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 eCommerce site; the forecasting by catalog drop; and the end of the season.  What quantity of each product is needed across all promotions—print, eCommerce 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 Management.

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 Management.  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 Management plans aren’t going to tie back to the others’ plans exactly. Management allows Inventory Management 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 supply chain logistics. Yet from an uninitiated perspective, it looks like a free-for-all, with many different versions of plans and results.

How can business intelligence tools, dashboard and executive analytic tools help with this critical decision-making?  The business intelligence tools 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 tools 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 business intelligence tools and executive analytics, would be to planning and reconciling results—day-for-day, week-to-week, and throughout the year.

If you’re interested in more information about business intelligence tools and would like to talk with a consultant, contact Jeff Barry at jbarry@fcbco.com, or call (804) 740-8743. F. Curtis Barry & Co. is a national consulting firm that works with eCommerce, catalog, retail, manufacturing and wholesale distributors on projects focusing on supply chain strategies, order management systems, warehouse management systems, inventory management, third party logistics, and to reduce freight costs.

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 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 order management systems aren’t viable for most companies, and anyway, there are multiple data elements that are all valid for whatever processing order management 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 tools with dashboards and analytics

It’s time to advocate with management for solutions to this problem. Especially in this recovering 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 on. In our experience, companies that used business intelligence tools 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.

If you’re interested in talking more about business intelligence tools with a consultant, contact Jeff Barry at jbarry@fcbco.com, or call (804) 740-8743. F. Curtis Barry & Co. is a national consulting firm that works with eCommerce, catalog, retail, manufacturing and wholesale distributors on projects focusing on supply chain strategies, order management systems, warehouse management systems, inventory management, third party logistics, and to reduce freight costs.

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.

A: Today’s comprehensive order management system performs integrated functionality for order entry, customer service, order processing, warehousing, marketing and merchandising.

There are literally hundreds of tables and files in these order management systems that have to be converted or built from scratch manually. These range from promotional tables, shipping tables to the more complex customer files, item masters and purchase order files.

For smaller businesses, the better approach is to minimize the automated file conversion. For larger companies (meaning tens of thousands of customers and products) it will be a blend of build manually and program file conversation.

The reasons are:

•Converting years of history often result in many file integrity problems because the data is not consistent over long periods of time. Needless to say it takes many more passes through the data and it may still not be totally corrected;

•Conversion programs take time to write and test. Many of the new order management system files and tables can be set up faster manually than writing programs and converting files;

•Setting up files has also proven to be a good way of training departmental users in what the new order management system will require in terms of maintenance. It gives you familiarity with the new order management system at a detail level. If you attempted to convert all files the users will never understand early what the order management system requires.

For larger businesses, it may be more compelling to look at automating a larger share of the file conversion. But we would still advise that this should not be taken to extreme.

Some Guidelines:

•Most companies under estimate the time required to develop specs, program and test file conversion and using copies of subsets of the live file in training.

•Don’t try to machine convert too much data – too many years back. How much history do you need to convert?

•Look at using your marketing service bureau to be a source of hygiened customer data. Get them involved with the file conversion early to see how they can assist you. If you use them, you’ll end up sending them the files once the conversion programs are tested, several days before the “go live”. This will assure that you’ll have an update, hygiene customer data file. Merge/purge to eliminate duplicates just before the conversion. Address correction and NCOA would be performed.

•Take into account the data file problems that multiple years of data may have. System created problems, changes in coding of transactions or tables, etc.

•Consider the amount of time required to make the file conversion during the order management system “go live”. Obviously, you don’t test with the live data file. Initially test with a copy of selected records from the files. Selected records which are illustrations of as many conditions as you can identify. Then, do a conversion volume test to see how long the actual file conversion will take. This is especially crucial with large files (e.g. customers and item master) being loaded to a relational data base.

•Schedule sufficient time to humanly review data. Can’t look at every record but you need to sample the converted file sufficiently to know the file conversion programs are working correctly. The user departments should all be involved in reviewing samples in the files they use. If you only review a few accounts you are taking a high risk.

•Plan out the final days of the conversion. There will be the need to begin the file conversion a few days in advance of the order management system “go live” date. Most businesses can not shut down the business during the file conversion, so you need to figure out how to update the key files during the “go live”. How will you continue to process new customer orders and returns, add new products, etc.? Need to go back and update the files during the “go live”.

•Can you keep your old order management system operational for some period of time to answer inquiries and compare records? Remember a very high percentage of inquiries and complaints happen in the first 90 to 120 days after the sale or return and then inquiries drop off quickly. Does all customer data need to be on the new order management system back 10 years? But for marketing purposes we don’t want to lose customer purchase activity and promotional history.

File Build Versus Convert

In our order management system consulting practice we look at each company’s file conversion and its file data objectively. But here are some generalizations about the types of files and whether should be built manually versus converted

These are the files that are typically file converted with programs customer files, item masters, customer order and return history, inventory files, purchase orders, subset of item master for warehouse management system, item locations, etc.

The majority of files and tables are set up manually by user departments. These include promotions, source codes, sales tax, shipping & handling, files which govern business rules (system control values which determine the functions of the order management system), open orders (keying the data gives you experience with order entry and all the order coding), general ledger chart of accounts, merchandise hierarchy ( div, dept, class, ) and employee files.

Types of files could go either way – build or convert – accounts receivables.

There are some types of files – like the historical promotions – that aren’t converted. The results may be sent to a data warehouse, spreadsheet or marketing data base.

Summary

Get with user management and get an early start on planning the conversion. Realistically, consider what it will take to convert files by program versus building them manually and giving the user departments more experience with the new order management system’s maintenance.

jbarry@fcbco.com, or call (804) 740-8743. F. Curtis Barry & Co. is a national consulting firm that works with eCommerce, catalog, retail, manufacturing and wholesale distributors on projects focusing on supply chain strategies, order management systems, warehouse management systems, inventory management, third party logistics, and to reduce freight costs.

Gorman has written about the company and its growth in the last half-century in L.L. Bean: The Making of an American Icon. This is one of the industry’s great books. It painstakingly charts the changes in marketing and merchandising that achieved these dramatic results over 38 years. The book discusses the synergy and the necessary tension between marketing and merchandising. The role that supply chain strategies, including call center, plays in providing exemplary customer service. Staying true to the principles established by his grandfather L.L., sourcing the best outdoor products at the right price, how the college and preppy trends accelerated L.L. Bean’s growth, trying to sell to women shoppers without getting caught up in fashion trends, providing a 100%, no-quibble guarantee (there are legendary stories about shoppers returning outdoor gear after extensive wear). It is the ultimate in customer service and kept customers coming back. Bean’s huge retail presence in Freeport, ME and the slow charting of retail growth outside the region. Gorman talks about how different these channels are for them.

I met Leon Gorman in the mid-1970s. Mr. Gorman was friends with Mr. Frank O’Reilly, the then president of Brooks Brothers. In a very forward-thinking strategy, Mr. O’Reilly launched the first Brooks Brothers’ catalog when BB had less than 20 stores. At that time I worked for Garfinckels, Brooks Brothers, Miller & Roads, Inc., in the corporate data center as the manager of research and development (systems and programming). Our team was invited to Freeport, ME for a week to explore all the aspects of order management software and customer service. Mr. Al Schmidt was in charge of the marketing at that time. Mr. Gorman and his team couldn’t have been more gracious and thorough in educating us on the basics. Back then there were no commercially available order management systems. I vividly remember Mr. Gorman walking us through how he guided the selection of product and worked with creative to paginate the catalogs, and his concern for developing new products. We designed and programmed our 370 mainframe system by emulating L.L. Bean.

In the book, Mr. Gorman continually talks about the top guy being thoroughly involved with the merchandising of a direct company, something which is obviously very difficult to do given this rate of growth. Without continual product research and development and sourcing, retail and direct businesses are essentially out of business.

What’s interesting about the way the book is written is that many people were interviewed, current and former L.L. Bean managers across the company and consultants as far back as Stanley Fenvessy. Mr. Gorman has his commentary and the other participants give their viewpoints (they are identified by name and position). This illustrates the contrasting viewpoints of various people who charted and achieved the company’s long-term growth. But one thing for sure, Leon Gorman was ultimately in charge, and he held himself and the company accountable to achieving the best results for all stakeholders.

This is a great read. Get your team reading it now. Especially for young managers it’s a great way to see how all the functions fit together.

–

Curt Barry is president of F. Curtis Barry & Company, a national consultancy focusing on warehouse, systems, and inventory management.

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

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?