Inventory That Fits

DSW has the science of retailing down cold. Based in Columbus, Ohio, the shoe retailer has more than 320 outlets, a thriving online business and leased departments in other stores.

With stores averaging 20,000 sq. ft. and in-store inventory of 24,000 pairs of shoes, plus hosiery, bags and other accessories, using space to the best advantage is crucial. On top of that, DSW must ensure merchandise matches changing consumer preferences. Efficient technology tools are key.

“We had a mosaic of home-grown and developed elements, as well as part of an acquired application that we used to do all planning,” says Harris Mustafa, executive vice president, supply chain and merchandise planning and allocation for DSW. “We were using Excel spreadsheets, an Access database and numerous other independent technology pieces. When you do that, you can have a much higher level of inaccuracy.”

DSW made the decision to move to a single platform solution, implementing JDA’s Enterprise and Allocation Planning solutions three years ago.

Bottom-up planning
“Our solutions focus strongly on fashion — apparel, softlines,” says Scott Welty, vice president of retail industry strategy for JDA Software. The solutions allow retailers to plan “holistically,” reduce inventory, improve sell through and margins and achieve better stock-to-sales ratios and turns, by accelerating the pace at which retailers can make decisions.

Automation, Welty says, enables 20 percent of a retail planner’s time to be spent preparing data for analysis and 80 percent actually performing the analysis. “Previously, these percentages were reversed,” he says. “Retailers find they can reach ROI within 12 to 18 months because of the savings they realize.”

DSW started with merchandise financial planning, followed by store planning and item planning. “Merchandise Financial Planning allows us, with the help of the software, to build very detailed financial plans for each of our businesses: women’s, men’s, athletic and accessories,” Mustafa says. DSW can now plan sales and inventory, markups and markdowns, receipts and margins down to the sub-class level. (The lowest level at DSW, style/color, aggregates to a subclass, which aggregates to a class, which aggregates to a department, which aggregates to a division; all divisions add up to the general merchandising managers’ entire area of responsibility in women’s and men’s, athletics and accessories).

Assortment plan
DSW has a core assortment, items that are in all stores based on common need. “We then use the assortment plan to determine what else we want to add for a group of stores to more closely align selection with customers who shop there,” Mustafa says. DSW uses the core item planning system in JDA’s Enterprise Planning to maintain correct inventory levels and purchase the right products.

Mustafa would like to do an assortment plan for every DSW store, but his more practical plan is to group stores with similar customer profiles. The company uses JDA Allocation for a fleet of stores with the same customer type, even if the geography is not the same.

Mustafa says DSW’s productivity has improved from a user standpoint, and efficiency has increased. “Essentially what we’ve done is eliminate all the different types of worksheets and databases — everything now takes place within the confines of enterprise planning.” As a result, DSW is able to reinvest planning hours and other resources in deeper analysis, something it had not been free to do before.

The right fit for profit
JDA’s solutions are easily implemented, Welty says, since there is no need for retailers to make major changes due to the solution’s flexibility. “Retailers easily configure the base solution to what they do,” he says. “A lot of our competitors’ solutions require source code changes.”

Many times retailer plans must be changed due to long lead times when sourced goods are imported. Then, “When the goods arrive, sometimes market conditions have changed.” Welty says. Retailers may have less than a day to revise plans for every store. “In these cases, the system quickly looks at the original plan, compares ‘without delay’ and ‘with delay’ conditions, and makes a recommendation.”

In the near future, DSW plans to deploy the solution for its online business. “Some adjustments will need to be made for online commerce, but the concept is the same,” Mustafa says. “The difference is that online merchandising is based on demand rather than the next sale.

“It is our intention in the future to do much more refined assortment planning for stores, similar to customer profiling.”