise, speed of delivery and speed of merchandising" are all critical, he explained. "The faster the company can get inventory in and out of the distribution center, the greater their gross margin will be."
He said that retailers that have systems in place to move inventory quickly also lower their cost of carrying inventory.
"They need less space, have less damages, less inventory financed by their vendors, and less occurrence of best seller sell-outs," he added. "The distribution center is the engine of an operation. Its efficiency or lack thereof affects everyone — including the customer."
The main focus of Profitsystems has always been inventory management, said McMahon.
"This includes not only purchasing so that you keep the products that make you money in stock, but also some of the less tangible inventory issues — such as having product in your warehouse for weeks or even months before you are able to display it on your floor or storing purchased inventory for long periods of time without having the customer take delivery."
He said Profitsystems offers "easy-to-use reports designed to help owners/managers manage their inventory investment. ... Keeping product flowing in and out of the distribution center as quickly as possible is the key to remaining profitable."
Storis
Figuring out the true cost of doing business in today's import-driven market is another key issue facing retailers, said Gloria Walsh, product marketing manager for Storis.
"Even the smallest retailers now are buying containers," she said. "Imports may seem like a bargain at first glance. (But) if you can't accurately measure your true landed costs, your return on investment will be drastically affected.
"If you have painted yourself into a corner by purchasing a large amount of product at a price which people don't want to buy, your turns will suffer. Until you move that excess inventory, your capital can't be used to purchase items that are selling."
Walsh said Storis has developed tools to measure this cost, as well as forecasting tools to help retailers better manage import product flow.
Storis offers automatic replenishment processing to ensure the items retailers are selling well are always in stock. And since time is money, Storis' software also can automate reorders for best sellers so buyers can focus their efforts on turning other inventory.
"Efficient supply chain management to get the right merchandise at the right margin at the right time is what will sustain retailers in this challenging market," said Walsh.
Descartes Systems Group
Reducing operational costs is of major importance to warehouse and distribution centers, said Nicole German Coulter, vice president of marketing and communications for Descartes.
"Today's retailers face the challenge of working with multiple trading partners, managing the time to sense, respond and react in real time to delivery planning, all while trying to optimally plan logistics operations to minimize costs while improving productivity," she said.
The software-as-a-service (SaaS) logistics solutions provider helps retailers streamline and improve the effectiveness of their warehouses and distribution centers by "maximizing the use of their assets," she said.
Descartes automates appointment scheduling and enables better visibility and collaboration with carriers. "Our solutions enable access to inventory information at a detailed level in transit, which enables better decision making," she said.
"We manage both inventory at rest and in motion across supplier and distribution networks. Our solutions are compatible with any warehouse management system, outsourcer or region that controls the goods."
CDS Solutions
Every savvy retailer is looking for ways to enhance efficiencies right now, said Ren Baker, CEO of CDS Solutions Group. Often, he said, a macro approach is taken instead of the necessary micro approach, which would look at each process, break it down into steps, evaluate and measure performance, and identify methods of improvement.
"So many retailers, manufacturers and distributors get stuck measuring just the big picture of volume versus costs," he noted.
For example, a typical retailer looks at how his operation handles 1,000 pieces of inventory and makes significant changes for a 10% improvement. "So now a CEO or management team has made a big impact and nets good gains on the income statement, and they may be able to handle 1,100 pieces at the same cost structure.
"But instead of this quick fix that burns out, if that same company breaks each step down and yields a 3% to 5% improvement in each, they are able to double or triple that improvement because results are cumulative."
The first question CDS asks its clients, he said, is this: "Does your staff think in terms of delivering 1,000 pieces of furniture correctly, or do you think in terms of delivering a single piece of furniture correctly, then doing it over and over again 1,000 times? More often than not, operations groups can find vastly unrealized efficiencies by focusing on (small) quality improvements."
Myriad Software
Inventory is still the largest asset for most home furnishings retailers, said Carolyn Crowley, president and co-founder of Myriad Software.
One important issue, she said, is streaming the inventory information between a retailer and an outside source, whether it is a manufacturer's central distribution center or a delivery company's distribution center.
To simplify their operations, several of the software company's small and medium-sized retail clients are considering offers from delivery companies and manufacturers to provide one central distribution center that will house their inventory so an individual retailer wouldn't need a large warehouse at all.
"The thought of the retailer running his own warehouse is costly and time consuming and requires staff to stay on top of their inventory," Crowley said.
But she added that moving warehousing totally to an outside vendor involves a lot of important questions.
"It's a good opportunity to cut back on costs for the retailer, but our clients are concerned about who will stay on top of the inventory. What if the DC is also doing the deliveries for the retailer and the customer refuses the delivery? Who owns that inventory? Will the retailer know they have additional inventory to sell at the DC that they didn't own before? Will the manufacturer be willing to take the inventory back without billing the retailer?"
The list of such concerns is long.
Myriad Software has several thoughts on how to make this approach a 'win' for a retailer. But many issues would need to be reviewed and put into place to make this work, Crowley added.
