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The 380-unit, 27,000-SKU home goods retailer streamlines fulfillment processes. In Q4 2001, New Jersey-based Linens 'n Things decided to address its supply chain fulfillment procedures. Because demand is highly seasonable and variable, and because the company must set inventory levels weekly for more than 4 million store/SKU combinations, sales were being lost due to out-of-stocks and large inventory investments. The retailer sought a solution that could optimize inventory levels through improvement of forecasting and replenishment processes. As the result of a recommendation from fashion/bedding accessories supplier American Pacific Enterprises, one of its leading trading partners, Linens 'n Things selected analytics modules from Pennsylvania-based 4R Systems to develop a new forecasting and supply planning engine. During Q4 2001, Linens 'n Things established a list of required criteria for supply chain optimization success that included improving its buying processes, determining the best stores to test a product, optimizing the initial buy and store allocation, and computing optimal weekly store/SKU order points once an item was on replenishment. Based upon the recommendation from American Pacific Enterprises, the retailer began investigating 4R Systems analytics technology and during Q1-Q2 2002, decided to perform an in-depth, live pilot of 4R Systems-hosted solutions in all 380 store units. Linens 'n Things and 4R Systems worked together to select SKUs and pilot metrics that would serve as benchmark indicators of success or failure. Two similar product and selling characteristic SKU sets were chosen – one would be completely planned by 4R (pilot SKUs), and the other would be controlled by Linens 'n Things using normal forecasting processes. At the beginning of the test, the pilot group started with store on-hand delivery equal to 15 weeks of supply, and the peer group with 30 weeks of supply. Each week, 4R received Linens 'n Things’ point of sale and inventory data, processed it through the 4R Supply Planning suite, and then furnished the retailer with optimized order points via flat-file extract that was then uploaded into the retailer’s existing system for transaction execution. Currently, Linens 'n Things has begun an aggressive rollout plan and will have six to eight departments utilizing the 4R Systems solution by the end of Q4 2002. The retailer is currently moving the fulfillment solution in-house, and is syncing the solution with its existing JDA enterprise application. Linens 'n Things noted several benefits from implementing the 4R Systems solution. Forecasting and replenishment algorithms were significantly more accurate and cost-effective using the new processes, rather than relying on traditional methods used to plan and optimize stock levels. The retailer also observed an increase in sales and decrease in overall inventory, which elevated gross margin. Linens n’ Things found that depending on product type, movement and demand patterns, 4R technology could be used to optimize inventory levels rather than simply recommend inventory reductions across the board. Linens ‘n Things’ future plans include further rollout of the 4R Systems solution and product testing modules. The modules will be used to segment stores by sales mix, and further improve forecasting and fulfillment processes. (Supply Chain Alert, November 2002)
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