The Limited Designs Supply Chain to Begin and End With the CustomerBy Baselinemag | Posted 2006-04-03 Print
Bottlenecked distribution center convinces Limited Brands to rebuild it supply chain systems from the bottom up, making it transparent to staffers, and responsive to customers.
Four years ago Limited Brands, the $9.4 billion specialty retailer, learned about the need for supply chain visibilityand the cost of not having it in placethe hard way.
"We had a pretty significant catastrophe," Paul Matthews, the company's senior vice president of supply chain transformation, told attendees at the National Retail Federation (NRF) annual convention in New York in January.
"Due to the combination of four or five situations, we had about 400 trailers turn up unexpectedly in the parking lot of a distribution center, and the parking lot is only capable of handling about 150 trailers," Matthews explained.
"You can imagine the line of trailers blocking traffic along the main highway, interfering with the community. It was the beginning of a sales period for us, and everything that could go wrong did go wrong.
"Planning systems went down," Matthews continued. "Assumptions were made at the corporate level. The right hand didn't talk to the left hand. Worse, nobody seemed to have any idea where the inventory in the trailers had come from, what it was or where it should be sent. To this day, we are still not entirely sure what went wrong."
At the time Limited Brands, which counts Victoria's Secret, Express, Bath & Body Works, C.O. Bigelow, The Limited, White Barn Candle and Henri Bendel among its brands, was growing exponentially. In 2002, it had sales of $8.4 billion, but much of its growth had come as the result of acquisitions of different retail companies since opening its first store in 1963. These include the purchase of retailer Lane Bryant and the Victoria's Secret store and catalog in 1982, 798 Lerner stores in 1985 and 25 Abercrombie & Fitch stores in 1988.
As a result of acquiring so many stores and brands, Limited inherited a complex hodgepodge of information-technology systems and software, including 60 major systems running hundreds of applications, many of them redundant, on numerous platforms. Many of these platformsincluding Hewlett-Packard HP-UX, Sun Microsystems Solaris, and IBM OS/390 and AS/400, as well as Intel-based servers and Tandem computersare still in place today.
Given the complexity of the company's information-technology operations, Limited's ability to stay on top of its supply and demand chains was going to be a challengeat best.
The situation became acute when beginning in 2001, discount retailers started encroaching on Limited's market space. In response, the company began shifting to a high-end product line that would generate fatter margins. To make this new strategy work, however, Limited needed new supply chain technologies and processes to drive the speed-to-market requirements of the new growth strategywhat Leonard A. Schlesinger, Limited's vice chairman and chief operating officer and a former Harvard Business School professor, has described as "integrated brand delivery"; i.e., integrating and leveraging the supply chain and logistics supporting a brand for maximum value.
To that end, the company has spent the past few years upgrading its supply chain capabilities and replacing most of its disparate legacy environment. Among the hoped-for benefits: greater sales from its retail brands, greater flexibility in terms of being able to respond to market needs, and the capability of relieving the stores of processing and logistics tasks so the company's 100,000 associates can do what they do bestsell.
Its participation at the retail conference notwithstanding, Limited Brands doesn't talk much about its overall integration or related supply chain initiatives. In fact, the company turned down Baseline's request for an interview to discuss these initiatives. But a look at one piece of this effort provides an idea of some of the larger supply and demand chain challenges confronting the company.
For starters, it's important to grasp the complexities relating to integration.
Limited Brands buys merchandise from more than 1,000 suppliers worldwide and sells through multiple channelsretail stores, the Internet, catalog and third-party. "We're a very diversified company and, more importantly, actually own our stores, so we're rather vertically integrated when you consider some of the other retailers," Matthews told attendees at the retail show.
An enterprisewide view is critical in dealing with supply chain efforts, Matthews said. "We often talk about visibility as looking through a glass pipeline, but it's not actually just looking at pipeline, not just looking at inventory or customer buying patterns or raw-material transportation. It's actually looking at all of the above and, more importantly, all at the same time."
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