April 30, 2009, 12:00 AM

Location, Location

How web-based inventory and demand systems get more products into shoppers’ hands.

By Paul Demery

Selling spring fashions or apparel licensed by college sports teams may be a good way to kick off retail sales in the first half of the year, but it can also be a logistical nightmare for retail managers charged with getting the right items in place at the right time. In some stores depending on their demographics or location, certain fashions may sell out quickly, while in another city or region the same products might linger unsold, destined for the markdown bin.

A retail web site faces the same challenge. With a market reach across a retailer’s entire customer base, the web operation’s warehouse might run out of the jersey number worn by the season’s hottest college basketball player or the latest style made suddenly popular by a movie star. If only the retailer knew that some of its stores still stocked that item, it could arrange for a shipment from that store while the fashion is still hot.

Many retailers, however, operate with disconnected systems within online and offline selling channels for managing inventory records, merchandising plans and incoming orders. This leaves them without a central application that can show real-time updates of what products are still in stock and where they’re located, experts say.

Broad view

“Order management systems should show available inventory throughout an enterprise because often retailers own more inventory than they’re showing customers as available,” says Janet Sherlock, research director on the retail strategies team at research and advisory firm AMR Research Inc.

Now retailers of different sizes and market niches, such as college bookstore operator Follett Higher Education Group and fashion apparel designer, wholesaler and retailer Jones Apparel Group Inc., are deploying web-enabled systems that enable them to boost sales by better matching customer demand with inventory, regardless of where that inventory resides. They’re also using these systems to better understand cross-channel customer demand, which is helping them more accurately allocate products to avoid stock-outs in the first place.

So if an online shopper at one of Jones Apparel’s Nine West, Anne Klein or Jones New York e-commerce sites orders a spring pantsuit that is no longer available in the web store’s designated distribution center, for example, the retailer can automatically re-route that order to another distribution center, a drop shipper or a store that has the suit in stock.

And by viewing the locations of customers placing online orders for particular products, retailers can better plan how to stock those products across stores as well as at distribution centers. This can be helpful for planning allocations when introducing products without an order history because it lets a merchant test customer demand online before taking on the cost of distributing products across its store network, experts say.

Store fulfillment

Follett Higher Education Group sells college textbooks and general merchandise like apparel, gifts and school supplies through some 900 college campus bookstores. The stores also have associated retail web sites that Follett operates on its eFollett.com e-commerce platform.

With every freshman class more Internet-savvy than the last, Follett is facing an unusual challenge: Although it maintains nearly its entire college textbook inventory in its 900 stores, more orders for them are being placed online every year, putting pressure on Follett to connect web orders with store inventory. Although Follett ships some used textbooks from its distribution center directly to customers or to retail partners including Amazon.com, Follett fulfills all of its web orders for new textbooks and other merchandise from stores.

With the web already accounting for about 12% of store sales, double about two years ago, Follett sees that percentage rising every year. “It could go as high as 50%,” says Tom Dillon, vice president of merchandising systems.

Until recently, however, the surge in online orders was disrupting Follett’s ability to fulfill them and keep its growing number of web shoppers happy and stores running efficiently. That’s because Follett’s retail sites didn’t indicate whether featured products were actually in stock in the associated store.

So as online shoppers placed their orders, choosing either home or dorm delivery or in-store pickup, store clerks would print orders off a computer, hunt for the products to see if they were still in stock, and scan available products at a store point-of-sale terminal, where the clerk would also manually enter the online shopper’s credit card account number to complete the purchase. The clerk would pack the products and ship them off, then return to the computer to e-mail an order confirmation to the online customer.

That entire process would take several minutes. And with Follett’s entire retail operation handling some 1.2 million online orders per year, it was a costly process, even at the minimum wage level, to try to fulfill products that might not be available. “We were essentially providing poor customer service and taking too long to get orders out the door,” Dillon says.

Good hunting

Follett has changed all that with a suite of applications from JDA Software Group Inc., including the JDA Merchandise Management System and Win/DSS point-of-sale system, which integrate information on merchandise inventory and online and store sales data.

Now as sales occur online and at the store POS terminal, the system automatically updates the JDA Merchandise Management System, so product availability is displayed accurately on the web. And as store clerks receive online orders, they can be sure items are in stock before going to the picking location to find the merchandise.

The JDA suite also integrates with JDA’s Performance Analysis tool, which provides Follett with reports such as which products are selling best on particular web sites and in their associated stores. This enables Follett to plan store product allocations to meet customer demand, Dillon says.

The most measurable benefit of the JDA system has been a 30% reduction in the time and cost to fulfill web orders in Follett’s stores, Dillon says.

Follett also realizes harder-to-measure benefits through more productive store staff that spend more time assisting customers and improving merchandise displays, he adds. Combined with improved product allocations in its stores, this has led to increased sales through web orders. “This helps us complete web orders faster and keep online customers happier,” Dillon says. Follett’s e-commerce sales have grown 20% or more a year and so far this year are also running 20% over a year ago, even though Follett’s total sales are flat.

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