Supply Chain Blockbuster

Bill Wissing oversees Blockbuster’s 850,000-sq.-ft. distribution center in McKinney, Texas, which, in turn, supports 38 regional DCs and the chain’s 4,000 company-operated stores.

Blockbuster’s supply chain consists of five distinct operations that reflect the competitive requirements of getting movies and related materials to their intended destinations quickly, accurately, consistently and at an affordable cost.

“We have multiple supply chains that we have to work with under one roof,” says Wissing, the company’s senior vice president. Those include:

•CPG, for which Blockbuster undertakes extensive packaging using high-speed automation

• What Wissing terms “traditional retailing 101”

•POP and value-added services -- customized packaging, ads and signs

•Reverse logistics

• Transportation

“Each of those five operations does tens of millions [of units] annually, and some do multiples of tens of millions,” Wissing says.

Several years ago, it became obvious that Blockbuster’s legacy system would have to be replaced to ensure that the company could handle future supply chain needs.

Blockbuster selected the SCM Warehouse Management solution from Alpharetta, Ga.-based Infor. SCM Warehouse Management works in conjunction with Blockbuster’s warehouse control systems that manage the carousel, A-frames, sorters and packaging equipment at the McKinney fulfillment center. Infor’s application serves as the front-end solution, which has been customized to meet Blockbuster’s needs. It delivers huge volumes of data to the company warehouse control systems.

“We were good before, and we’re now able to become great,” Wissing says. “If we were stuck with our old legacy system we would be good, but in this competitive environment you have to be great.”

Customers’ choice
Consumers have become more sophisticated and demanding about accessing entertainment, and Blockbuster’s goal is to provide that entertainment in whatever way the customer wants it -- through stores, kiosks or digital downloads. In addition, Blockbuster is bringing renewed emphasis to its store operations, consistent with the priorities being set by new chairman and CEO James W. Keyes, formerly of 7-Eleven.

Infor says 22 of the top 50 retailers use its warehouse management solutions, including three of the top five electronics companies. It cites several statistics supporting its promise to deliver the “right stuff” for end-to-end fulfillment and distribution, including reducing inventory by 5 to 20 percent, and improving labor productivity15 to 40 percent and shipping accuracy 2 to 5 percent.

“Retailers are faced with many challenges, but they want to have as many perfect orders as possible,” says Wilson Rothschild, director of product marketing for Infor.

“What you’re dealing with is a highly automated environment. All those processes have to work together to avoid incomplete orders -- all the bits and pieces need to come together. Retailers have a bunch of different assortments that are going out to different stores and they have to be able to rainbow and mix pallets, which makes the environment challenging. They need a system to track the kitting information and which pallets are going to each individual store.

“You have to be able to look for and overcome bottlenecks and find the weakest links,” Rothschild says.

First-year ROI
Infor’s clients tend to see a return on their initial investment in the first year, with a more significant ROI in the second year, he says. “They might be running at 90 to 94 percent in on-time/in-stock, but this will get them to 99 percent,” Rothschild says. Over the long term, in the second and third years, they tend to look at labor management and save 10 to 20 percent in labor just by not having to pay overtime.”

Prospective retail clients “typically call us when they are dealing with one of two things,” Rothschild says. “If their same-store sales are growing significantly, they call us because they have outgrown their existing system. On the converse side, people are looking to keep their fulfillment and distribution costs the same as last year or they want to reduce them. They turn to us because they know we help the industry leaders perform better than their counterparts.”

Blockbuster installed the SCM Warehouse Management solution in 2004. “Typically, with a major project of this size, the realistic timeframe for getting a return on investment is seven years,” Wissing says, “but we have been able to do that in half the time. Over the past several years it has been gravy. We are still reducing our costs: Our per-unit cost is a continuing reduction from the installation. We’ve had five straight years of reducing costs.”