Shortly after Staples opened its first office-supply superstore outside Boston in 1986, the competition came calling. By its own estimate, about 20 different companies quickly rose to garner a piece of this new market. Today, the office-supply superstore industry is composed of Staples and two other key players.
When you think that the first Staples store opened just over a decade ago, it's hard to imagine how far the company has come. Today, Staples has more than 870 office-supply superstores scattered throughout the North American landscape and a total of more than 940 stores worldwide. As the number of retail stores has risen, so have Staples' revenues.
Headquartered in Framingham, MA, Staples opened 174 new stores worldwide in 1998 alone. And, in that same year, gross sales increased to $7.1 billion from $5.7 billion in 1997. For 1999, the company projects it will add close to another 170 retail stores. While the growth of Staples is impressive, it certainly didn't happen by accident. From the beginning, the company has valued technology and invested in infrastructure.
"Few companies have been able to achieve the consistent growth that we have," remarks Brian Light, senior VP and CIO at Staples. "And, as we've gone into new markets and acquired businesses, IS (information systems) has supported that growth without constraining our business. Staples has leveraged technology effectively."
For an example of how Staples leverages technology, one needs to look no further than the company's retail distribution centers. "We were the first company, in our industry segment, to realize the supply chain efficiencies of having retail distribution facilities support our stores," states David Barclay, VP, merchandising and supply chain systems at Staples. "The objective of our replenishment strategy is to support efficient product flow in order to maintain high in-stock levels in stores and increase inventory turns, while being cost effective."
Automating Distribution Centers Relieves Pressure
Currently, Staples has three distribution centers (DCs) that replenish inventory for the company's more than 870 retail stores in North America. The DC in Hagerstown, MD is about 850,000 square feet, while the remaining DCs (Killingly, CT; Rialto, CA) range from 300,000 to 500,000 square feet in size. A fourth DC, to be located in Terre Haute, IN, is scheduled to start construction this Spring and will be online early next year.
Each DC handles 95% to 97% of all the products that can be found at any Staples store. The remaining product is shipped directly from vendors to the stores. The types of products vary from pencils to software to office furniture. At any given time, the DCs have between 8,200 and 9,200 stock keeping units (SKUs) to keep track of. And, depending on the DC, between 50 to over 300 orders are filled each day.
Starting in January, 1997, Staples made a move to improve operations at its DCs. "The DC in Hagerstown was built to support our growth on the retail side. We had too many stores and not enough capacity," recalls Jim Joyce, IS development manager for retail distribution at Staples. "Obviously, building a new warehouse relieved a lot of pressure. But, we wanted to automate the DCs to support improvements in operational efficiency and future growth at the company."
As a result, the company implemented a warehouse management system (WMS) called EXceed, from EXE Technologies. The WMS was a UNIX version of the software, which is the platform Staples has adopted. Each DC, and its WMS, is connected by a frame relay wide area network (WAN) to the corporate data center. EXceed also interfaces with the corporate host systems to access information regarding store orders, purchase orders, receipts, and vendors.
Each DC receives store replenishment orders to satisfy the DC's daily pick schedule. Based on a store's sales volume, it can be replenished from a DC between two to five times per week. Each night, an IBM AS/400 at Staples' corporate data center collects customer sales information from each of its retail stores. This information is used to update the store's on-hand inventory balance per SKU, which in turn is passed on to Staples' E3 SLIM system to generate the actual DC-to-store replenishment orders.
Radio Frequency Is Effective – To A Point
The new WMS has allowed Staples to use radio frequency (RF) technology at its DCs. However, the company does not use RF in every aspect of picking and put away. Some products, such as paper and furniture, are considered non-conveyable full-case orders and picked directly to pallets. Other smaller, conveyable products, such as staplers and software, are either break-pack orders and are placed in totes or selected by the case and placed directly on a conveyor belt by Staples associates when filling orders.
Handheld RF scanners and forklift-mounted scanners from Intermec are used to control inventory put away, replenishment, and inventory control functions. Full case selecting is accomplished using picking labels, while break-pack picking is done using a traditional pick list.
Workstations throughout the DC use Zebra and Printronix printers to print corresponding labels and pick lists for a particular order. An associate affixes the bar code to a tote and uses the pick list to fill the order by placing products in the tote. Once completed, the tote is sent by a Bushman conveyor system to the shipping dock. The conveyor system sorts the totes so break-pack orders meet up with full-case orders at the dock.
According to Joyce, Staples has considered using handhelds for fulfilling orders, but the company decided labels and pick lists were more efficient. "If you watch our selectors, they know their product and their area," says Joyce. "Waiting for confirmation from handhelds (letting associates know they are picking the right product from the right place) really slows people down. In a sense, we are trading productivity for accuracy. But, our accuracy is high enough that it doesn't justify the additional investment in handhelds."
Adding New Systems To Support Growth
The WMS implemented by Staples is hardly a stand-alone system. The software integrates with JDA Merchandise Management Software (MMS), which is run centrally at the corporate data center. While JDA supports retail's inventory control, Staples uses E3 TRIM (vendor-to-DC replenishment) and E3 SLIM for product ordering and forecasting. Staples has also adopted Oracle Financials, and is currently implementing a system from Manugistics to more efficiently manage its transportation concerns.
"We have a mixture of ‘best of breed' systems here," says Joyce. "There is talk about unifying all these activities with an ERP (enterprise resource planning) system. But, we certainly won't address that issue until we are finished with our Y2K to-do list."
Staples originally implemented JDA nine years ago as a fully integrated solution to support the company's financials, DCs, merchandising, and inventory. Since implementing JDA, the company's IS staff has had to integrate new systems to support Staples' phenomenal growth. "We had concerns about whether the architecture and functionality of our JDA solution could support the desired growth of the company," states Barclay. "As such, over the years, we have adopted our current ‘best of breed' solution set."
Investment In Technology Provides Big Returns
The investment in technology in the company's DCs and overall infrastructure certainly contributed to Staples' healthy bottom line. The company's stock more than doubled during 1998 (136% increase) and gross sales rose by 24%.
"Our executive team recognizes that technology is critical in allowing us to generate those returns – and our IS organization is continuing to expand its impact on the business. The company is willing to make the appropriate investment in IS to continue getting those returns," comments Light. "We don't brag about the amount of money we spend on IS. But, we are very proud of the returns on capital we have been getting from our IS investments."
Integrating new technology with existing systems is a constant process for the Staples IS department. When it comes to IS projects, Light says the Staples team has more wins than losses. Looking strictly at the company's bottom line, Light's claim seems to be a pretty big understatement.