Superstar Service: Supply Chain Strategies Win Satisfied Customers

Tags: Warehousing, Retail, E-commerce, Customer Service

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Stellar retail supply chain planning and management seal the deal on the consumer shopping experience.

As consumer confidence wavers from month to month, retailers are working extra hard to win shoppers' hearts and coax money from their wallets. All aspects of customer service—including extended hours, attentive employees, attractive displays, well-organized Web sites, easy checkout, and hassle-free returns—keep shoppers in the mood to buy. So does a well-run supply chain.

Sure, retail outlets stand at the far extreme of that chain. By the time a customer lifts an item from a shelf or drops it in an online shopping cart, the retailer has completed most of the planning and execution needed to move that product from the manufacturer to consumer.

Still, to make sure that customers get the products they want, when they want them, and enjoy the experience enough to come back for more, a retailer must create a smooth and efficient path from supplier to store—or, in the case of online retailers, all the way to the consumer's door.

Retailers with a knack for pleasing customers deliver the best possible mix of product offerings, superior store operations, and a visually appealing environment, says Briggs Briner, a director with PricewaterhouseCooper's PRTM Management Consulting Practice in Dallas. Solid supply chain management is key to that kind of success. "Effective supply chains deliver the optimal product offerings and associated non-product store supplies to enable a superior and consistent shopping experience," he says.

An optimal product offering provides what PRTM calls the Triple A—an affordable and available assortment. "Affordable products are delivered by keeping supply chain costs low through effective sourcing strategies, quality standards, and optimized logistics or distribution networks," Briner says. Companies that implement supply chain strategies to cut costs can pass some of those savings to customers.

Retailers keep products available by accurately forecasting demand, then using smart tactics, such as postponed inventory allocation, to allow for adjustments when forecasts are inaccurate. "The optimal product assortment—size, color, style mix—is achieved through effective planning and a responsive supply chain," Briner says. Capabilities such as rapid replenishment help in this area.

An effective supply chain also supports customer-centric store operations. "The supply chain can provide shelf-ready products, such as pre-tagged goods or goods on hangers, that enable store employees to focus on serving customers," Briner says. And a retailer with a well-run supply chain can offer a wider variety of shopping options, such as the ability to order online, then pick up the product in a brick-and-mortar store.

The following case studies demonstrate how four retailers use stellar supply chain strategy to guarantee customer service that outshines the competition.

Brookstone: Ready to Ship in One Hour

One example of a company that uses nimble channel-crossing strategies to good advantage is specialty retailer Brookstone. Founded with a 24-page black-and-white catalog in 1965, Brookstone opened its first retail location in 1973. Today, it's a multichannel merchant selling solar-powered backpacks, the iPod-controlled Rover Wireless Spy Tank, and thousands of other useful and unusual items. Customers connect with Brookstone at more than 300 stores in shopping centers and airports, as well as through a print catalog, an e-commerce site, and an affiliate program that places select merchandise with partners such as Staples and Bed, Bath & Beyond.

Brookstone stores carry 300 to 500 products, but its Web site offers a great deal more, says Bill Wood, vice president and chief information officer at the Merrimack, N.H.-based company. Customers who like an item in the store, but want to see alternatives, can use their smartphone or tablet computer to scan a quick response code attached to the product, view more items on the mobile version of the Brookstone Web site, and place an order on the spot. If the customer doesn't have an appropriate mobile device, a sales associate with an Apple iPad can help.

"We have full capability at the store level to place orders for all the products that are available online," Wood says. "The customer can be sitting in a massage chair at the store, order that chair, and place an order for accessory products."

Thanks to the company's supply chain infrastructure, staff at Brookstone's distribution center (DC) in Mexico, Mo., may well have that massage chair ready to ship before the customer leaves the mall. As of 2011, that infrastructure includes a newly upgraded warehouse management system (WMS) from Atlanta-based Manhattan Associates.

When Brookstone first implemented its WMS in 2001, it operated stores and a catalog business, but had only started to experiment with e-commerce and affiliate partnerships. "Now they represent a much larger portion of our business," Wood says.

A big incentive for the recent upgrade lay not with Brookstone's retail operations, but with the wholesale affiliate program. "Manhattan Associates' software integrates with many leading retailers. By operating on the current version, we could take advantage of that pre-defined integration," Wood says. The new version of the WMS allows Brookstone to, for instance, generate shipping labels that comply with its partners' specifications.

But the upgrade also helps Brookstone operate more efficiently and cost effectively, freeing up money to invest in providing products of greater value. "Consumers are looking for innovation and quality in our products," Wood says. "If we can invest dollars in those areas, as opposed to handling packages, I think they appreciate that."

For online shoppers, including in-store customers who turn to the Web for more options, the upgrade provides quicker turnaround. "Many times, a package is ready and waiting for UPS pick-up within one hour of the order being placed," Wood says.

The new WMS also allows Brookstone to prepare packages for a wider range of parcel carriers, rather than using UPS for every delivery. "That allows us to be more flexible and ship more cost-effectively to consumers," he adds.

BuySeasons: Staying Ahead of What's Hot

When managers at BuySeasons haul out their crystal balls every October, they're not preparing to pose as fortune tellers a few days later on Halloween. They're trying to divine which pop culture trends will shape demand for the costumes they will sell in 12 months.

"As the last parcels leave our facility every Halloween, we start planning for what's going to be hot the next year," says Terry Rowinski, chief operating officer at the direct marketing company in New Berlin, Wis.

BuySeasons is really two businesses in one. Through its CelebrateExpress, BirthdayExpress, and 1stWishes catalogs and Web sites, it satisfies a steady, year-round need for party supplies and décor. But under the company's other two banners, BuyCostumes and CostumesExpress, BuySeasons serves demand that peaks massively in September and October.

Logistics activity for the costume business comes in three phases, says Rowinski. First, there's an inbound flood of materials for BuySeasons' own manufacturing operation and finished inventory from vendors in Europe and Asia.

Then, in September, orders start pouring out the door to customers. Finally, as the outbound flow swells to its peak in late October, the company starts grappling with exchanges and returns.

Long-range planning is part of the magic that BuySeasons deploys to keep customers delighted with its costume selection and service. The company stays closely in touch with licensing agencies that represent movies, TV shows, celebrities, and other pop culture phenomena that might feed customers' dreams for a Halloween transformation.

"We work with the licensing agencies to understand what will be trending in their businesses as they move forward in the next year," Rowinski says. Will Angry Birds and Snooki retain their appeal? What does Pixar have in production? Based on those insights, BuySeasons lays plans for making and procuring costumes.

As the new season approaches, BuySeasons uses its Web sites and catalogs to provide a sneak peek at new products and let customers pre-order. "We start taking demand against those products even though they haven't left the country where they're being manufactured," Rowinski says.

BuySeasons uses data it collects from suppliers and its own production plant to determine when those early orders will be ready to ship. That data must be accurate. "You don't want to tell customers they will receive their costumes on Sept. 15, then not deliver until Oct. 30," says Rowinski.

Pre-orders provide a clue as to how popular new products will prove once the season ramps up. That information helps BuySeasons match production to demand as the season progresses.

Recent efforts to maintain a lean inventory of paper, inks, and other costume materials also have helped BuySeasons respond to evolving demand for specific products. "We've eliminated weeks—or even days—of materials on hand, so that we can always keep products fresh, and be as nimble as possible in what we're manufacturing," Rowinski says.

If customer demand soars for a specific costume line, BuySeasons can order larger quantities of the necessary materials and ramp up production. "On the other hand, if for some reason demand starts to trail off, we can easily let the time run out on the theme or product until it makes sense to let it die," notes Rowinski.

One further key to delivering excellent customer service is strong coordination among all of BuySeasons' departments. "It took a sales operations and planning exercise to integrate our merchant team, financial team, and supply chain department to make sure everyone was on the same page," Rowinski says.

If buyers get merchandise in-house, for example, but it takes four days for DC staff to receive it, put it away, and make it available for picking, customer service bogs down. "The ability to organize and work together is what makes our operation run so well," Rowinski says.

Pet Supplies Plus: 98 Percent In-Stock

Employees at Pet Supplies Plus (PSP) take pride in their ability to keep stores stocked with the products customers want. "When consumers elect to come into one of our stores, more than likely they're going to walk out with everything they need," says Todd Pankey, senior vice president, supply chain, at the Farmington Hills, Mich.-based company.

Founded in 1988, Pet Supplies Plus claims a position as the third-largest pet retailer in the United States. It operates more than 240 outlets in 23 states, and company officials work hard to keep product flowing steadily to all those locations. "Our in-stock position is at 98 percent," Pankey says. And as the company pursues ambitious expansion plans over the next five years, officials are determined to maintain that high service standard.

With that goal in mind, PSP is working to gain more DC capacity and make its distribution network efficient enough to serve a rapidly growing roster of retail locations. The strategy calls for replacing PSP's two existing DCs, in Jackson and Ann Arbor, Mich., with a single large facility.

Early in 2011, PSP started working with LLamasoft, a supply chain planning and analytics software vendor, to identify the best location for the new DC. LLamasoft, based in Ann Arbor, provided its Supply Chain Guru software and brought in experts to perform modeling on PSP's behalf.

One goal of the modeling exercise was to find a location from which PSP could continue serving its stores effectively and at the best possible cost. Another goal was to figure out how big the facility should be and how much inventory it should hold.

"Typically, our freight tends to be more expensive than warehousing from a total cost perspective," Pankey says. So the model had to consider what it would cost to serve the stores over various distances. "The tool let us do that by quantifying the rates for shipping from these new locations," he adds. The model also considered how much product the DC should hold, and what it would cost to keep that inventory.

The modeling tool helped officials at PSP decide to locate the new facility somewhere between Indianapolis, Ind., and Columbus, Ohio. "It also helped us to decide how big the warehouse needed to be," Pankey says. The next steps will be to choose a precise location, and contract with an industrial engineering firm to design the facility.

Since completing that initial project, PSP has worked with LLamasoft to perform further analyses that, among other things, will help the company maintain its high customer service standards. One initiative was a trend analysis, which revealed that PSP's sales volume spikes around Labor Day, then remains heavy through the end of the year.

"That project has given us a tool we can use for labor planning to hit our service expectations from a shipment perspective," Pankey says.

LLamasoft has also helped PSP standardize reporting on key performance indicators, including one that measures order fulfillment performance. In addition, LLamasoft has helped PSP analyze its use of warehouse space and, based on that knowledge, achieve a better product flow.

"We applied a new slotting program that has improved our efficiency in the facility and allowed us to move to zone picking, rather than the batch picking that we had been doing previously," Pankey says.

The coming years will see PSP transporting pet supplies to more and more locations. "As a percent of the total, our increase in stores should outpace any of the other specialty pet retailers in the marketplace," Pankey says. Thanks to solid supply chain planning, PSP should have no trouble keeping all those new shelves filled.

Wayfair: Fast, On Time, and Clean

Boston-based e-tailer Wayfair's tag line is, "A zillion things for the home." The company revels in big numbers, such as the 9.6 million orders placed via its Web site since 2002, and the 200,000 hours its employees had spent with customers in 2011 as of late October.

Wayfair also revels in praise from happy customers, as evidenced by testimonials posted on its Web site: "The experience I had with Tiffany has made me a customer for life." "I am very thankful for how fast you reacted." "I am impressed by the way you care about customers."

Responsive customer service reps help Wayfair shine in customers' eyes. But another secret behind the company's customer service success is its logistics savvy.

"The delivery of the item is where we prove ourselves," says Mark Mastrandrea, vice president, supply chain at Wayfair. "We're focused on fast, on time, and clean." That means getting customers the products they want as soon as possible and in great condition, whether the shipment contains a corkscrew, a backyard sandbox, or a four-piece living room suite.

"In order to do that, we rely on having accurate inventory information and shipping times, and being able to quote them to the customer," Mastrandrea says.

Tracking availability is a particular challenge for Wayfair, for two major reasons. One is the sheer number and variety of its products. Wayfair currently offers more than 4.5 million items from more than 5,000 suppliers, and it's adding to those numbers all the time.

The second reason is that Wayfair is mainly a drop-ship merchant, passing orders to its suppliers, then managing transportation to get the goods directly to customers. To tell customers when to expect their shipments, Wayfair must be able to peer into the inventories of all 5,000 suppliers.

That visibility comes thanks to the company's heavy investments in technology, most of it developed in-house. Wayfair's processes for collecting data from suppliers are easy to set up and replicate. "We excel at onboarding new suppliers," Mastrandrea says. "We bring on about 130 new vendors every month."

Because fashion plays a big role in home goods, vendors are constantly introducing new products and discontinuing old ones.

"We have a lot of technology and data feeds that allow us to stay on top of that information for all our suppliers," Mastrandrea says.

Besides keeping track of which products are available, Wayfair also must maintain precise data on the dimensions and weights of all the items it sells, so it can plan the deliveries. "We select the best carrier for the origin and delivery points, the product weight, and the service class," Mastrandrea says.

Wayfair works mainly with parcel carriers, several less-than-truckload (LTL) carriers, and white-glove carriers that specialize in delivering and setting up furniture and other high-value merchandise.

For a company that manages transportation from vendors' DCs all over the United States, to customers all over the country, speed is a major challenge. Speed is also a key element of customer service, which is why Wayfair recently implemented a new strategy to get its most popular items to customers even faster than before.

To accomplish that, in 2011 Wayfair altered its business model, introducing DCs in Ogden, Utah, and Hebron, Ky. LTL and full truckload carriers haul selected products from suppliers to the two DCs, where employees pick orders and ship products via parcel carrier.

"These DCs make thousands of products available to anywhere in the United States within two days," Mastrandrea says. "It's part of our initiative to be faster, reduce lead times, and get products to customers right away." The new strategy has proven so successful that Wayfair plans to bring more products into the two DCs in the near future.

Company officials also plan to revamp the way they ship larger items via LTL or white-glove carrier.

"We're focusing on improving packaging and package testing, and how we work with carriers on larger goods that are heavy, contain glass, or present different kinds of problems than a parcel package would," Mastrandrea says. The goals are to deliver these items faster and to reduce the risk of damage.

Ultimately, all these efforts are designed to promote Wayfair's core values—selection and service—and to make sure the company's numbers keep soaring. "Our supply chain and customer service are built around growth—bringing on more suppliers, handling more products, and talking to more customers," says Mastrandrea.

Like their counterparts at PSP, BuySeasons, and Brookstone, officials at Wayfair understand that implementing strong processes all along the supply chain can help make shoppers happy and keep them coming back for more.