KSA helps specialty retailer develop business plan and forecast
Enhances shareholder value by projected 10.3% ROI on multi-channel platform

Background
This leading specialty retailer and cataloger of women's and children's apparel was looking for expansion opportunities to drive long-term sales and earnings growth.

Challenge
The client wished to expand into the menswear market, but was unsure of the transferability of the brand's equity or how to effectively establish this business. Several other women's brands/retailers had tried unsuccessfully to move into the men's apparel market, but misunderstood the nuances, including product and point-of-purchase merchandising requirements, financial returns, operating metrics, and channel- of-distribution emphasis.

Solution
The client conducted detailed research to determine key differences between the men's and women's markets, total market size and appropriate segmentation, relevant market definition and size, and brand positioning vs. key competitors.

Based on this research, KSA helped the client develop a men's product line and merchandising strategy, including categories, size runs, fabrics, colors, pricing, target initial margins, and seasonal promotions. KSA then developed:

  • •Detailed assumptions for building a men's customer file via creation of a new catalog.
  • Detailed assumptions for the creation of new retail stores.
  • Organizational requirements for effective execution.
  • A detailed multi-channel financial plan; a merchandise assortment; targeted revenue/ cost streams by channel; and optimal growth scenarios for strong financial returns.
  • An execution plan.

Results
This project revealed new opportunities in a $63 billion market, and yielded a detailed business plan with action steps and defined investment returns supported by:

  • •A financial model by channel with revenue expectations over a 10-year horizon.
  • An initial merchandising mix and gross margin goals by product category.
  • A detailed execution plan for an 18-month timeframe.

The client decided to go forward with catalog introduction in the fall and an initial store in the first quarter of the following year. Using a multi-channel platform, the forecast for shareholder value enhancement is 10.3%.

 

KSA helps multi-channel retailer improve inventory effectiveness
Reduces SKUs by 21%

Background
This multi-channel retailer wanted to grow its retail store business beyond its flagship location, but poor inventory performance was hindering its expansion. KSA was asked to perform a comprehensive inventory effectiveness assessment.

Challenge
The company needed quick results, but wanted a long-term plan for maximum benefit. The biggest challenge was migrating from a catalog-based operation to a bricks-and-mortar philosophy, and then developing supporting policies, processes, and systems. KSA identified the following:

  • Poor understanding of retail-specific consumer needs
  • Lack of retail merchant ownership of assortment or merchandise plans
  • High level of inaccuracy in store inventory counts, high labor costs, and high shrink
  • Lack of tools for product performance analysis and planning
  • High volume of under-performing SKUs and high stock-outs
  • Poor utilization of promotions and markdowns
  • Lack of visibility or accountability for inventory issues upstream or in stores
  • Abundance of customized, homegrown systems

Solution
KSA led five initiatives to address these issues.

1. Assortment Rationalization

  • Assessed inventory position and found opportunities in store assortment planning and management. Provided framework for understanding product trends and translating them into actionable merchandising plans
  • Created SKU rationalization database to analyze seasonality, sales, and gross margin contribution relative to similar SKUs

2. Replenishment

  • Worked with Planning to determine inventory flow variances and segment product assortment by basic and seasonal product
  • Implemented a replenishment and forecasting package and established parameters for algorithm calculations
  • Made policy and operational changes to improve perpetual inventory accuracy

3. Merchandise and Line Planning

  • Developed new planning processes aligned with product development calendar and catalog forecasting/buying cycle
  • Developed supporting analytics for in-season planning and end-of-season analysis, including customized templates for strategic, merchandise, location, and assortment planning
  • Selected and implemented planning system for merchandise and location planning

4. Store Inventory Accuracy

  • Analyzed loss prevention and inventory protection, store receiving, replenishment, POS, and inventory adjustment processes to identify and correct steps with an unacceptably high rate of error. Benchmarked client's current labor cost to industry averages to determine magnitude of opportunity
  • Developed new procedures that reduced need for merchandise handling and identified opportunities to add physical and systematic controls to further improve accuracy levels

5. POS and Merchandising Systems

  • Helped select and implement central merchandising and store (POS) systems for retail and factory stores, providing the base infrastructure for inventory and merchandising management within both store channels
  • Developed standard store, inventory, and merchandising processes across retail and factory stores
  • Organizational structures and requirements were reviewed across initiatives to support recommended changes and future store growth.

Results
KSA helped the client achieve the following results:

  • 21% SKU reduction
  • Liquidation of $4.6 million in inventory
  • Cut inventory processing tasks by 30% to 50%
  • Improvements in merchandise and assortment planning
  • Improved inventory positioning relative to seasonal shopping patterns
  • 5% improvement in customer service levels
  • 2% improvement in store conversion
  • Projected $24 million in benefits from implementation of central merchandising and POS systems

 


KSA implements logistics strategy for specialty store retailer
Increases productivity more than 50%

Background
When this $5 billion specialty store chain brought its distribution operations in-house, KSA was hired to help implement its strategic logistics direction. This retailer receives and ships more than 80 million hard goods units annually, and distributes these time-sensitive goods to more than 4,000 U.S. stores.

Challenge
The client needed to reduce costs and improve service to its stores. The retailer recognized that building a logistics network, developing a transportation infrastructure, assembling a strong management team, and starting up new distribution centers (DCs) was an enormous challenge.

Solution
As distribution operations were brought in house, four DCs were set up to handle the volume. KSA helped improve performance in these newly acquired DCs by establishing the proper processes and installing a pay-for-performance program in each facility. These initiatives quickly brought organization and control to a very large operation, while decreasing labor costs. They also bridged the transition to the next step of the logistics strategy implementation.

The retailer then began planning a new 800,000-square-foot highly automated DC. This facility would handle all the volume from the four existing DCs, while automating the processes using state-of-the-art material handling equipment and an enhanced warehouse management system.

KSA designed the processes to support the state-of-the-art equipment in the new DC. KSA also tested and debugged the equipment, trained 1,200 new associates, and re-initiated the pay-for-performance program. The facility was opened and the equipment, systems, and people integrated so the facility could meet its design parameters. Further enhancements included improvements to inventory management and the design of additional processes to automate new product offerings.

Results
The client realized tremendous success. Within 24 months, it had migrated from a completely outsourced logistics operation to its own in-house, state-of-the-art logistics network. Operating costs were reduced, while store service and on-time performance improved. Unit volume grew and new product lines were introduced. Labor productivity increased by more than 50%, and cost per unit decreased by more than 30%. This retailer's logistics operations are now a core strength and have positioned the client for ongoing exemplary service and support to its stores.

 


Popular Grocery Retailer Implements New System to Reduce Shrink
Identifies $4.5 million in potential annual savings

Background
Drawing on its years of industry experience to get better answers faster, KSA helped a popular grocery retailer quickly identify $4.5 million in potential annual savings.

Challenge
Tightening competition in local markets and very aggressive corporate goals had prompted vigorous efforts to unearth new opportunities to cut costs. While the company had implemented several such measures already, it needed expert advice and turned to KSA to help further efforts to improve its margins.

Together with the client, KSA identified sizeable savings potential in decreasing the company's shrink. KSA quickly found two problems: 1) existing systems were not able to track and analyze the shrink of perishables and 2) ordering and production plans were based primarily on the intuition of department managers.

Solution
To solve the problem, KSA recommended a rapid implementation of new processes and tools in two departments: produce and bakery, with the first store going live in just six weeks. With very little previous experience with structured processes and tools in the fresh areas — and with a very aggressive timeline — the client needed an experienced consulting partner to lead the project, guide top executives, and train staff.

KSA surpassed the objective, implementing the new processes and supporting tool set in six pilot stores in three months. To facilitate the rapid implementation, KSA developed a business process for the lifecycle of all items and created a tool set that integrated with the client's existing item master and point-of-sale systems.

Results
The results of KSA's work were convincing. The client identified twice as much shrink as originally reported in the two pilot departments. In one example, a department identified $3 million in yearly shrink savings and implemented merchandising changes at test stores to capture those savings.

 

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