Getting The Right Mix

By Edward Cone  |  Posted 2003-06-01 Print this article Print

Retailing is getting cutthroat. In major metropolitan areas, direct rivals are opening up shop across the street, daring the other to blink and pull up stakes. Among neighborhood pharmacy chains, Eckerd is now in a fight for its life, as Walgreens threate

Getting The Right Mix

The Quantum Leap project emerged from a 1998 consultant's study of Eckerd's supply chain. "We had too much of the wrong product and not enough of the right product," Hale says.

Through early 1999, Eckerd mulled over how to approach the project—whether to update the existing inventory management software based on IBM's Information Management System (IMS) hierarchical mainframe database, create a new system from scratch, or purchase a commercial software package.

In May 1999, Eckerd selected Retek's family of enterprise software modules to act as the core of Quantum Leap, judging it to be the most mature and complete offering for the retail industry (see Retek Dossier, p. 56).

Eckerd is using the Retek Merchandising System, Demand Forecasting, Sales Audit, and Active Retail Intelligence modules in its first Quantum Leap stores. A Retek module that supports wireless access also supports the deployment of handheld computers for inventory control from Symbol Technologies. About the only thing Eckerd stuck with is its existing distribution center inventory management and replenishment system from E3 (now part of JDA Software), rather than replace it with Retek software. The current distribution center software was getting the job done, and Retek promised the most benefits from helping Eckerd tune its store inventory systems.

The Retek combination is designed to maximize profit from the assortment of products and prices in the store, keep stores adequately supplied, check reported sales against actual inventory, and analyze data on customers' purchasing patterns.

Eckerd also plans to implement Retek Allocations, which will help it parcel out inventory to various stores, and Retek Trade Management, which is focused on improving management of foreign suppliers.

Retek is a 17-year-old company with more than 735 employees and $192 million in annual sales. Other big customers include Best Buy and the Gap. Even Walgreens has purchased a demand-forecasting module to supplement its proprietary systems. But what Eckerd is putting in place adds up to a comprehensive implementation of the functionality Retek offers, says David Vranicar, the account manager for Eckerd.

"By almost any measure, Eckerd will be our largest go-live to date," Vranicar says. Eckerd's thousands of stores, each with thousands of stock-keeping units, or SKUs, factor out to "tens of millions or even hundreds of millions of SKU locations to manage," he says.

Lisa Cook, manager of an Eckerd store in Largo, Fla., that was the first to implement Quantum Leap, had to count inventory exhaustively, down to the last pill in the pharmacy.

But once finished, she could operate the store on a leaner inventory, reordering just what the store needs to satisfy customers. For example, a particular shade of mascara might sell just once or twice a year. In the past, if six of that item would fit on the display-rack peg, the tendency would be to keep six in stock at any one time. But because Quantum Leap tracks sales patterns for each store, it's smart enough to know that keeping two or three in stock is plenty.

"A lot of managers and assistants over-ordered out of fear of being out," Cook says. But Quantum Leap lets store personnel trust the software. "The system will never let you be out unless the warehouse is out of something," she says. Quantum Leap minimizes the amount of inventory sitting idle and makes her store more profitable.

Cook says she welcomes every piece of assistance she can get, but has also managed without this sort of technology for years. "I'm right across the street from a 24-hour Walgreens, and I've got a CVS to the left of me and to the right of me, within a couple of miles. I've held my ground, keeping my customers with me," she says.

That's good, because there are still some gaps in Quantum Leap. Features that help with stocking up prior to a promotion have yet to be delivered. That's a critical function precisely because routine inventory levels have been lowered. Cook also found she had to manually raise the stock of over-the-counter medicines for flu season. "That's not necessarily new to the world, but it was new to this system," Cook says.

While they await Quantum Leap, Eckerd managers must rely on their own judgment for what to reorder out of some 20,000 items per store, not counting pharmacy. To date, Eckerd's managers have done more to keep inventory tight than technology has, says Larry Irby, pharmacy replenishment manager and a member of the Quantum Leap team. "You should see more impact from the Retek rollout over the next couple of years," he says.

Senior Writer and author of the Know It All blog

Ed Cone has worked as a contributing editor at Wired, a staff writer at Forbes, a senior writer for Ziff Davis with Baseline and Interactive Week, and as a freelancer based in Paris and then North Carolina for a wide variety of magazines and papers including the International Herald Tribune, Texas Monthly, and Playboy. He writes an opinion column in his hometown paper, the Greensboro News & Record, and publishes the semi-popular EdCone.com weblog. He lives in North Carolina with his wife, Lisa, two kids, and a dog.

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