Eliminating Bottlenecks In Inventory & Shipping

During the Christmas season, Fossil Partners' shipping volume exceeds 80,000 cartons per month. Fossil Partners (Richardson, TX) - with 1996 net sales of $206 million - supplies watches, women's handbags, belts and wallets to retailers like Macy's and Bloomingdale's.

Three years ago, Fossil Partners used paper and pencil to track inventory and process customers' shipments. However, one inaccurate shipment convinced Rob Wilson, the director of operations, that a change was in order.

Fossil Partner's distribution center adopted Manhattan Associates' warehouse management system, called PkMS. Manhattan Associates (Atlanta, GA) is a developer of bar code-based warehouse management systems. Says Wilson, "Continuing to rely on a manual system - at a time when we had to make more shipments - would have put us out of business."

In the following pages, read how combining AIDC and electronic commerce has helped Fossil Partners solve its inventory and shipment woes. For example, the distribution center now needs only two days - as opposed to two weeks - to fill customer orders.

Retail Compliance Demands Automation
The retail and retail distribution industry has undergone a paradigm shift. Retailers used to receive large, infrequent shipments of consumer goods - items like clothing or cosmetics, to name a few - enabling them to stock enough inventory for several weeks or months. However, retailers no longer want to tie money up in excess inventory, which has forced their suppliers to make smaller - and more frequent - shipments.

Many suppliers are finding they can't meet retailers' more intensive shipment requirements without the help of technologies like automatic identification and data collection (AIDC) and electronic commerce (EC). Prior to adopting the Manhattan Associates' system, Fossil Partners' 138,000-square foot distribution center struggled to ship orders efficiently and accurately.

For example, retailers used to fax their orders to Fossil Partners, where data entry employees key-entered the requested item styles and quantities into a database. Then, a hard copy was printed and given to workers who picked the items listed. (These printouts are commonly referred to as "pick tickets.")

However, key entering that order information was time consuming and led to errors, according to Wilson. For example, data entry employees occasionally entered item styles and quantities incorrectly. As a result, Wilson wanted to achieve several goals upon adopting the Manhattan Associates system, including:

• Improve accuracy in shipments - Because data entry employees generated inaccurate pick tickets, Fossil Partners made bad shipments to customers. Says Wilson, "We once shipped the wrong items to a major customer for the Christmas shopping season. The customer was upset because the shipment wasn't right. Some retailers refuse to buy from suppliers that send bad shipments. Luckily, our customer didn't do that. But we knew we had to correct the problem or we would eventually start to lose customers."
• Ship customer orders faster - Previously, Fossil Partners' needed two weeks to fill customer orders. Why? The distribution center didn't have the ability to update its database of available inventory until the end of the day.

  "Our former system didn't tell us, as we created pick tickets, whether the items were available - there was no real-time, or up-to-the-minute, inventory information. As a result, workers would look for products that had been picked earlier in the day," Wilson says. "On average, workers found 75 of 100 items they looked for. If the items weren't there, we had to order them from one of our manufacturing facilities. Those types of inefficiencies and delays prolonged the time we needed to fill customer orders."

AIDC And EC Combine To Eliminate Bottlenecks
According to Wilson, Manhattan Associates' system has helped Fossil Partners realize a number of successes. These include:

• A reduction in order fulfillment time - Electronic commerce (EC) software has helped Fossil Partners cut its order fulfillment time down to two days. Because customers now send purchase orders electronically, order information doesn't have to be key entered. Instead, it can be transferred - in a matter of seconds - to a database for outgoing orders, and a pick ticket can be printed immediately.

  AIDC also has helped Fossil Partners more efficiently process customer orders. For example, workers use Symbol's PDT 3110 radio frequency (RF) handheld data collection terminals (handheld computers). Now, when workers pick cartons for a shipment, they use the terminals to scan bar codes on the cartons. They also scan bar codes on the cartons' storage locations.

  Workers then use the terminal to transmit that information - via a radio frequency signal - to the distribution center's host computer system, or local area network (LAN). The ability to instantly access real-time inventory information means workers don't have to look for items that have already been pulled. The handhelds have given Fossil Partners the real-time information on inventory items it previously lacked.

• More accurate invoices - Fossil Partners also has improved the accuracy of its invoicing because of e-commerce. With the previous system, information from customer orders also was key entered into an accounts payable database. Because data entry employees incorrectly keyed item quantities, Fossil Partners both underbilled and overcharged customers. Now, item quantities and styles from purchase orders (received electronically) are transferred to the accounts payable database.

  Says Wilson, "We lost hundreds of dollars on an order a few years ago because we underbilled the customer. That caused us to take a hard look at our invoicing process. Since we've been using electronic commerce to receive orders, those problems have been eliminated."

• More accurate shipments - EC also has helped Fossil Partners improve shipment accuracy. "Because orders are received electronically, there's no chance a data entry employee will key enter the wrong information, Wilson says. "As a result, the workers are given accurate pick tickets."
• A reduction in labor expenses - As a result of the new technology, Fossil's order-entry department has been reduced from six employees to three. The invoicing department has been reduced from six employees to two. Fossil is operating with fewer staff largely because information from purchase orders no longer has to be keyed into multiple databases, Wilson says.
• A reduction in overtime expenses - Fossil has reduced the amount of overtime needed to fill customer orders by 30%. This reduction is largely the result of workers no longer searching for missing items.

The Struggles Of Adapting To Changes In Technology
Despite the increased efficiencies the distribution center has realized, some employees didn't immediately embrace the system. Says Wilson, "Going from a paper-based system of tracking inventory to an automated system is a significant change. Any time employees go through a major change in how they do their job, there are going to be some headaches.

"And, when a distribution center uses an automated warehouse management system, the floor workers have less flexibility. For example, as soon as a carton is picked, it has to be scanned, and the information transmitted to the host system. If the information wasn't transmitted immediately, then we'd lose the benefit of real-time information. Some employees don't like to work in that type of structured, rigid system."

As a result, Wilson had to convince some workers that the system would make their jobs easier. "Part of selling them on the system was showing workers how they wouldn't have to waste time looking for inventory items that had already been picked for a different order. In the past, that had caused a lot of frustration with some of the workers."

Integrated System Allows Distribution Center To Change With Times
"Now, retailers don't want to carry excess inventory," Wilson concludes. "They want shipments to arrive just as they are running out of that item. That puts more pressure on the suppliers to ensure that their shipments arrive on time. In addition, suppliers to retail have to ship the right items in the right quantities. A store's worst nightmare is not having a hot-selling item, especially at peak times.

"If we can't fill retailers' order quickly and accurately, there are enough other suppliers who will. That's why a warehouse management system was so critical."