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Philz Coffee Cures Growing Pains With Scalable ERP Solution

BY Dan Berthiaume

Store growth is the ultimate goal of most chain retailers. The more locations you have, the more revenues you (generally) bring in. But sometimes adding new stores creates its own new challenges.

When San Francisco-based Philz Coffee determined about four or five years ago that it wanted to start adding to its base of five coffee shops in the Bay Area, first with more stores in California and eventually hundreds of locations throughout the U.S,, the retailer knew its existing enterprise systems would not support that type of aggressive growth strategy.

“There are a lot of things that are not major issues for a younger company that can become issues as a company grows larger,” said Jacob Jaber, CEO of Philz Coffee.

The Enterprising Approach
Specifically, as the company grew larger, those things included having a scalable, secure ERP system capable of managing areas such as CRM, e-commerce, accounting/finance, warehouse management, order management, procurement and sales, and HR/benefits. In addition, Philz needed easy, real-time access to most data.

Philz’ existing entry-level accounting system lacked the scalability and deeper functionality required to support its growth plans. And manual processes for tracking and replenishing inventory, reporting on sales and other metrics, and managing transactions with suppliers and corporate customers were consuming too much time and definitely not growth-friendly.

After initially identifying its enterprise technology issues and spending roughly a year and half evaluating offerings from various providers, Philz selected NetSuite’s single, integrated, cloud-based business management solution.

“It helps us leverage technology to move quickly,” said Jaber. “We have good support and quick response from NetSuite.”

Moving at the Speed of Retail
By integrating the NetSuite ERP solution with POS systems at all stores, Philz is able to track real-time transactional data and automatically deduct customer orders from inventory. A real-time business dashboard gives Philz management on-demand visibility into such key metrics as margin, customer count, average ticket, sales by store, labor costs and more, with drill-down into detail.

Philz also relies on NetSuite to simplify and speed coffee procurement from suppliers that source beans from a variety of Middle Eastern, African and Asian nations. Philz revenue has soared 400% since implementing NetSuite in May 2010, with rapid growth to 13 coffee shops in the Bay Area. And the retailer is not done leveraging the benefits of the technology.

“When we have 500 stores, the ERP solution will help us more,” commented Jaber.


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Alco focuses on improving profitability

BY CSA STAFF

Alco is developing a strategy to improve profitability and deliver shareholder value, following a growing net loss during the third quarter of fiscal 2014, compared to the same period in the prior year.

Net loss totaled $16.4 million, compared to $1.4 million. Results in the third quarter of fiscal 2014 included a non-cash charge of $9.8 million related to a valuation allowance on the company’s cumulative deferred tax asset, and $1.1 million of non-recurring expenses attributable to merger activity.

Net sales from continuing operations, excluding fuel, increased 1% to $105.4 million during the third quarter of fiscal 2014, compared to $104.3 million in the third quarter of fiscal 2013. Same-store sales, excluding fuel, decreased 2.9% to $101.1 million during the third quarter of fiscal 2014.

Alco intends to maximize the benefit of headquarters relocation to the Dallas area, which is enabling Alco to recruit experienced managers, buyers and marketers from top retail organizations. The company plans to expand gross margins by completing a price optimization initiative with Revionics, which increases top-line sales and gross margin by adjusting prices store-by-store and item-by-item based on detailed demand data.

The company also plans on improving the real estate portfolio by closing unprofitable stores and open more productive ones. By the end of fiscal 2014, Alco will have closed a total of 18 underperforming stores and opened three high-performing locations in regions with growing energy-based economies.

Alco will be upgrading IT with a new ERP system and a new supply chain service provider, as well as reducing inventory and associated debt levels by, in addition to the store rationalization and IT upgrades, making a number of targeted changes in store layout and merchandise mix.

"Operating results in the third quarter were impacted by several significant one-time events, as we dealt with a proposed merger and also took steps to fix long-term problems that have hurt Alco’s profitability,” said Richard Wilson, president and CEO. “We recorded approximately $1.1 million in merger-related costs. We experienced a net reduction in gross margin dollars of approximately $5 million, primarily due to increased promotional activity in an attempt to reduce inventory and debt levels. In addition, Alco has closed eight underperforming stores in the first three quarters of fiscal 2014 and decided in October to close 10 more locations by year-end. Store-closing costs in the quarter were approximately $934,000. Finally, we recognized a large non-cash charge relating to the accounting for deferred tax assets on the company’s balance sheet."

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Macy’s to build new fulfillment center

BY Dan Berthiaume

Cincinnati – Macy’s will build a major direct-to-consumer fulfillment center near Owasso in Tulsa County, Okla., to support continued sales growth driven by Macy’s omni-channel strategy. The company is expected to invest more than $170 million in the facility, including the latest technology in material handling equipment and warehouse management systems.

Construction of the 1.3 million-sq.-ft. facility is expected to begin in spring 2014, with operations starting in April 2015 and the first orders shipping in summer 2015. When fully operational, the Tulsa fulfillment center is expected to employ approximately 1,500 full- and part-time associates year-round. In addition, another 1,000 or more temporary seasonal associates are expected to be hired each year to handle a significantly higher level of online orders from customers during the holiday shopping season

“The rapid growth of Macy’s direct-to-customer shipments, rooted in our omni-channel approach to business, requires us to continue to strategically add fulfillment capacity so our customers can receive their orders quickly and efficiently,” said Terry J. Lundgren, chairman, president and CEO of Macy’s, Inc. “Customers today are shopping whenever, however and wherever they prefer, via stores, desktops and mobile devices, and we continue to invest to meet the customer demand. We have rolled out fulfillment capability to 500 Macy’s stores nationwide, as well as built three major fulfillment centers over the past seven years. Our new Tulsa County facility will represent another significant expansion of our shipping capacity, particularly to customers in central and southern regions of the United States.”

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