Popular Fashion Brand Automates Operations to Accommodate 125% Growth, Bigger RetailersPosted: 10/9/2009
| To accommodate sales growth of 125 percent in one year, clothing designer and distributor Head Gear needed to automate and streamline its warehouse operation. The company’s existing Activant Eclipse ERP system, however, lacked the functionality needed to take on new business requirements. For example, the system did not support EDI, which became a necessity as Head Gear penetrated new markets. To meet this need and others, the company deployed Microsoft Dynamics® NAV and add-ons for shipping and the fashion industry. Since then, Head Gear has automated operations and increased responsiveness to customers through EDI. The company has also driven significant improvements in productivity, resulting in a savings of more than U.S.$250,000 a year, and reduced its turnaround time for orders from three days to only one—all while handling a sales volume as large as $1 million a day.|
In 2008, Head Gear announced record sales of U.S.$47 million, up 125 percent from $21 million the year before. With the growing popularity of its brands, Head Gear began to penetrate new markets, including leading department store chains. This rapid growth brought about new business requirements. Guy Stello, CFO of Head Gear, notes, “To compete effectively against the more established wholesalers that dominate this market, we needed to provide advanced shipping notices to let retailers prepare for new shipments and get merchandise to the floor faster.” However, the company’s Activant Eclipse enterprise resource planning system lacked the fundamental electronic data interchange (EDI) capabilities that would enable Head Gear to automate delivery of the advanced shipping notices (ASNs). “If we can’t provide ASNs, then when our goods arrive—even if perfectly—they get put aside,” says Stello. “Someone has to receive it manually; it gets to the store floor slower and we receive payment later.” Looking at its current popularity and future company growth, Head Gear also needed a system that would grow with them, specifically, to support Web sales and retail point of sale as the company expanded.
Head Gear’s rapid growth also put a strain on operations. The limitations of Eclipse—and the processes that the company could once rely on—became increasingly cumbersome. For example, because the system lacked functionality for creating UPC codes, Head Gear devoted four employees to this process. In addition, the company’s field sales team could not view inventory levels or place sales orders remotely. Instead, internal Head Gear staff would receive the orders via phone, fax, or e-mail, and then enter the orders into the system. Because field sales could not see the inventory levels, and the related information was not updated in real time, sales staff could unknowingly oversell a SKU or collection—the majority of which were already presold given the nature of the business. “Customers might not get what they ordered because we promised things that were already sold,” says Stello. “And, some customers would cancel an entire order because a few SKUs were unavailable.”
Warehouse operations were also manual. Containers would show up from the port, and then warehouse staff would manually enter each item into the system from packing lists. Warehouse staff would then do their best to organize the warehouse by keeping collections together to aid in picking. Over time, however, the collections were moved around and SKUs were broken up. To aid in picking, Head Gear hired 30 temporary staff members on top of its 15-person picking team. “We had people literally walking around the warehouse looking for products,” says Stello. “With as much as $1 million a day in orders, there was no way we could manage our order volume with the existing system.” As a result, it took as many as three days after a customer placed an order to ship it out the door.
The manual warehouse operation also had a large impact on accounts receivable. “If a system doesn’t support the process we need, what we end up with are islands of data,” says Stello. “It’s hard to manage a business with information that is not accurate. If we were going to get a handle on our growth and play with some of the big players, we were going to need a new system.”
To streamline warehouse management, Head Gear first tackled its inventory visibility issue at the source by requiring its manufacturers to provide UPC codes on all garments. Now, by using E-Ship on barcode scanners, the warehouse team scans incoming items as the goods come down the warehouse conveyor system. When scanning the item, E-Ship performs a direct putaway in Microsoft Dynamics NAV. Because all inventory is centrally accounted for in the underlying system, pickers only need to use item locator functionality on their barcode scanners to locate merchandise. Pickers can then scan the bin barcode and then the garment barcode to ensure that the bin contains the right item. If the item is incorrect, the picker can perform a dynamic move, enabling them to move the item to the correct bin. “The job is a higher-level job now,” says Stello. “People aren’t just wandering around and going through racks to fulfill orders. Now, there is a taste of technology behind their jobs and they can do new tasks, such as cycle counting and dynamic moves.”
Head Gear is also using the system to track inbound containers. As a result, the accounting team can now figure freight costs and customs duties into inventory costs, rather than just expensing them.
Field sales staff can now view inventory information and place orders in Microsoft Dynamics NAV from the Web by using Terminal Services. Based on the specification that the salesperson creates, Microsoft Dynamics NAV generates the UPC codes and purchase orders. And now, the system locks out-of-stock items, so when a salesperson tries to offer an out-of-stock item, the system suggests a list of alternatives, such as garments of a different color. With the system only recently deployed, Head Gear was quick to test it at a trade show. “We went to the Magic trade show in Las Vegas for the first time with our inventory up and live in Microsoft Dynamics NAV and we had great success,” says Stello. “Our salespeople had visibility into inventory and were able to enter orders right there.”
Supply Chain Management with EDI
With its new system, the company can exchange transactional data with suppliers and retailers by using EDI, which has played a fundamental role in sustaining the company’s continued growth, especially with larger department stores. When Head Gear ships orders from its warehouse, not only do retailers receive alerts from the system, but they also know exactly what merchandise the orders contain when they scan the packages. Says Stello, “By using EDI, we can send retailers an ASN noting that the goods have left the dock. A retailer can scan the box and know exactly what is in it.” The level of detail that Head Gear can provide to retailers also means that these retailers are tracking Head Gear merchandise at the garment level instead of the SKU level, enabling them to understand just how well items are selling. As a result, retailers can get items on and off the floor quicker and increase inventory turnover.
BenefitsWith Microsoft Dynamics NAV in place, Head Gear has gained control over its warehouse, accommodating rapid growth and building a foundation for the future. Since implementation, the company has seen significant improvement in warehouse productivity, gained valuable business insight, and matured its relationships with retailers.
By automating its warehouse and improving inventory visibility, Head Gear has been able to reduce its workforce of pickers from 45 to only 15 employees, for a savings of more than $250,000 a year—all while handling a sales volume reaching upwards of $1 million a day. And, now that employees benefit from a locator system and can enter all items into the system as items arrive, Head Gear has reduced the time to ship new orders from three days to only one. Says Stello, "With $800,000 to $1,000,000 in orders a day, there is no way we could handle this kind of volume without a system like Microsoft Dynamics NAV."
Helping Head Gear to continually improve productivity, particularly if any issues arise in the warehouse, an audit trail of all actions that took place lets managers pinpoint and resolve problems. Says Stello, “When we run into an issue, we are able to find out what had happened, and then determine if it was a training issue or something else. All that log history is there.”
Improve Supply Chain Management and Customer Service
Although the implementation is still relatively new, Head Gear’s ability to provide ASNs to its retailers will greatly increase inventory turns, reduce reorders due to merchandise getting to the retail floor slower, and streamline the payment process, enabling the company to gain control over cash flow. Perhaps more importantly, this also means greater customer satisfaction through improved responsiveness. Says Stello, “At one point, we had one of our biggest customers reading us the riot act because our system didn’t support EDI. Now, the customer is much happier.”
Centralize Business Information for Enhanced Insight
Because sales, inventory, and other key business information is now stored in one system and updated in real time, Head Gear has complete insight into operations and can make better-informed decisions to guide the future of the company. Says Stello, “We can make more intelligent purchases because we can see the histories of sizes and colors, and determine our sell-throughs.
Adds Stello, “Microsoft Dynamics NAV gives me the ability to sleep at night because I have faith in the numbers.”