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- 1. Saks Transforms Demand Chain Management: Merchandise Allocation as an Art Molly Shaw VP, BIS Phil Sleboda VP IT
- 8. What is Demand Chain Management ( DCM)? DCM is the software system that generates orders based on historical and forecast sales and provides a profiling method to account for seasonality
Hinweis der Redaktion
- Welcome to Saks Transforms… I am Molly Shaw, VP of business Intelligence Services and presenting with me is Phil Sleboda VP of IT applications. Today we are going to present our great experience with Demand Chain Management and how we combined the art and science together to improve merchandise allocation.
- We will provide you with an overview of the company Review our strategic pillars Tell you where we were in the process Our methodology Specifically about the DCM project What benefits we received And some takeaways Certainly we will take questions as well.
- So a little bit about the company We have 3 outlets for selling product Saks Fifth Avenue Stores We have 47 locations and our mission from when we started in 1924 is to be the first and only choice for the most discerning customers. We are focusing on our inventory concentration in the most productive stores Off 5 th Stores OFF 5TH is the premier source of discount designer clothing and accessories Our customers are quality and fashion conscious outlet shopper We offer her style at a considerable value in 58 locations across the country Saks.com In 2000 we launched an online shopping experience with the ability to shop by look, designer or item
- The way Saks looks at the business is in operating segments Product Selling Marketing Expense management – we are always looking to drive value out of our expenses These are the 4 strategic pillars and Real Estate/HR/IT/Operations/Logistics/Asset Protection are the foundational supports of the business Today we are going to talk about the product 4 of the 5 Rights of retail Having the right product in the right stores, at the right time, in the right quantity, for the right customer
- Historically the majority of our product was distributed to the stores at the time of purchase this resulted in high transfer costs product off the floor for too long manual analysis lower sell through rates allocations were based on history For our replenishment business we had higher forecasting error due to sub-optimal inventory allocation and high rate of out-of-stocks for replenishment items – especially in cosmetics
- So we implemented a strategy to incorporate a range of inventory flow options. These multiple types of shipments decrease the financial risk One Shipment bring it in sell it and your are done Push-Push bring in an initial allocation to the stores with a back up in the DC and pushed to the stores Hold & Flow bring in an initial allocation to the stores with a back up in the DC to distribute this product gets distributed after an initial read on selling and are pulled to the stores hold & flow product is fashion merchandise – it has an end date DC Replenishment Is the same as hold & flow but it is basic product. It does not get marked down in - season Pack & Flow An initial bulk order is written to the vendor, allocations are created up to this bulk commitment. Usually not on going product Replenishment on going programs of basic product. As you can see all the options except one shipment are managed by Teradata – Demand Chain Management Application
- As we implemented DCM we changed the allocation methodology Read the slide
- DCM is the software system that generates orders based on historical and forecast sales and provides a profiling method to account for seasonality Forecasting All active SKU/Locations ARS (Adaptive Rate of Sale) Recalculated Weekly Seasonal Profiles ( Avg. of all 52 weeks equals 1) Promotional Uplifts Sales Forecast = Current ARS * Seasonal Factor Automated Order Generation (Replenishment & H&F)
- DCM is the software system that generates orders based on historical and forecast sales and provides a profiling method to account for seasonality Forecasting All active SKU/Locations ARS (Adaptive Rate of Sale) Recalculated Weekly Seasonal Profiles ( Avg. of all 52 weeks equals 1) Promotional Uplifts Sales Forecast = Current ARS * Seasonal Factor Automated Order Generation (Replenishment & H&F) Forecast – review & lead time, planned sales days, safety stock Effective Inventory on hand + on order DC Inventory – uses a constrained process
- Saks prioritized DCM as a critical project to transform inventory allocation across the company The objective was to completely re-engineer merchandise allocation across the inventory spectrum from full automatic replenishment through post-distribution of inventory We were looking to facilitate less manual intervention in the replenishment process Add improved seasonal profiles Provide improved short, medium and long-term forecasts Enable adoption of a “Hold & Flow” methodology for select Fashion and Basic merchandise Replace the legacy automated replenishment system I am going to turn it over to Phil to talk about the details of the implementation portion of the initiative.