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11/21/2003
10:57 AM
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Steady Supply

Retailers and manufacturers that have invested in smart supply-chain technology are dreaming of a green Christmas this year

Mattel Inc. has cut weeks out of the time it takes to design, produce, and ship everything from Barbies to Hot Wheels. Atari Inc. can receive orders from retailers on a Wednesday and have the video games on customers' shelves by Friday. Best Buy Co. can check inventory levels at each of its 750 stores in North America as often as every half-hour, thereby cutting much of the guesswork out of replenishment.

All indications are that this holiday season is going to be jollier than it has been in recent years. Many retailers and manufacturers reap much of their annual revenue in the fourth quarter, and now it's payback time for those that continued to fuel supply-chain projects through the dark times. The National Retail Federation predicts holiday sales will increase 5.7% this year to $217.4 billion, the largest increase since 1999. Holiday sales last year increased only 2.2%, to $205.6 billion, over the year before.

"We move products all year long, but we have huge shipments in the November and December time frames," says Gus Pagonis, Sears, Roebuck and Co.'s senior VP of supply chain and president of Sears Logistics Services. "This is going to be a great fourth quarter for everyone. All the signs are pointing to that."

Mattel's CIO, Joe Eckroth

Mattel went "knee-deep into the supply chain" to improve operations, Eckroth says.

Photo by David Strick
Forget Black Friday. The holiday shopping season is already in full swing at stores across the country and on the Web (see story, "Tools Track Online Shopping"). "We've already placed our bets, and our peak shipping period is going on right now," says Mattel CIO Joe Eckroth. "From our perspective, and from our point-of-sale data, we're already seeing positive momentum on key products." Swan Lake Barbies and Hot Wheels T-Wrecks are flying off the shelves, he says, and the company is "shipping those to the customers as quickly as they'll take them."

Mattel can meet demand because it spent the last few years paying a lot of attention to software and processes that simplify its supply chain, cut costs, shorten cycle times, and bring more science to the art of meeting customer demand. Last August, the company installed a new transportation-management system that Eckroth says has saved it a lot of money by reducing the number of less-than-full truckload shipments and optimizing its shipping networks. And Mattel has gotten forecasting down from "monthly to weekly buckets," he says. "We aren't building more stuff than [stores] need, and they're getting it when they want it."

As forecasting becomes more granular, it's even more important to ensure that the supply chain can move quickly to meet demands. So, for instance, Mattel also has installed optimization software that helps it measure, tweak, and validate--from cost and operational perspectives--the locations of its seven distribution centers, seven manufacturing plants, and other facilities that make up its vast worldwide supply chain. That's key, given that geographic barriers and border red tape have an impact on how you can move products, Eckroth says, especially in areas such as Latin America. And customers can access shipment data to better manage the inventory coming into their own distribution centers.

All this was done at a time when many companies were tightening their IT belts under pressure from a down economy. "There's a danger that maybe a lot of companies haven't done much," says Navi Radjou, a senior analyst with Forrester Research. "Many companies have become so defensive from the experiences in the last year that they haven't invested in the right technology to help them deal with this growth."

Mattel looked at things differently. Though he declined to name specific providers, Eckroth says the company invested in strategic off-the-shelf tools in areas where technology has proven itself. Instead of being squeezed, "we optimized our spend," he says, first improving back-room operations and then going "knee-deep into the supply chain to gain more efficiencies and improve strategies."

One supply-chain operation advanced by commercial software in the last few years has been forecasting. Businesses have access to modeling and simulation tools, algorithms, and applications that can combine data from multiple sources to help plan days, weeks, and months out (barring unpredictable events such as strikes, blackouts, and the like). And better forecasts for tomorrow result in better preparedness today.

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