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.

We are not pushing domestic versus off-shore, but instead the analysis of what using a third party call center can do for your business. One of our clients outsourced 300,000 phone calls off shore, resulting in a substantial reduction in costs. How substantial? This client’s fully loaded internal cost per minute was $0.72, while a fully loaded off-shore cost per minute for this client was$0.42—and most of the customer service remains in-house. Additionally, the client’s 90,000 mail/fax orders cost was only $0.15 per order: scanned, transmitted to Asia, keyed overnight and available on-line for picking and customer service the next morning.

Clearly, you need to look at the potential savings of outsourcing. How should you approach doing this type of study?

Know your internal costs. In order to compare your internal costs versus third party outsourcing, you need to identify your fully loaded internal costs. “Fully loaded” includes direct and indirect labor, occupancy and telecom costs. This needs to be converted to a cost-per-minute basis, which is how outsourcing will generally be proposed and invoiced. You may say that you can’t control occupancy costs, however, there may be other uses for that space, if call center is outsourced.

Competitively bid out to multiple vendors. It goes without saying that you need to competitively bid the call center functions in question to a short list of qualified bidders; both domestic and off-shore. This is the only way to get the lowest costs.

Formalize an RFP (Request For Proposal). This should include:

• A pro forma for your business, meaning the types and volumes of transactions (actual and multi-year forward projections)
• Required services and functions
• Service level standards for total call length, abandonment rate, and average call service level standards
• Request references, boilerplate contract, and reports available
• Details about order management systems needs and systems integrations including eCommerce site, etc.

Decide what to keep in-house. You should keep your call center customer service internal. This gives you a way to monitor the service levels of the outsource company. It also gives you the opportunity to have control and be the “front line” for resolving customer issues.

Ask other critical questions. Among the things you’ll want to know:

• How will training be conducted about your product(s) and company policies?
• Is the third party provider PCI compliant and certified? To what level?
• How will you monitor your customers’ calls coming into the third party call center?
• Who are the company’s references? Come up with standardized questions to ask each of the references so you can compare their responses.

Domestic outsourcing has some advantages over off shore. Here are a few that I think are important:

• There may be an advantage in the area of English speech. However, I am greatly impressed with how well the Philippines has performed for some of our clients.
• Shorter travel distance means you can visit call centers more often.
• Understands US culture.
• Keeps jobs in the USA. This may or may not be as much of a factor for you.

Of course, domestic outsource providers’ costs may be higher than some off-shore solutions, but that is not necessarily a dead end. We have one client, a major non-profit with a high average order, that outsourced 100% of its direct orders domestically while keeping customer service in house. They were able to successfully renegotiate with their domestic outsource provider so that the costs were not so widely different.

If you’re interested in potentially using a third party call center and want 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.

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.

The company president authorizes a project to investigate replacing the order management system. Immediately a turf battle ensues. IT is already researching the Internet for the most technically up-to-date IT platform. The users’ comments are predictable: “They’ll pick the most expensive, technology-driven order management system out there regardless of whether it fits our business.” There is a proverbial glass wall between the two groups in many companies.

The outcome: After months of no progress, the company president shrinks from his responsibility and says, “We’ll keep the current order management system.”

Unfortunately, this scene is played out on a daily basis in many companies both large and small. In defense of the IT department, they are often given responsibility for everything from telephone systems, to help desk, to advanced warehouse management systems, e-commerce systems and e-mail management systems. Most often they are under-budgeted. Management backs into a percent to net sales that the company can afford to spend. Additionally, the technology is diverse, complex and represents generations of different languages, databases and standards.

But in defense of the users, IT more and more takes a technological point of view rather than a business perspective. By a “business perspective” I mean that in many cases IT no longer knows the company’s business – not the mechanical things like how to enter an order. They lack knowledge of the industry overall. And they lack the understanding of how to help you grow and manage your business. Examples include details about what will make your marketing more effective; what do the merchants need to plan, grow and evaluate their merchandise selection; and how to help supply chain logistics become more efficient. In many companies, IT often looks at application function as secondary to technology. Additionally, they hide behind a lot of technical jargon that pushes users away from them.

And order management system vendor salesmen are no better off. Gone is the day when talented sales and support people really understood the industry. Many barely know their company’s system, and many can’t even demonstrate their order management system without the aid of a support analyst.

The result of all this is a collection of negatives.

A technically advanced order management system or a system that fits the IT standard is selected. It may be a weak system from a business perspective. Technology by itself rarely gives an ROI.

The IT department’s lack of a business focus means that users don’t ever make high-level use of the systems in place, because they don’t know what applications and capabilities exist in commercial order management systems or in previous generations of in-house developed systems.

Another result is that there isn’t a partnership between the user departments and IT, which optimizes the full, untapped potential of IT. The company suffers because the rather large investments in critical applications don’t materialize or they are years off of the projection.

Tear down the wall
You will have to start thinking differently in order to change things.

• Is there failure to recognize problems with IT? This amounts to costly neglect. Ask, is IT an expensive utility or a necessity in your company? Your management team and IT need to have a clear understanding of the mission and charter of IT, to provide information systems that assist in company profit and growth.
• Is there failure to get IT to realize it’s role in the future of the business? Put IT management in place that understands the bigger picture of your business and the information that is required to manage and grow it.
• Is there failure to make your IT director an equal partner in your strategic planning process? There must be exposure to the company’s direction and an understanding of where IT plays the crucial role. Get IT buy-in earlier rather than just handing them a list of requests after many months of meetings.
• Is there failure to fully utilize IT resources? Develop internally, or hire business analysts who are interested and dedicated to maximizing the user community’s use of the systems.
• Is there failure to hold users accountable? Don’t let the users hide behind IT flaws and shortcomings. They should know the business and they need to take responsibility for understanding the applications with which they’ve been provided.

Outside resources can help your company make this transition. In our order management system and warehouse management system consulting projects, we have successfully assisted companies in making these types of sea changes.

We believe that IT “for good or bad (and ineffectiveness is certainly bad)” governs the productivity and profitability of this industry. How well is your company tapping its potential?

If you’re interested in discussing your systems project 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.

Here are the 10 major mistakes that we see companies make in selecting order management systems:

- Not having the right team in place to select and implement the order management system;
- Failure to write requirements and develop a gap analysis between vendor order management systems;
- Limiting the search to a few vendors too early in the process;
- Not conducting a competitive bid process;
- Picking technology over application function;
- Planning too many modifications versus adopting the order management system’s business process;
- Superficial demos that aren’t scripted to critical functionality;
- Incomplete reference checks;
- Signing vendor contracts before the total investment for hardware, software, services and maintenance are identified;
- Not having an intellectual property lawyer review the agreements before signing.

If you’re interested in discussing your order management system project, 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.

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.

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