How web-enabled inventory management helps two niche retailers expand their Internet markets
By Paul Demery
Based in Surrey, England, housewares and gifts retailer and wholesaler Authentics Ltd., which sells through 400 partner stores and recently began selling direct to consumers online, has little in common with Limoges Jewelry, a Chicago-based pure-play online merchant expanding its presence in e-marketplaces.
But two characteristics they do share are an interest in growing a product line and the need for an inventory management system that supports more efficient product flow across additional channels. And there is a third thing the two retailers have in common: Each uses a web-enabled system that makes it easier and faster to process inventory to support multi-channel merchandising and marketing strategies.
Accounting for all inventory
Authentics, using a warehouse management system from Radio Beacon Inc. integrated with an SAP inventory database, has cut by 50% the time it takes warehouse workers to pick orders, says Darren Creasey, warehouse manager for Authentics. The retailer has also increased the efficiency of its warehouse operations 500%—an improvement that led to the first inventory check in which all items were accounted for, Creasey adds. “This April, we had our best-ever stock check,” he says. “100% of inventory was accounted for. Under our older system, it would take five to seven days to do a stock check, now we can do it in two days or less.”
Limoges Jewelry, with inventory records managed in an Oracle database, is using Mercent Corp.’s Mercent Retail application for integrating its inventory with third-party shopping sites. That inventory visibility has created efficiencies in the company’s e-commerce department. “This has freed me to optimize our sites rather than spend all my time sending data feeds to the comparison sites,” says Lara Stache, e-commerce marketing manager.
While the Internet’s role in selling has gotten much of the spotlight in the retailing industry, its role in inventory support has become equally important. The ability to better manage inventory, Creasey notes, is crucial to expanding growth through Authentics’ new web channel while increasing its exposure through catalogs. “The web is a fairly new concept to us, and we needed a new system to handle our growth,” he says.
The improved inventory management is supported by a Java web-based platform that integrates customer orders between a Radio Beacon warehouse management system and SAP Business One enterprise software for managing accounting and inventory records.
Mapping the route
When orders are received in the Business One application on a headquarters-based Authentics server, managers click a file-transfer button to move the orders into the Radio Beacon warehouse management system. Warehouse workers then print out order tickets containing customer addresses and barcodes. Using handheld scanning guns to read the barcodes, workers can view on their handheld screens not only the locations of ordered products but also the most efficient pick cycle for gathering the products.
“The system tells workers to start at point A, then go to points B, C, D in a logical cycle,” he says. The system also tells workers how many items to pick at each location. Workers will also scan codes at each warehouse location to double check that they’re picking the correct product.
For wholesale replenishment orders from its retailer customers, Authentics also uses the Radio Beacon system to divide order picking between bulk and individual item locations. If a customer orders 250 items of a product that is packaged in bulk at 200 items per container, the system automatically directs workers to pick 50 individual items from one section of the warehouse and one 200-item container from the bulk section—eliminating the former time-consuming need to break up bulk containers, Creasey says.
By replacing the former paper-based inventory management system, the Radio Beacon/SAP set-up enables instant updates of inventory records as products are ordered and picked, Creasey says. And with all picking sequences recorded and accessible for instant retrieval through a web interface, the system makes it possible for Authentics to more efficiently conduct inventory reviews and check what may have caused discrepancies in inventory records.
“We can drill down into everything to find out who did what, such as if someone created a delivery order note in Business One and didn’t upload it into Radio Beacon,” Creasey says.
Initial skepticism
The system initially was viewed skeptically by warehouse workers. “At first, they were afraid of the system,” Creasey says. “They were used to just getting a sheet of paper to work with.”
But it took only about a day of operation for workers to become comfortable with the system and recognize its advantages, he says. “The system made their lives much easier,” Creasey says. “In the past, if I asked a worker to count how many half-mirrors we had, they had to look up on a computer where the items were and go to maybe ten locations to count them. Now they enter a product code into their handgun, and it tells them what locations to check and how many are supposed to be at each location.”
If there are discrepancies, Creasey can then check inventory flow from order numbers to pick records. “I can keep 100% control of my inventory at all times,” he says.
The operation of the Radio Beacon/SAP system so far has proven to Authentics that it can handle larger inventory to support its emerging web channel at Authentics.co.uk as well as at its wholesale business to retailers, Creasey says. Though its warehouse is small by some standards—with 750 SKUs in 16,000 square feet—it can be efficiently maintained by a four-person staff, he adds.
The real-time view into inventory records also helps him to decide which product categories to expand, Creasey says. “We’re working on expanding our product range while looking at which products are selling—for example, our bathroom products and furniture items—and we’ll be looking at bigger warehouse space,” he says. “There is so much information we can gather from this system, it amazes me.”
Growth through portals
While Authentics is using its web-based inventory management system to manage back-end functions, Limoges Jewelry is using its system to manage certain consumer-facing functions.
Although the web accounts for only about 20% of sales, Limoges Jewelry is operating on a course to sharply increase that share by building its presence in several shopping portals and comparison shopping channels Shopzilla.com, PriceGrabber.com, Shop.com, NexTag.com, PriceRunner.com, Smarter.com and FindGift.com, plus search sites Google and Yahoo as well as on LimogesJewelry.com. “We’re up 84% year-to-year so far this year, and we were expecting 34% for the full year,” Stache says. Limoges Jewelry, a unit of MBM Co. Inc., is ranked No. 427 in the Internet Retailer Top 500 Guide to Retail Web Sites with an estimated $7.2 million in 2005 sales.
Mercent Retail brings benefits in two areas, Stache says: It frees her and her staff from having to spend time feeding data to third-party sites, and it provides daily data updates to show how each SKU is selling in each channel.
Under its former system, Limoges Jewelry would receive weekly inventory updates, which wasn’t good enough for online shopping portals. “Our inventory was only accurate once a week, so sites didn’t have the right out-of-stock information at the right time,” she says.
Now, with the web-based Mercent Retail system using XML to transfer new inventory and pricing data daily from Limoges’s Oracle database to third-party sites, then feed back inventory updates from these same sites also on a daily basis, Limoges Jewelry has improved the shopping experience and increased inventory turns and sales by providing shoppers on partner sites with more accurate inventory status and by reacting faster to out-of-stocks.
Finding variations
“Any time we see a product doing well in any channel, our merchandise people work to get more variations of it,” Stache says. But it takes two to six weeks to develop a new product, depending on where it’s coming from, she adds, and the retailer’s former inventory management system often didn’t produce information quickly enough to plan products, many of which can be personalized. “Now we can act faster, so we can show customers hot products when they still want them,” she says.
Mercent charges a percentage of sales for Mercent Retail, plus set-up fees that range from about $499 to $20,000 based on the amount of integration needed with third-party sites.
Retailers can save on some set-up costs if they’re already operating on e-commerce platforms such as OrderMotion, CommercialWare and Venda, which are easier to integrate than most home-grown systems, Mercent says.
Because Mercent Retail produces daily data on each SKU placed with each shopping site, Limoges can also use the inventory updates to better plan marketing and merchandising strategies, Stache says. “If a product does well in a print advertising campaign, we’ll also push it on our web site and bid it up higher on comparison shopping sites,” she says.
By integrating daily information on inventory turns with the profit margins of separate SKUs, retailers like Limoges Jewelry can set business rules to automatically bid up search marketing and comparison shopping site placements on the fastest moving, most profitable SKUs, says Mercent CEO Eric Best. “That should be the driver of marketing budgets across online channels,” he says, adding that inventory updates with shopping portals can be done as fast as every 15 minutes.
Expanding SKUs
The ability to manage inventory in partner sites down to the SKU level also makes it easier to satisfy the requirements of different sites, Stache says. “Every time we add inventory, we have to tweak it for each channel,” she says. With mounted-stone pendants, for example, some sites record a single SKU for the entire item, but other sites record a “parent” SKU for the pendant and a “child” SKU for the stone. “We can tell Mercent to send just one SKU or both the parent and child,” she says.
Maintaining inventory of about 1,000 SKUs, Limoges Jewelry brings in at least 30 new SKUs per month while others may go into clearance and become discontinued. But with its enhanced ability to view inventory movement and quickly respond with new inventory, “our overall SKU count could grow,” Stache says.
Like England’s Authentics, Limoges Jewelry is gearing up for increased sales thanks to additional selling channels presented by the web. But it’s because of new inventory systems built on web-based integration technology that both of these relatively small retailers appear headed to bigger things.
paul@verticalwebmedia.com
