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Posted Date: 10/1/2006

Supply Chain: U.S. How Reynolds Managed Inventory Amid Crisis

By  Staci Kusterbeck

Prompted to change by financial distress, Reynolds Bros. reinvented its IT infrastructure, significantly reducing inventory management costs along the way.

Not that long ago, executives at the Reynolds Bros. clothing chain had to hire a consultant to the tune of $50,000 a year if they wanted customized reports on how items were selling or needed customer mailing addresses for marketing promotions.

The New Jersey-based chain, which operated 30 stores at the time, sold 103,000 SKUs of mens, womens and childrens apparel, including swimwear and accessories, but data on sales was largely inaccessible.

In addition, the firms UNIX system was unable to match a vendors UPC code to a Reynolds SKU, which extended purchasing hours and made inventory tasks more complicated.

But the 105-year-old company also faced a much bigger challenge: Its very existence was at stake. With sales dropping significantly in the late 1990s, it had to make some tough decisions that ultimately would result in layoffs and the closure of many of its stores.

The company had to tackle a major restructuring, which included the elimination of many administrative jobs as well as its truck fleet. No one knew if Reynolds was going to stay in business and get out of Chapter 11, says Enrico Bozzetti, information systems manager for the firm. But with savings from the store closures, and system changes, we were able to survive.

And survive it did. The company ultimately tightened its belt down to three stores, but thanks to technology, it is operating them much more cost effectively, giving it a strong foundation to support some expansion down the road.

The new Reynolds Bros. has 70 employees and 86,218 SKUs in its database, and has turned the corner on its financial reorganization, says Bozzetti. This past February, a vice president of the company, Mark Salaway, purchased the business from its previous owner, Excelled Sheepskin & Leather Coat Corp.

Cutting costs everywhere

Reynolds has lived through downsizing pressure that would challenge the foundation of any retail business.

In early 2004, just after it filed for bankruptcy, Reynolds began looking for a new retail system to cut operating costs while managing the needs of its remaining stores. We needed a system that would manage inventory across our stores and allow us to save money on our maintenance contract, says Bozzetti. I had six months to come up with a solution.

After evaluating two other systems, the retailer selected Microsoft Business Solutions Retail Management System (RMS), partly because the Windows-based platform allowed for significant savings in maintenance compared to the UNIX system.

Reynolds implemented the system on its own, with training provided by Chicago-based Sales Catalyst. At the time, Reynolds had 150 employees. Three IT employees set up the hardware and software, and then buyers and management started using it to manage inventory, products and SKUs.

The company rolled out the system to one store per week within a 30-day timeframe, linking each of the locations to its corporate headquarters in Lakewood, NJ. We installed the Microsoft Windows 2003 Server Small Business Version and SQL Server on the main server to support RMS, says Bozzetti. Then we rolled out the new touch-screen J2 cash registers, and Epson thermal printers at all the stores, and linked them to headquarters using DSL lines.

By September 2004, the new system was in place and the company emerged from bankruptcy.

The biggest obstacle during the transition to the new system was the migration of receipts and purchase orders. Purchase orders from the UNIX system had to be manually entered into RMS, which meant there was an interim period when some stores had to deal with some receipts on UNIX and others on RMS. During this time of change, Reynolds had to perform a full physical inventory using wireless barcode scanners to ensure it knew its stock position. But the effort was worth it. Software maintenance expenses were cut to less than $5,000 annually a savings of about $100,000 per year. It is also easier to train new employees on a Windows-based system as opposed to the UNIX system. Store managers can customize their own reports, which only IT could do before, says Bozzetti.

Merchandise shipped direct to stores

The new system also solved the problem of matching a vendors UPC number to Reynolds SKUs. The old UNIX system generated random product ID numbers, and limited the number of items that could be ordered on a single purchase order. Because there were no standard UPC codes, employees at Reynolds central receiving warehouse manually matched incoming merchandise to the retailers own SKUs.

Reynolds now uses the Inovis Catalogue to download vendors UPC codes. We use the vendors UPC number when possible throughout our business. This allows us to receive floor-ready merchandise [for] each store already ticketed from the vendor, says Bozzetti.

For the 20 percent of its vendors that do not have UPC capabilities which are mostly non-apparel vendors Reynolds assigns their products a random UPC number.

Because the new system supports standard UPCs, merchandise can be drop shipped directly from distributors to individual stores, with UPCs mapped to company SKUs that provide product data.

This capability allowed Reynolds to close its 12,000-square-foot Lakewood receiving warehouse, which saved about $500,000 in salaries, rent, supplies and transportation, and cut delivery times by 30 percent. There are no more warehouse or DC receipts, says Bozzetti. This has saved us a tremendous amount of money in labor and warehouse costs.

About half of merchandise is shipped floor-ready. It varies by vendor; not all of them are able to send us floor-ready merchandise, says Bozzetti. But it is less labor-intensive and gives us the ability to sell merchandise faster.

And remember that pesky problem the old Reynolds had when it came to getting its customer mailing lists from the UNIX system? That previous database of customer contact information is being imported to a standard SQL server database that the retailer can use without the help of consultants for future marketing efforts.

Ready for growth in stores, online

Future growth is a very real possibility, including the opening of new retail stores and expanding into online sales, says Bozzetti. The latter could come in the next year.

Every night, our headquarters are updated on sales, returns, customers and inventory information. This gives us the ability to see the entire inventory for Reynolds, and also on a store level if needed, he says. We would like to use RMS for the ability to ship directly [to consumers homes] from the store that has the most merchandise available.

Each of its stores has storage space that could be used for packing and shipping of merchandise ordered online. It will be a couple of years until we start opening new stores again, says Bozzetti. But we expect to see Reynolds growing again very soon.

Staci Kusterbeck is an Apparel contributing author based in New York.

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