Focus on: Operations
Given the escalating cost of fuel, conventional wisdom dictates the way to save money would be to schedule fewer miles. But this is not always the case, as witnessed by specialty retailer LifeWay Christian Resources, which found that more frequent deliveries translate to less cost across its retail enterprise.
LifeWay Christian Resources, which operates 170 stores throughout the nation, reinvented its distribution model — shifting from one consolidated truckload delivery per week to its stores to multiple UPS deliveries of smaller quantities.
“Even with the increases in fuel costs, it is still more efficient overall to have frequent store deliveries with smaller volumes rather than one large delivery per week,” said Mike Harry, chief supply chain officer at LifeWay Christian Resources, Nashville, Tenn., whose stores sell a wide variety of Christian materials and services, including books, music and videos.
The benefits to store operations have been numerous, particularly the reduction in time to process deliveries and the ability to get product on the selling floor more quickly. Store managers know precisely when UPS will deliver each day and exactly what is in each shipment. This visibility, plus the smaller volume of product arriving in each shipment, enables more productive scheduling of store associates and more proactive outreach to customers waiting for new or special-order merchandise. Previously, LifeWay found that while it often had stock on-site, associates couldn’t find the items they needed because supply rooms were jammed with boxes of inventory needing to be unpacked.
“At a high level, we save approximately one hour per store per week — that’s 170 hours saved per week, which is very significant when multiplied across the year,” Harry concluded.
Before adopting the new distribution model, 65% of merchandise shipped direct to store and only 35% went through the LifeWay distribution center. Today that model is reversed: 65% of store deliveries are processed through the DC and arrive at stores in small, easily processed quantities.
“Our goal is to make delivery of product as seamless and quick as possible,” Harry explained. “We have taken steps to minimize the impact of deliveries at the store level by doing things like pre-pricing product before it ships so it arrives floor-ready, and store associates can focus on serving customers rather than performing backroom functions.”
In addition to maintaining and replenishing some 16,000 SKUs in its stores, roughly 130,000 SKUs are available to LifeWay customers via special order and the company’s e-commerce site. A robust visibility tool available through UPS, the Quantum View Inbound Notification system, marries the physical movement of goods with the movement of information — effectively providing store managers with an advanced view of inbound shipments so they know what is arriving on any given day. This visibility and the consistency of UPS deliveries contribute to a positive shopping experience in the store and enhanced service for e-commerce as well as special-order customers.
Looking ahead to the 2012 back-to-school and holiday seasons, Kiel Harkness, UPS retail strategy manager, noted: “E-commerce is the fastest-growing channel, and excellence in fulfillment operations is becoming a key differentiator for retailers. Increasingly, retailers must have the ability to deliver packages when consumers expect to receive them and provide information along the way.”
Lifeway’s Harry acknowledged that the new distribution model was counterintuitive to the retailer’s historical practices and certainly presented a cultural shift. But he said the chain drove the change by helping everyone to understand costs from a holistic standpoint rather than just based on one segment in the operation.
“You have to look at the savings from the standpoint of total operations, not just transportation costs,” Harry emphasized.