Saks Inc. has improved inventory turns at its Proffits and Parisian stores by 3% on basic replenishment products since implementing an inventory planning tool, and has gone from an average double-digit out-of-stock position to 95% in-stock, according to Marty Abercrombie, vice president of replenishment for the Birmingham, Ala.-based retailer.
According to Abercrombie, who spoke at the Connect IT conference here last month, this is the retailer’s first step towards more involved forecasting and vendor collaboration. “We still need to get our focus further out towards collaborative planning, forecasting and replenishment,” he said.
This is quite a leap for Saks, which “didn’t have any forecasting tools” at all as recently as less than two years ago.
Simply getting a consistent order flow for basic replenishment products was the first order of business, said Abercrombie, because “if you don’t know what you need in a particular store, you’re not going to succeed.”
Abercrombie said Saks chose a solution from Logility, based here, because it met several requirements, including:
- the ability to generate automated store- and SKU-level models based on sales forecasts and replenishment performance criteria;
- the ability to monitor replenishment performance on an exception basis; and
- the ability to report on performance in a number of ways.
The most important criterion was the first, said Abercrombie, because “demand is erratic a the store/SKU level.” Because the solution can take such variability into account, “it helps us to be very reactive to the markets in which we operate.”
According to Abercrombie, the solution has allowed Saks to “be able to balance inventory productivity with customer service levels. We need to be able to turn the products as quickly as we can, and we can’t afford to be 100% in stock on every item.”
He credited the solution with enabling Saks to achieve a satisfactory balance in this regard.
Abercrombie said he learned the importance of accurate orders from his days on the manufacturing side. “When I worked at Bally’s I learned how bad the information from the retailers could be.”
He said there could only be true collaboration between retailers and manufacturers once the vendors were confident that the retailers’ numbers were reliable.
Despite the difficulty, Abercrombie said the future of collaborative planning, forecasting and replenishment (CPFR) is far brighter and offered greater efficiencies than the old model “where the manufacturer just wants to ship you what’s in the DC, the don’t care about what the consumers are buying.”
Andrew White, vice president of product strategy at Logility, and a member of the CPFR committee at the Voluntary Interindustry Standards Committee (VICS), noted that this concept is emerging thanks to consensus effort to develop a single global standard for collaboration between all members of the supply chain.
He also noted that CPFR may well succeed where electronic data interchange (EDI) failed precisely because the latter never developed a single standard for use throughout the world. “We screwed it up,” he said.
That is a significant problem for an industry such as apparel manufacturing, where the supply chain for a single garment is often peopled by players from around the world.
White also revealed results from several pilot studies using CPFR conducted with major retailers and manufacturers throughout the world.
Results credited to CPFR include:
- a 30% decrease in transportation costs,
- a 67% reduction in cycle times,
- a 60% decrease in forecast error,
- a 40% reduction of inventory,
- a whopping 70% increase in revenues, and
- a 22% increase in fill rates.
According to White, strong collaborative relationships between trading partners will yield much better results that Internet-enabled trading exchanges. “They are best suited to parts of the economy that do not typically provide for significant profits, or competitive opportunities.”
Abercrombie also noted that Saks is itself moving more towards the CPFR model and seemed entirely disinclined to join one of the numerous electronic markets emerging today.
