It has taken more than 80 years, but McLendon Hardware has become "inventory conscious." A family-owned and operated specialty hardware retailer with six stores in the state of Washington, the company was founded by Mac McLendon, who rode through Seattle on a horse-drawn wagon to collect used tools and appliances for resale.

Its first stores had narrow aisles and musty dirt floors, but McLendon Hardware now has a commercial lumberyard, two distribution centers and an Internet sales operation.

Vice president Mike McLendon, grandson of Mac, says the company is insistent on remaining viable in an era when many family-owned firms have been forced to capitulate to larger, well-financed behemoths.

"Our key challenge in competing against them is to provide what they don't," McLendon says. "When a person goes to The Home Depot, sometimes he has a hard time finding someone to help him. You walk into our stores and there are plenty of people. We also really focus on trying to have the hard-to-find items.

"It's one of those things that when your name is on the door you just feel like you need to do a little more for your customers," he says.

For McLendon Hardware, being "inventory conscious" means ensuring the operation is run as efficiently as possible. To help achieve that, McLendon Hardware last year adopted the Latitude Warehouse Management System from PathGuide Technologies, a Seattle vendor that provides solutions for small to mid-sized wholesalers and industrial distributors.

Getting a handle on its inventory was key to continuing to provide quality service to its customers, McLendon admits, yet migrating to automated inventory was a leap of faith for a company that began using computers only 11 years earlier.

McLendon Hardware moves approximately 45 percent of inventory from its DCs to its stores. With its former, paper-based warehouse management protocol — owing as much to gut feelings for replenishment as anything — the chain would not be able to account for as many as three million items at any given time — items that "were just sitting around somewhere," McLendon says.

The typical fear was that the company would run out of stock, so under the former system it would just order more product. That meant more inventory always was on hand than was needed, and turnover occurred too slowly. That led to space problems in the warehouse that made precise inventory counts impossible, distorting inventory value.

"Before the warehouse system, we didn't worry about keeping accurate inventory," McLendon says. "We'd have a list the store would generate and send to us via fax. We would take that order and we would split it up among all our guys and they would walk down the aisles looking for these things. The store would ask for four and we would give them six."

Works with existing system
PathGuide's Latitude system provides real-time online information about inventory, automating operations that include receiving, order picking, manifesting, put-away and truck route/stop management. The system integrates with the company's ERP network.

In consigning inventory, the Latitude system uses portable radio frequency terminals to pinpoint the location of specific items within a warehouse or distribution center, integrating with conveyor sorting systems. The software operates on an open architecture that can be reconfigured to meet business needs and emerging operating systems.

A cycle counting module can develop schedules to verify that item quantities are accounted for. The module selects subsets of inventory and by counting them on a frequent basis, operations can continue unimpeded and misplaced items can be identified quickly.

Since deployment, McLendon Hardware has seen picking rates within the DCs increase by 50 percent and inventory accuracy improve from 65 percent to better than 90 percent. The company also was able to reduce its inventory level from 21 million to 18 million items.

Inventory deficiencies often mean store shelves go unstocked, resulting in the potential for lost business. Just as bad, expectations are reduced when a customer cannot find the product he needs, says Eric Allais, president of PathGuide Technologies. "It puts that idea in their head that says, ‘Is it worth me stopping again at that store when they were not able to provide me with what I really came for?'"

Working in conjunction with ERP, warehouse fulfillment is able to monitor shelf levels and generate automated orders.

Warehouse productivity
Features of the Latitude system, which include the automated printing of carrier shipping labels and documentation, are designed to enhance warehouse productivity in addition to inventory management.

"If a retailer owns its own distribution center, it's all about productivity and efficiencies and what can they really bring to the bottom line," Allais says. They can add people all day long in terms of checkers and people checking the checkers. But over time, that really wreaks havoc on your margins and pretty soon you've got a clumsy situation."

McLendon knew the company was moving in the right direction when his 78-year-old father, Ted, who still comes to work every day, embraced the system.

"He never used a computer in his life," McLendon says. "He doesn't use voice mail. He doesn't have a cell phone. But we gave him one of these [radio frequency] guns; we trained him in one day, and he uses it day in and day out. I think that's what finally got us to say this is the system that we can use."

Warehouse management will allow McLendon Hardware to keep slugging it out on the retail front with the big boxes while better serving its own niche in the market.

"You can't afford to be out of stock because it is a lost sale," McLendon says. "That could be the reason the person never comes back. You want to build these relationships and you want to keep them. Some of our relationships are 50 years old. We're trying to build new relationships that will last 50 years because that is what's profitable."