Click Here to view the original article from the Integrated Solutions for Retailers Magazine.
By Matt Pillar
June 2013 Integrated Solutions For Retailers
A new software implementation is helping the world’s largest college bookstore operator to reduce out-of-stocks and to manage unique demand stimuli.
As college bookstores go, Follett Higher Education Group is the big man on campus. The company operates close to 1,000 campus stores, spanning the gamut from the likes of Notre Dame and Stanford to hundreds of local community colleges nationwide. It’s the 67th largest e-commerce retailer in the U.S., boasting e-commerce sales growth in the double-digit range. Follett also operates a call center and supports several catalog mailings per year. While textbooks account for much of the $2.2 billion privately held retailer’s sales volume, its stores also sell emblematic apparel and gifts, computer products, and school supplies.
Considering the family-owned company has been doing business for more than 140 years (it claims the distinction of 7th-oldest retailer in the U.S.), Follett is surprisingly progressive with its retail systems infrastructure. For instance, it’s been facilitating order online, pickup in store — which many retailers struggle with today — for more than a decade. In fact, more than half of its orders are placed online and picked up in stores today, often in the maddening back-to-school rush.
While the company has made a science of perfecting omnichannel college textbook sales, up until recently the homegrown replenishment systems used to maintain stock levels to meet sales demand were outdated and laborintensive. Tom Dillon, VP of merchandising systems for Follett Higher Education Group, explains. “Most retailers plan at the product level and allocate at the store level. Because our customers are so uniquely aligned with the store, we plan at the store level. So, our planners are charged with handling all the merchandise management decisions within a school store or a group of school stores, as opposed to having one planner managing outerwear, one planner managing gifts, and so on.” In the homegrown application it was using, this store-level planning approach resulted in highly manual data management requirements, forcing planners to conduct many data extracts in their effort to understand merchandise movement and replenishment needs. “The system could only handle automated replenishment at our largest stores, and even then it couldn’t handle all the products we wanted it to,” says Dillon. For products not replenished with the homegrown system, store and assistant managers had no choice but to place orders manually based on shelf-level availability, which was the main factor in the decision to seek a new inventory management solution.
Unique Approach To The Inventory Management Search
Instead of going the traditional RFP route, Follett took a different approach that brought it rapidly to a short list. It developed a list of 20 unique aspects its business model required and asked for response only from the vendors that could accommodate. Of the five vendors who made the company’s first cut, Dillon says product demonstrations proved that Retalon provided the closest out-of-the-box match to Follett’s needs. “Some of the vendors we considered were willing to build the functionality we needed, but at a premium cost,” says Dillon. “Retalon is a bit smaller than the other providers we considered, but they had the constructs in place to meet our needs, and with a smaller installation base, they were more agile and eager. We could get the changes we needed on the fly, without having to wait for major new software releases.” In fact, Dillon said it was only a matter of weeks before Follett was running what he tongue-in-cheek calls V.36 of its Retalon implementation.
Refining Forecast Accuracy With Small Data Points
Among the features that appealed to Follett was the ability to determine the rate of sale down to a store/SKU level in order to replenish inventory, even though sufficient sales data does not exist at that level to make an accurate forecast. “We have wide variability in the breadth and depth of our assortment across our chain, due to the unique product needs at each of the schools we serve and many products that are sensitive to seasonality,” says Dillon. “Planning for these products is challenging because they have limited historical data sets. The Retalon architecture features unique algorithms that allow us to develop accurate sales forecasts even with small data points.”
At Follett, product data is integrated into Retalon from the retailer’s JDA MMS (merchandise management system), along with sales and on-hand inventory data from its JDA Retail IDEAS data repository. Dillon says the solution is allowing Follett’s planning team to focus more time on analysis and understanding stores’ sales patterns and less time on data gathering and repetitive order processing tasks.
Dillon says the solution is helping Follett validate its assumptions with science. “In some cases, a seasonality profile had been generated, and the rationale for it was perfectly clear — back-to-school season, for instance,” he says. “In other cases, we are now able to see how specific calendar event changes affect sales, and we can plan accordingly. When Notre Dame plays Michigan at home, for instance, it’s a variable event that we have to build for because the football schedule changes from year to year.” Enabling that very specific planning and allocation is a user interface that facilitates preparation for geographic and school-specific outliers. On the other hand, the retailer can also use a store cluster assignment feature within the Retalon solution, which allows it to merchandise to groups of less event-driven school stores based on more traditional variables like geography and climate.
While the implementation is in its early stages, Dillon says a significant reduction in out-of-stocks is already evident. In the coming months, Follett will extend the solution to more product lines, including textbooks.
Click Here to view the original article from the Integrated Solutions for Retailers Magazine.
