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A Fresh Look at Supply Chain

BY CSA STAFF

The New Year poses more opportunities for retailers to grow profits by shrinking costs, and taking a fresh look at the supply chain can provide the surest avenues to enhanced bottom lines. Chain Store Age talked with Ryder Supply Chain Solutions’ Chris Merritt about supply chain trends and methods for strategically reducing expense.

What do you see as overriding trends in retail supply chain?

As many retailers strive for organic growth, they have looked to their supply chain as a source of funding. Retailers follow a typical cycle to grow organically: reduce costs in the supply chain; re-deploy cost savings into revenue-growing activities, such as opening new stores or improving their online purchasing capabilities. These increase sales, which results in increased supply chain volume, which creates opportunities to reduce supply chain costs, triggering the cycle to restart.

The relative importance of the components of the supply chain is shifting. Broadly, domestic transportation costs, distribution facility costs and benefit costs are becoming more important compared with labor availability and higher job complexity.

To keep the organic growth cycle spinning, retailers will have to take a fresh look at the supply chain in light of the changing cost environment.

How has the retail supply chain changed over the last few years?

Domestic supply chain components have traditionally focused on the centralization and automation of distribution processes. This strategy was valid when high debt leverage allowed capital to be allocated to the supply chain, and when longer training curves due to increased job complexity created a net reduction in fully loaded labor costs.

The environment is changing, causing erosion in the value of this strategy. Debt leverage has come down, causing a reassessment of the use of capital. Full-time employee benefits are on a path to drive up costs.

Several other factors also affect the cost of centralized distribution centers and transportation networks: fuel cost increases, labor costs and high unemployment rates. Therefore, only having a small number of national DCs no longer offers all of the advantages retailers used to enjoy. Companies are moving away from centralized DCs and are, instead, increasing the number of smaller, strategically located regional DCs that better serve retail stores. Contrary to what many think, this strategy actually reduces costs.

What are some specific strategies that retailers can employ to leverage their distribution networks to benefit their bottom lines?

Evaluate increasing the number of DCs by replacing large automated facilities with less complicated, smaller facilities located in more spots closer to final delivery destination. Another strategy is to relocate DCs every four to six years to be closer to any new retail stores that open in order to reduce network transportation costs. So as retailers add stores and their customers change, their DCs should change to better supply the stores.

When it comes to the international aspect of the supply chain, there are a number of improvements that have increased visibility and speed to market, such as electronic filing, which decreases customers’ clearance times, and PO Management, which increases supply chain visibility by allowing you to track where your PO is at all times. Visibility is very important, since you need to be able to take immediate action when your product is not moving as expected.

What should retailers expect in 2012 and on into 2013 in terms of supply chain challenges and opportunities?

One of the major challenges retailers will continue to face throughout 2012 and 2013 is that consumer demand is fickle. Therefore, it is challenging to have the right inventory in the right place at the right time in order to support the consumer who is willing to spend.

Many opportunities exist for retailers to continue to evolve their supply chain network in order to leverage the changing cost environment. By finding ways to reduce costs, they can continue to leverage the capital to drive the organic growth cycle.

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The Right Fit

BY Connie Robbins Gentry

Apparel retailers know success hinges on finding the right fit for their core customer — and that “fit” encompasses all aspects of the shopping experience from merchandise selection to customer service. The challenge is even greater for Casual Male Retail Group (CMRG), the nation’s largest retailer of big and tall men’s apparel and accessories.

“We need store associates who engage guests,” explained Dennis Hernreich, COO and CFO, Casual Male Retail Group, Canton, Mass., which operates 456 stores under several banners. “Our customer satisfaction index is in the 90th [percentile] when an associate interacts with a guest, but drops to the 70th [percentile] if there is no interaction.”

The epiphany that guests equate proactive interaction to positive service prompted the chain to redefine the in-store experience and what constitutes a “right fit” in terms of the professionals recruited to manage its stores.

When recruiting managers to create a customer-engagement culture, a candidate’s personality and behavior are bigger factors than prior retail experience. Casual Male partnered with Headway Workforce Solutions of Raleigh, N.C., to develop a centralized recruitment program integrating assertive sourcing with technology-based screening. Through online and live behavioral assessments, candidates who exhibit the defined characteristics of a “best-fit” assistant manager, store manager and district manager are identified.

Following the February 2010 implementation of the recruitment program, the company experienced a marked improvement in its hiring process that has translated to numerous benefits for the business.

“We’ve made great strides transitioning our stores to a customer-engagement model where guests receive better service because Headway has brought a wider selection of qualified candidates who are consistently capable of executing our culture,” Hernreich said.

While the chain anticipated improved recruitment processes, the most dramatic benefits were a pleasant surprise.

“The most significant improvement is that district managers (DMs) have more time to train and mentor store teams,” reported Walter Sprague, senior VP human resources at Casual Male. “DMs still interview every candidate who might hold a key to a store, but they don’t have to review thousands of applicants. Headway narrows the pool to a handful of candidates who are the best fit.”

Outsourcing the initial screening streamlined the interview process and freed DMs to focus on creating a customer-engagement culture that effectively improved overall productivity and performance in stores.

“All of the key metrics we use to gauge store performance have increased,” said Brian Reaves, Casual Male’s senior VP store operations, “including year-over-year improvements in dollars per transaction, sales per hour and number of units per transaction.”

Adopting the customer-engagement culture precipitated a hiring frenzy and, in the first 18 months, Headway screened 50,000 applicants, from which the chain hired 735 employees. To fully appreciate the time savings, consider how many hours district managers would have invested to assess the 50,000 candidates screened by Headway. In addition to store managers and assistant managers, 14 of the company’s 30 DMs were recruited through the new system, which Casual Male also utilizes for corporate positions, call center workers and seasonal help.

“We’ve certainly seen better-quality candidates since we began using this recruitment process, and the caliber of seasonal candidates is just as strong as for full-time management positions,” Reaves added.

Connie Robbins Gentry is a regular contributor to Chain Store Age.

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Focus on: Loss Prevention

BY Katherine Boccaccio

Despite the challenges in its category, Birmingham, Ala.-based book retailer Books-A-Million has embarked on an aggressive growth plan that added 41 new units to its store count in October and November 2011. The expansion, which put the 250-store retailer squarely in the No. 2 bookseller slot after Borders’ liquidation earlier in the year, has been accompanied by a newly honed focus on improving its loss-prevention program system-wide.

Books-A-Million teamed with shrink management supplier Checkpoint Systems, Philadelphia, to implement a loss-prevention solution focused around electronic article surveillance (EAS).

Rolled out in about 90 stores initially, the Books-A-Million implementation involves Checkpoint antennas located at the doors of each participating store, which detect radio frequency circuits on paper tags throughout the units.

By combining radio frequency technology with Checkpoint’s energy-saving ECO electronics brand of antennas, along with robust communications and remote alarm data-capture, the system maximizes loss-prevention effectiveness.

Books-A-Million is also using Checkpoint’s Alpha Keepers & Mini Spider Wraps with an RF circuit to protect DVDs. If the tagged product is not deactivated at the point of purchase or the DVD Keeper or wrap is not removed, the product will alarm the antennas, alerting store personnel that someone is attempting to take products without purchasing them.

“The system provides both deterrence and detection,” according to Chad Tice, VP loss prevention at Books-A-Million. The physical presence of the antennas at the door, and the tags, wraps and keepers on products, provide deterrence. The system provides detection if someone tries to leave the store with unpaid merchandise.’

The new system is already seeing positive results.

“Our mix of legacy loss prevention systems wasn’t well suited for books and didn’t enable us to utilize source tagging for greater efficiencies and a better customer experience,” Tice said. “We made a capital investment with Checkpoint because it provided a superior plug-and-play solution, has a national footprint and offers dedicated in-house experts who provide quality implementation results on a consistent basis. In fact, we’ve already seen an immediate impact by generating merchandise recoveries and expect a positive impact on shrink.”

A second phase of program implementation is scheduled for the first quarter of 2012, and will introduce the system to 50 additional Books-A-Million stores.

[email protected]

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