| Thorntons opened its first shop in 1911. The confectionery retailer/manufacturer is expanding the commercial side of its business, supplying Tesco and other multiples, its online presence through Thorntons Direct, and its franchise operation. To support complex operations in an increasingly competitive market, it decided to update its systems, including buying enhanced forecasting and auto replenishment tools. “Our ordering system was over 20 years old and it became almost impossible to make further modifications,” comments Thorntons’ programme manager, Jim McLaughlan. Replenishment was handled manually, based on store managers’ knowledge.
Thorntons chose Aldata, who provide inventory management, ordering and forecasting solutions to retailers, particularly in food and pharmacy. The company decided to replace its core systems in head office, stores and warehouses, as part of a two-year project, installing Aldata’s G.O.L.D. suite of retail management to give it item-specific information and help it manage sales and demand, across its retail, franchise and commercial business channels.
Hand-held mobile terminals were introduced into stores, allowing inventory checking and ordering to be done on the shop floor. Aldata UK’s managing director, Mark Croxton, comments: “The clever IT stuff comes in the forecasting and order calculations, but manual inventory checking at store level is just as important. No matter how much science you have, if you don’t have up-to-date inventory figures, in relation to sales and inventory on the shelf, you’re going to get it wrong.” The mobile terminals can also be used as queue-busters to serve customers during peaks in what is a famously seasonal business.
Using the information gathered in stores, Aldata’s software produces specific forecasts of the sales of many different categories of item in different locations. “It provides a good view of our stocks and sales, and enables us to more effectively manage fluctuations in demand. It is very important for us to be able to manage retail demand on the one hand and integrate this with our manufacturing and production planning and scheduling on the other,” says McLaughlan.
Fast forward for fashion
New Look increased its retail space by 20 per cent over the last 12 months and diversified into online and franchised channels. It has 590 stores in the UK and Eire, 263 stores in France trading as Mim, 13 New Look branded stores in France and Belgium and franchise stores in Dubai, Kuwait and Saudi Arabia.
Looking for a replenishment solution to support improved management of demand and supply, New Look selected Quantum Retail Technology’s Q. “As a fast fashion business with our customers at the core of everything we do, their demand forecast model offered us an opportunity for our customers to further influence our decision making,” says New Look’s IT and e-commerce director, Adrian Thompson.
Quantum’s co-founder and head of product strategy, Chris Allan, identified that the reason retailers were not getting value from replenishment and fulfilment systems was partly systemic. “Everybody spends a lot of time and money identifying which products to buy, how much they’re going to make by selling them, even the roles of the products within the assortment. But for 99 per cent of retailers, none of that information is used to drive the fulfilment process.”
With his colleagues, he set about developing a new solution. “Q is a mechanism to achieve both the merchandise and financial goal for every product in every location, that enables you to drive, in a heavily automated way, the fulfilment process from those goals and strategically use the inventory you buy to maximise your opportunity to get through all those mistakes in forecasting that you’re bound to make.”
The solution had proved its credentials and user-friendliness in its US implementation in 2007 at 200-store musical instruments retailer Guitar Center. Allan: “Guitar Center was able to double in size in terms of number of stores, without adding a single user in this area of the business. They pulled out ten per cent of their inventory from stores, achieved their service level and profitability targets for nearly every product, and increased their forecast accuracy by 20 per cent for a lot of their import and
long-range products.”
Implementing Q paid off equally quickly for New Look: “It went live within seven months, and had paid for itself just five months later,” says Thompson. Allan adds: “We’re seeing a 2.5 per cent increase in full-price sales, but a 4.5 per cent increase in margin across the product life-cycle.” Instead of
bridging the gap between planning and fulfilment by a mark-down scheme, Q strives to avoid markdowns in the first place, described by Allan as a “double whammy.”
The solution generates a forward view of a product’s life-cycle at SKU/store level, which it updates continuously, based on how the product is actually behaving. Its reactivity, says Allan, really adds value. “Too often in a traditional environment you’ll come up with a plan on how the product is going to sell, and that’s what you execute to. Within a week or ten days of a product going out, Q is already adapting its assumptions. Once you line that up with your specific merchandise objectives for that product – maximising profitability, or turn, or sales, or some combination of those – you’re able to create a very good answer. It’s good at doing that really quickly.”
Spencer Maynard, New Look’s head of stock optimisation, says: “It has enabled us to proactively manage products by exception, whilst the system takes care of the day-to-day decisions. We can now focus our attentions on expanding the business and exploring new routes to market.”
Future developments
Q is about understanding the relationship between sales, inventory and profit, and has a lot more potential. Quantum is looking at how to use information collected at store level to improve purchase decisions and assortment planning. It also wants to help fashion retailers evaluate when to choose higher-cost nearshore manufacturing capability, with its shorter lead-time, over its offshore alternative.
Meanwhile, adding integrated PoS to the mix, more mobile computing at store level, and fine-tuning recipes, wastage and mark-down control in fresh food retailing are just some of the future developments Aldata has in the pipeline. In an ever more customer-orientated market, improving your inventory control and aligning replenishment more closely to customer demand may well.
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