Controlling Warehouse MerchandiseInventory Management System Warehouse refined to limit overstocking; Builders Square name on stores will soon be a bad memory. After months of replenishment snafus that left Hechinger Co.'s home centers awash in excess inventory, the industry's third-largest retailer is revamping its distribution system and increasing its investment in technology. These efforts are part of an ongoing company-wide overhaul, whose elements have included expanding its management team, with recruits from competitors such as Home Depot, Lowe's and Payless Cashways; the regionalization of its operations: and the phase out of the Builders Square name.
The remaking of Hechinger continues to be a work in progress, as demonstrated last month when the company suddenly cancelled reorders from vendors in several categories. Earlier this year, in what a paint supplier characterized as "a mad rush to fill the stores with product," Hechinger had ordered large amounts of merchandise in most categories that ended up sitting in its stores for months. Now, Hechinger is holding off reorders to certain vendors until it sells the overstock. Hechinger's tool buyer reportedly told a tool manufacturer last month that the company had at least $ 240 million in overstock, with about $ 4.1 million of that being in the tool department alone. A frustrated hardware vendor lamented that Hechinger cancelled a $ 750,000 purchase order two weeks after placing it, with no explanations offered. A leading hard lines supplier complained about "wild swings in Hechinger's ordering patterns," attributing the unpredictability to the retailer's outdated technology and last year's merger with Builders Square. Hechinger CEO Mark Schwartz admitted candidly that his company's product purchasing and inventory systems were in disarray. "I can cut about 20 percent of the inventory in stores right now," he said, conceding that the lack of technology was drastically handicapping the company. "It's either feast or famine here. We're either out-of-stock or we have too much, and I'm changing that." When Schwartz took over Hechinger in March, stores were not even equipped with hand-held scanners, making inventory management a labor-intensive, time-consuming and often error-ridden task, he said. In October, the dealer rolled out Telxon scanners chain wide, giving store employees real-time access to ordering information just by scanning UPC codes, thus making them better able to recognize out-of-stocks and to place accurate orders. By September 2009, Hechinger hopes to have fully automated its seven cross-docking distribution centers, or 'pool points,' from which its stores are served. One critical element of Schwartz's turnaround plan is to change how the company buys product. Jeff Macak, Hechinger's vp-logistics, estimated that 20 percent of Hechinger's inventory currently goes through the pool points, which are essentially empty buildings where product is cross-docked. The rest is shipped directly to stores, which can cause a number of challenges. For one, vendors require minimum orders for shipments, which at times are larger than the stores' needs. Stores consequently get stuck with too much inventory. Also, scheduling large numbers of trucks to deliver to stores with three or fewer receiving doors is "almost impossible," said Macak. Then, employees have to visually inspect each shipment, thus dragging out receiving time. |