A Measured Solution

Within months of BevMo!’s first store opening in the San Francisco Bay area back in 1994, the “alcoholic beverage-lifestyle specialty retailer” added five additional stores and continued a rapid expansion strategy, reaching its current total of 112 store locations throughout northern and southern California and Arizona.

Clearly, the company had a winning formula, attracting customers to its 10,000-sq.-ft. stores with a broad assortment of wines, spirits, beers and other popular categories, including specialty foods and snacks, cigars, glassware and bar and wine accessories. Add high-traffic store locations, competitive pricing and friendly, knowledgeable sales associates to that formula, and what could possibly go wrong?

The answer was the legacy system BevMo! had been using for inventory management and replenishment. It offered one-size-fits-all forecasts, overlooking a raft of variables among individual stores and markets.

“Our former inventory management system was rudimentary and singular focused, with all stores and all SKUs being treated similarly,” explains Carrie Smith, senior vice president of planning and strategy for BevMo!, which is headquartered in Concord, Calif.

The system made “an assumption that the assortment would perform the same in northern and southern markets [in California and Arizona],” she says.

For BevMo!, the solution was the inventory management and replenishment offerings from JustEnough. The installation began in November 2009 and was completed the following month.
“Being able to start replenishing at the site SKU level and create every store’s inventory individually and localize it at the store level was a huge win, and we were able to right-size the volume to the store’s performance,” Smith says.

Improvements resulting from implementation of the JustEnough system include a 30 percent reduction in time spent on replenishment — avoiding the need for staff increases — managing forecasting and replenishment processes (despite rapid growth), improved demand forecasting and inventory management and improved in-stock positions during critical promotional and holiday periods.

One of BevMo!’s requirements during the selection phase was finding a sophisticated tool it could “bolt onto our existing infrastructure without having to do a heart transplant,” Smith says.
“One of the systems we looked at would have taken 18 to 24 months to implement. JustEnough is one of those tools you can just bolt on, and that was a critical selling point for our team. The user interface and functionality mirror that of Excel, and if you know Microsoft Office, you can run JustEnough.”

Not too much
One of JustEnough’s guiding philosophies is to “make something that is sophisticated but not complex,” says Malcolm Buxton, president and CEO of the Newport Beach, Calif.-based company. “We have a very obsessive focus on the design of the product and ease of use.”

As a practical matter, Buxton notes that many veteran executives spend years working with legacy systems, which may be the only system they’ve even known. Given the high rate of turnover within the retail industry, that circumstance becomes more problematic.

JustEnough’s two key platforms are planning and execution. They encompass functions that range from merchandise and assortment planning, markdown planning and allocation and replenishment planning to the financial strategy and open-to-buy guidance.

JustEnough’s retail clients range from individual online clients to Pacific Rim retailers with thousands of locations. Among retailers, a “midpoint” in annual sales ranges from $500 million to $2 billion, Buxton says. And with a strong representation of international clients, the company maintains offices in California and North Carolina, the U.K., Italy, Singapore and South Africa.

Buxton says clients reach out to JustEnough for a variety of reasons.

“Growth is one,” he says. “An executive will recall the days when a team could sit around a table and talk about products, but with growth the company gets to a point where that process breaks down and they lose control of the business.

“Also, the online channel has forced a lot of people to look at their systems — the legacy systems they’ve been using for their stores don’t work well with their online channel,” Buxton says. “And I also think it is just progress: They realize there is better technology out there today than yesterday.”

Individual client priorities also run the gamut.

“They either have what they see as an imperative to sort out their execution side and then move on to planning, or they are okay on the execution side but need help in their planning,” he says. “They all have the same, ultimate goal — they want to improve the efficiency and effectiveness of their processes and operations.”

Specific results
BevMo! has seen “significant improvements as a result of our ability to drive performance at the district level, and the new system has allowed us to have improved service levels in our stores,” says Smith. “We can make sure our stock levels are pacing with sales, seasonality and promotions — not just capturing sales volume, but re-forecasting for us based on the rigorous forecasting method built into the system, ensuring we are ahead of the curve.

For holiday promotions and sales events, like the company’s popular “Nickel Sale” — buy one and get the other one for 5 cents — “we can forecast inventory builds required to support the sale or moderate them if the sales trend dictates,” Smith says.

Rapid return on investment for BevMo! came as the result of labor savings, a reduction in overall inventory and improved service levels through improved in-stock positions.

“We have exceeded our own expectations in all three areas, and the system paid for itself in the first week,” Smith says. Labor savings have accrued from not have to increase staffing “despite adding new categories and growing stores, and our in-stock position has been getting better and better, while inventory levels have seen nice improvements.”

Smith says shoppers comment on BevMo!’s strong in-stock position. “Customers come to our stores for our vast assortment, which is not found in neighborhood liquor stores, grocery stores or club stores,” she says. “If someone is looking for a specific product and a specific brand, that customer is able to come in and find what they want.”

In the past, Smith says, BevMo! had what she terms “hills and valleys” when it came to managing in-stocks. JustEnough “has allowed us to improve our demand forecasting and inventory management,” particularly for those key products that generate half the stores’ sales.