The first reaction from the warehouse is that you have too much inventory. Although it is easy to dismiss this as typical whining, there usually is some basis to the complaint. Take a quick look at the aging of your inventory and apply the true carrying costs of that aged segment to determine if it makes sense to consider some type of liquidation to reduce inventory levels. Having said that, let’s take a look at some ideas that might increase the storage capacity in your warehouse.

There are the obvious issues of overall layout design and space utilization that affect the storage capacity along with the selection of appropriate storage media. After you achieve an effective layout, it is time to look for the fine tuning that can add to capacity. The following list represents several potential options or issues to consider.

1. Rack over doors – Most receiving dock doors are spaced far enough apart to permit rack to be erected that spans the door openings. These racks can provide several levels of product storage above the clear height of the door opening. Many companies use this pallet rack storage for pallet or packaging material inventory storage.
2. Tunnels in Rack – In warehouses where pallet rack is utilized, a missed opportunity exist if rack “tunnels” are not used over main or cross aisles. Most warehouses try to align rows of rack on either side of a main or cross aisle. The area above these aisles is wasted unless racking is installed that bridges the aisle between the ends of rows of rack. Even allowing clearance for lift truck traffic, it is possible to add two or three levels of pallet storage on these”tunnels”.
3. One area to review is the width of existing aisles in the warehouse. Most material handling equipment is designed with a minimum aisle width or turning radius associated with that particular style. Make sure that you have not overdesigned the aisle width and waste potential storage space. In larger warehouses with many aisles of racking, a small decrease in each aisle width can add additional rack bays for storage. Make sure you don’t go too far in making them too narrow and causing other operational issues.
4. After you establish the layout and location characteristics, the next job is to make sure you utilize all of the potential space in each location. We see instances where one or two cases stored in a location designed for a full pallet. It is necessary to have a variety of location sizes to accommodate the variety of storage needs on a product by product basis. Another waste of space occurs in picking areas where only the front portion of the pick slot is utilized with empty space left behind. The slotting process should take care of this, but we see it a lot in many warehouses. Make sure the pick slot is designed to fit the cubic velocity of the SKU. It is impossible to attain 100% of capacity on a daily basis but the higher % you can maintain in established locations, the more space you will have available.
5. Although they can be costly to install in some cases, the option of installing a mezzanine makes sense in some situations. If you can find the right use for this type space, you can double the footprint of the warehouse where you install the mezzanine. Issues such as beneficial use and the cost per square foot of space in your area will determine the potential use.
6. One of the key ratios to consider in developing space saving ideas is the ratio of aisle space to storage space. One way to reduce the ratio is to block stack pallets of product on the floor and stack them two or three levels high. It requires enough inventory of the same SKU and product that can be stacked without damage. Floor stacking pallets four or five deep is not uncommon in operations with high stackable inventory per SKU. This ability to deep stack pallets with few aisles manages the space ratio to your advantage.

Theses are a few ideas to consider but by no means a complete list. The key is to objectively look for opportunities with an open mind.

Bob Betke is vice president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com

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Dear Curt -

We met briefly at the NCOF conference in Vegas, and I wanted to reach out  to you regarding performance errors.  I was hoping you could provide  me with some insight into how other 3 PL fulfillment companies manage employee errors.  Currently, we don’t have a strong policy in place to  deal with these issues.

Some questions that arise in my mind are:

1.  How many mistakes is too many?

2.  Should the consequence be different in receiving than picking or packing?

3.  If there is a larger mistake that causes our company should there be a more severe consequence?

I understand that everyone makes mistakes and I would like to allow  for learning and coaching, but I also want to make sure that our  employees have a formalized consequence to ongoing errors, and they  know what to expect.  If you have any feedback on this I would really  appreciate it.  Or, if you know any warehouse managers I could speak with to get ideas on what they do that would be great!

Thank you so much for your time!

Sharon, VP of Client Services, 3PL Company

Dear Sharon -

In my opinion, there are a couple levels of issues:

1. Weekly productivity reporting by person through out the call center and fulfillment.  Our clients display these by department and person on white boards, reports and monitors throughout the facilities.
2. Contact center monitoring should be in place.  There should be a form for evaluating the calls and a weighting system for the responses.  What are your standards for monitoring experienced core employees versus new hires?  Companies have developed coaching approaches to improve employees, get them to accept responsibility for improvement or a basis for asking them to leave the company.
3. Personnel policy that deals with severe HR issues.  These include theft, embezzlement, sexual harassment, etc.  These should have clear documented policies which employees understand.

In terms of error rates, we would expect that controllable error rates would be only 0.5%. Meaning, 99.5% of all major transactions are error free.  In bar coded systems it will be much higher.

In a speech a number of years ago when I made the statement about error rates of 0.5%, a national FedEx manager pointed out that meant 73,000 of their customers would not get their package on time in any given day. What is your management’s attitude about errors?  And you are in a 3 PL service so what guarantees are you making to clients?  Hope this helps.  Call me if I can further explain.

Curt Barry

Hey, blog readers, what’s your company’s approach?

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Retail Pro product sales have not in fact been declining over the past several years, nor have their annual maintenance renewals.  Further review of the of the documents filed with the United States Bankruptcy Court in the District of Delaware, reveals that Retail Pro revenues have in fact increased over the recent past.

Also disclosed in public filings the Retail Pro source code is owned by Intuit and is not released to any third party for development or maintenance of the product. Retail Pro continues to develop, support and maintain its products exclusively.

To elaborate on the SEC filing on September 5, 2008 the Settlement resolves the SEC investigation into the Company’s financial condition, results of operations, accounting policies and procedures, internal controls, and internal revenue recognition investigation relating to the timing of revenue recognition for certain transactions during the fiscal years ended March 31, 2003, 2004 and 2005. “The Company settled the Lawsuit by consenting to entry of a permanent injunction in the United States District Court for the Southern District of California against future violations of the antifraud, reporting, recordkeeping, and internal control provisions of the Securities Exchange Act of 1934 (the “Settlement”). The Company entered into the Settlement without admitting or denying the allegations, and was not required to pay any civil penalty, fine, or monetary damages as part of the Settlement.”

Additionally, an Asset Purchase Agreement was submitted to the courts at the time of filing for protection under Chapter 11 of the United States Bankruptcy Code, demonstrating that Retail Pro will regroup.  In these tough economic times we hope that Retail Pro’s restructuring under the protection of Chapter 11 will allow them to emerge stronger and better than ever.

Paul Sobota is vice president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at www.fcbco.com

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At every step in the product and promotion life cycle, these three departments’ needs are different—but at the same time they all revolve around gross demand planning and results.  (By “life cycle” I’m talking about the Marketing side of planning a campaign, re-forecasting results once the initial demand is in, and then potentially re-projecting after half the campaign when the majority of sales are in.)

Merchandising’s needs are about the pre-season merchandise plan or the continual planning for the e-commerce site; the forecasting by catalog drop; and the end of the season.  What quantity of each product is needed across all promotions—print, e-commerce and store?

The thing that ties these three departments’ planning and results efforts together is gross demand data.  Marketing arrives at the catalog gross demand plan based on their circulation plans by drop, by house file, and by outside list segment.  They also must think through all the “electronic” media in which specific products are featured—website home pages, e-mail, affiliate campaigns, etc.—and give some direction to Merchandising and Inventory Control.

Ideally, Merchandising’s catalog pre-season plans are built top-down by merchandise category, and bottom-up by product.  But they should come close to tying together with Marketing’s demand plans at the demand level.

Then we have Inventory Control.  It’s their job to interpret the plans and selling results and purchase product far enough in advance to be in stock when customers order.  From an inventory perspective, the Inventory Control plans aren’t going to tie back to the others’ plans exactly.  Management allows Inventory Control to purchase more product than the demand plans indicate, based on vendor lead time, vendor discounts offered, etc.

Week-for-week, one of the hardest things to do is read selling trends and interpret them in a way that allows you to make the right decisions—which ultimately provide the base line projections for yet other departments, such as Call Center and Fulfillment.  Yet from an uninitiated perspective, it looks like a free-for-all, with many different versions of plans and results.

How can BI, dashboard and executive analytic tools help with this critical decision-making?  They can provide a consistent view of all the data, so that whether they’re analyzing demand or sales, all departments are utilizing a standardized view of the same data.  This allows each department to look at the segment of data that is meaningful to them.  Business Intelligence solutions allow users to take cuts of the data and compare them in multiple ways, whether it be this year to last year or actual to plan, as well as to reassemble the data and analyze it from one department to another.  Each department needs to maintain their own way of analyzing data, but also be able to bring their plans and results together in a consistent, uniform way.

The more we talked, the more the client’s managers got back inside their skins. And they realized how important having a single version of the truth, through BI tools and executive analytics, would be to planning and reconciling results—day-for-day, week-to-week, and throughout the year.

Brian Barry is a Senior Consultant with F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com.

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Read The Full Article

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Holiday sales for retail and direct industries.  After all the media flap about the weak Holiday season as it progressed, no one can be surprised that it ranks as one of the worst Holiday seasons in the last 30 years. In their September 2008 Holiday forecast, National Retail Federation (NRF) estimated sales would be up 1% to 3% over last year. At the NRF event this week, we heard estimates that many retailers will finish 5% to 8% below the previous year, which is obviously a disaster. This will lead to a record number of small and large businesses exiting the retail and direct space. In the past 6 months there have already been a record number of retail store closings from bankruptcies.

Catalog has a broken business model.  We feel there are two major issues that have changed the business model for cataloging:

• Prospecting has been on a 10-year decline in response rates. Renting and exchanging lists as a prospecting practice has totally been destroyed by the co-op databases. Co-ops overall are the major game in town for prospecting, but many of the senior management we talk to are concerned that co-op response rates are not as strong as they were. Is there over-saturation of mailings by co-op users, along with the bombardment of e-mail campaigns?

• Continual increase in postage costs. As a result of the postal reform of the last few years, USPS has a mandate to make money and the ability to almost automatically increase postal rates annually. Many of our clients had postage increases of 20% to 24%. At one client we worked with last week, their postage costs are now 33% of the total cost to create and mail catalogs.

Highly promotional offers and high use of free shipping.  We have just completed an in-depth study of free shipping practices during Fall/Holiday 2008. The study is featured in February’s Multichannel Merchant magazine. Clearly, this Holiday season was characterized by highly promotional pricing and free shipping. A number of clients interviewed mentioned they got poor results to e-mail promotions unless they offered a strong promotional incentive such as free shipping.

Suffice it to say that consumers were opportunistic with their purchases, looking for true bargains at the retailer’s expense.

What businesses did well?  Customers pulled back on discretionary spending and reduced gift-giving this past season. There were some discounters, promotionally priced and value priced businesses that did well. Two we have all heard about in the press are Wal-Mart and Amazon. We have one large client that is off price/value priced, and had order increases over 40%. Obviously, off-priced businesses that sell overstocks will have great selection to choose from and should continue to see strong sales.

A number of our business-to-business catalog clients saw a slowing of sales for the first time starting in October, and they finished 2% to 7% off plan.

Then we have a surprise: A number of smaller e-commerce pure plays we have talked to seem to have had major sales percentage growth. My guess is that they are truly niche businesses with unique products, whose customers cannot find the same or equivalent product elsewhere. Also, in a small business it’s easy to see double-digit growth, because the “last year” number is small. But not to take anything away from them, they are not significantly off plan. And because they are not print catalog or list prospecting oriented, they aren’t suffering from the issues we discussed earlier.

However, many of our gift, fashion apparel and general merchandise clients finished 10% to 25% below plan, which meant many ended below 2007. Plans in even the most aggressive companies may have only been up 5% to 10% over 2007. Circulation plans had been cut because of the postage increases.

Outlook for 2009.  The industry leaders we work with—retail and direct companies, venture capital and finance people—expect the downturn to get worse in the first half of 2009 and last 12 to 18 months longer. One retail client with over 500 stores told me at NRF that they are planning, from a financial perspective, that sales for the next two years will be down.

Given the seriousness of the downturn, our major challenge is how to plan 2009 in terms of number of products and pages circulated. We all know that if we reduce pages and products to reduce costs, we decrease revenue further and really shoot ourselves in the foot.

For many businesses, it will be a time of trying to survive.

Another big worry many companies will have is the lack of growth in the 12-month buyer files. Many companies will now have had two Holidays with the 12-month buyer count smaller than 2006.

The downturn, as we all know, is worldwide. We are hearing from clients who have been in the markets here and overseas recently that many of their smaller resources are in trouble and will probably close. And an even bigger issue is that there does not seem to be a lot of new product being offered.

Reducing Expenses. There are many resources on our website (www.fcbco.com), both in the articles and blog, that can help you to reduce expenses. Also, there is an article entitled “70+ Cost Reduction and Productivity Improvement Ideas” which is a good thought jogger for cost reduction and efficiency improvement.

Here are some current projects for which F. Curtis Barry & Company is engaged by clients looking to reduce expenses:

1. Perform an assessment of how to further reduce call center and fulfillment costs
2. Determine whether inbound and outbound shipping costs can be further re-negotiated
3. Do an inventory assessment to determine how to improve inventory forecasting and management strategies
4. Look at whether outsourcing call center and/or fulfillment can reduce costs

Feel free to call me today to talk through any or all of these ideas.

These are tough times for sure. But it’s also in this time of uncertainty that the smart and well-financed companies will pick up market share.

Curt Barry is president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at www.fcbco.com.

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Or, say management has tasked you with developing a report and you try and go back to prior results, maybe from a season or two ago. How many different versions of the sales, purchase and inventory plans are there? Which ones are the actual and which were prior versions?

Some readers might say we could do a better job of controlling and eliminating versions of plans—which is certainly true, and something every company should work toward. Or you may say if we use only one enterprise system we can eliminate this dilemma. But that isn’t really the solution; such systems aren’t viable for most companies, and anyway, there are multiple data elements that are all valid for whatever processing system is being used. There isn’t a “single version of the truth”—one official set of figures for sales, inventory, plan, history, etc.

Take for example a product’s inventory. You can find sales plans on a user-derived Access system or Excel spreadsheets. A product’s inventory on hand in units and dollars occurs on your order management system. A separate best-of-breed warehouse management system will also include the same product on hand, but needs to be synched up daily. The finance system will also carry the total company inventory in dollars—probably not updated real time, but daily or weekly. You may also have a specialized standalone forecasting and inventory management system, to project inventory by promotion or catalog campaign.

Additionally, because the major transaction systems require a high degree of training, management does not use them as the source for their information. Management has to go to extremes to get what they need, either by requesting that department managers pull data or by using business analysts to come up with reporting. Because these are manual efforts using sources not originally geared to management’s needs, they are delay-riddled, error prone processes. And they still don’t deliver a “single version of the truth.”

You get the picture. There simply isn’t a “single version of the truth” for the major data elements used in many businesses. For management to have confidence in the integrity of the data they’re getting, I think the time has come to advocate and budget for projects that resolve these problems. Such problems are not new, and I believe they inhibit the effective management and growth of direct businesses.

Here is a hierarchy of solutions you should consider:

• Extract data from major transaction processing systems into Excel or other reports
• Access databases, and business analysts using OLAP tools
• Data warehouse products
• Business intelligence systems with dashboards and analytics

As the New Year approaches, it’s time to advocate with management for solutions to this problem. Especially in this economy, knowing exactly where you stand is essential. You can only control expenses and inventory and know which products and promotions are working—and which aren’t—if you have accurate data on which everybody across the company can agree. In our experience, companies that used business intelligence systems to overcome such information problems have been successful in getting a positive ROI from these types of systems within 12 to 18 months. And in today’s business environment, that’s a “single version of the truth” on which all companies can agree.

Brian Barry is senior consultant with F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse management systems, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com.

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Our team understands the issues and challenges facing multichannel businesses and provides insight on the following topics:

• Business Management – including “Developing Your Corporate Dashboard Of Key Performance Metrics”
• Contact Centers & Call Centers – including “Managing Your Cost Per Call”
• Forecasting & Inventory Management – including “10 Ways To Improve Vendor Quality Control”
• Direct Commerce Systems – including “How to Select Any Business System: Four Steps To Take Now”
• Warehouse & Distribution -including “Rising Transportation Costs – And What To Do About Them”

With over 45 articles filled with data, results and in-the-trenches experience, we compiled this information to provide a how-to and best practices resource to our clients and others in the industry. The articles in this book reflect the type of in-depth knowledge that a consulting firm with 250+ published articles in US and European trade publications should have – the type of knowledge and experience that F. Curtis Barry & Company brings to every client engagement. Each article was reviewed by our team and edited with timely updates.

Best Practices in Multichannel Operations & Fulfillment provides quick tips and thoughtful answers to companies working to increase their profitability, improve efficiency & productivity and reduce costs.

To order visit: http://www.fcbco.com/book.asp.

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Among the mistakes I noted were the following:

• not having the right project team in place;
• failing to develop detailed business requirements; and
• limiting the search to a preselected number of vendors, based on the premise that someone that somebody knows said “this is the system you should get.

I also focused on the methodologies companies use to ensure their businesses are selecting the right systems. These methodologies include the following:

• assessing your business requirements and documenting them;
• developing a request for a proposal that accurately reflects your business;
• vendor demonstrations;
• vendor negotiations; and
• contracting through implementation.

Also covered in the wide-ranging session were tips on the average timeline for selecting a system, building a budget, selecting a systems model (build, licensed or SaaS), and choosing on-premise or hosted services.

I also covered trends that many businesses are looking for in systems today, including these:

• one system vendor with modules for e-commerce, OMS, customer relationship management and WMS;
• one customer view across the enterprise; and
• the integration of systems still being key for functions such as inventory management.

Catalog Success, F. Curtis Barry Team Up for Systems Workshop
Want to learn more about selecting and implementing the right system for your business? F. Curtis Barry & Company, in partnership with Catalog Success, is hosting a co-branded, two-day interactive workshop, “Evaluating, Selecting and Implementing Direct Commerce Systems,” on June 16 and 17 in Richmond, Va. For registration information, visit www.fcbco.com/seminar

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How realistic is it to have a rock solid single application for direct and retail? Are there ERP systems being installed in direct? What progress are Order Motion and ProfitCenter Systems making in developing and installing their SaaS models? How do you know about the stability of the vendors and the management changes that are taking place? How do you stay current, make sense of it all and know which option is most suitable for your business?

There are three essentials. One, it comes back to adopting a solid methodology and strategy for evaluating and selecting the solutions that are best for your company. The first task at hand is to have the right expectations. This means having realistic expectations for the time frames, tasks, responsibilities and level of investment necessary. This comes from experience. Are you better off continuing to develop your own application or moving to a commercial system?

Two, it’s important to have the right expectations and understanding of the capabilities and limitations of various software applications. In order to do this, a company must develop highly detailed business requirements as well as integrations to outside applications and service bureaus. It is nearly impossible to compare applications and to know if your expectations can be met, if you have not clearly defined what it is you are looking for in a software solution.

And essential number three, consider using an experienced consultant to temporarily augment your staff’s knowledge about the applications that are installed in this rapidly changing marketplace, and the most reliable vendors.

The vendors’ job is to sell. Your’s is to match up the applications against your requirements and to aquire or develop the best application strategy. For help with evaluating your application strategy, vendor application knowledge and determining the steps and tasks necessary to select your next order management system, call us today.

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