Now is the best time to asses your current systems infrastructure. Were you able to meet the demands of this past holiday season and meet your service levels of customer satisfaction?  Did you have the right inventory to meet demand at the right times?  Was your inventory forecasting accurate enough to get the inventory in time to meet your customer’s needs?

Does your current order management system have the functionality needed for future growth? Is it flexible enough to meet the changing needs of your marketing department?  What challenges will you face this year to get new functionality added to meet the demands of the business? What system functionality or business processes do you need or want to change?

You should look back now on all of the exceptions that you had this past holiday season – whatever they may have been – and determine how you will over come these this year.  It is time you asses your business processes and order management systems as well as prioritize what needs to be enhanced or replaced in order to better prepare you for 2010 and the upcoming holiday season.

Don’t hesitate to contact Jeff Barry at jbarry@fcbco.com or 804-740-8743 if you want to discuss your system needs and projects.

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: http://www.fcbco.com

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Over 26 years of providing consulting services to hundreds of warehouses around the world, this is the highest concentration of contacts we have received from this vertical. The common theme for almost every one of these assignments or inquiries has been the desire to control and reduce costs. They are looking for ways to increase productivity, improve layout and space utilization, increase service levels to their customers, and to increase control over their inventory. By focusing on these areas, there is a good chance that costs can be reduced. Most other businesses have realized over the years, that warehousing and fulfillment can be viewed as a competitive advantage rather than a cost center only.

With all the attention focused on the healthcare debate, it is encouraging to me to see a segment of this industry trying to “bend the curve” relating to cost. I hope this is a sign of more to come and more companies in this arena contact us and others for advice on how to reduce costs.

If we can help you evaluate and cut costs will improving your productivity and space utilization in your warehouse, don’t hesitate to contact us.

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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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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Recently, 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 is $0.42—and most of the customer service remains in house. Additionally, the client’s 90,000 mail/fax orders cost 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 offshore outsourcing. How should you approach doing this type of study?

Know your internal costs. In order to compare your internal costs to 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 potential project to a short list of qualified bidders. This is the only way to get the lowest costs.

Formalize an ROI (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
• Service level standards for total call length, abandonment rate, and average call service level standards
• Request references and boilerplate contract
• Details about order management systems needed, systems integrations including e-commerce site, etc.

Decide what to keep in house. In my opinion, you should keep your custom service internal. This gives you a way to monitor the service levels of the outsource company.

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 provider PCI credit compliant and certified?
• How will you monitor your customers’ calls?
• 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 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 will be higher than off shore, 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.

Tocky Lawrence 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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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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Taurus Software highlighted its business intelligence solution, Manage Metrix, developed in collaboration with co-exhibitor F. Curtis Barry & Company to provide intelligence across an entire retail enterprise. “It is unique in that it not only consolidates all the information across the enterprise into a single repository where business users can access it to do analysis, but it goes a step further in providing proactive, key performance indicators,” said Taurus president Cailen Sherman. “So it’s actually searching through the data and producing recommended solutions to problems that it spots in the system.” To learn more about Taurus Software, visit www.taurus.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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1. Production chases low cost labor. Where Japan and Taiwan were the centers before China, production is starting to move from China to other Asian countries such as Indonesia, Vietnam and Cambodia as well as Mexico, Central and South American countries.

2. China will not guarantee price beyond the current purchase order in many cases. Inflation in China is at an 11-year high. Some clients are expecting product cost increases of 5% to 10% or higher in 2008. Energy and material costs are going up dramatically. New labor standards and environmental regulations are adding costs.

3. Complexity of the supply chain has greatly increased. Today’s multichannel companies need the people resources (internal or outsourced) in place to deal with the ever-changing production and supply chain.

4. Product lead times are lengthening. Many products’ lead times are 18 to 24 weeks or more.

5. Vendor minimums are high, which forces many smaller businesses to promote products for two or more seasons just to meet the production minimums. That can be every risky if it’s a new product and doesn’t sell well.

6. Transportation costs for imports are 6% to 12% of gross sales – and as we all know, fuel charges are rapidly pushing up costs. So there isn’t any relief in sight.

The bottom line is, when you look at fully loaded costs for imports, the combination of all these factors is stripping the gross margin advantage many imported products gave multichannel companies.

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: http://www.fcbco.com.

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