CASE STUDIES

Inventory Impact of HDA’s Supply Chain

The Company provides sophisticated supply chain management services based on Category Managed Merchandising (CMM) and Vendor Managed Inventory (VMI) models. Very few vendors obtain CMM or VMI status with their retail trading partners because there is a perpetual open order from the retailer to the vendor for product orders that are under the vendor’s control.

In a VMI / CMM process, HDA has full responsibility for selecting the best product and mix, creating the plan-o-gram for the section, initiating the orders, accurate order fulfillment, timely shipping, reliable store level service, and maintaining all metrics including sales, inventory turn, margin, and ROI. This is accomplished through Electronic Data Interchange (EDI) communication of store level sales and returns, analysis of industry movement data available at the individual title level and periodic store-level input from field service personnel to HDA’s VMI software system.

The VMI software system generates the optimal order, based on agreed to or set service parameters. The system then integrates with the Company’s logistics systems, including the Perfect Pick and Pick-to-Light Systems both of which use RF scanners, to process orders with a fill rate accuracy of 99.92% and ship them with an on-time rate of 99.98%. Upon shipment, the company is then invoiced electronically as well.

The most obvious benefit is the ease and timing with which product flows through the collective supply chain. HDA’s retail clients typically use 20-30% less inventory on average in VMI stores versus traditional supply chain partnerships. Out of stocks and missed opportunities are kept to a minimum through HDA’s systems. In addition, sales are typically 10-15% higher in VMI stores. As a result, the retail customer experiences their highest level of turns for this category via this method of managing the inventory. Other benefits include retailers’ personnel time savings, lower customer/vendor service expense, and an overall higher return on investment.

Decrease in Shrink

HDA’s national home improvement client has experienced decreasing chain-wide inventory shrink on magazines for 4 consecutive years. The compounded annual decrease in inventory shrink has been at a rate of -18.2%.

Comp Store Growth

HDA’s national home improvement client has experienced positive same store comparable sales in 13 of the last 16 fiscal quarter periods.

Magazine and Book Efficiencies

HDA continues to outperform industry efficiencies with regards to return rates. In 2007 HDA’s sell through rates were 15% more efficient than the single copy sales industry. For books, HDA was approximately 25% better than the book industry in sales versus returns.

Where the Feet Meet the Street – The Effects of Superior Merchandising

HDA’s national craft client with approximately 1000 stores purchased all books and magazines on a direct basis for seven years utilizing store associates to unpack, stock, merchandise weekly shipments, down stock, perform resets, set all new promotions, process weekly RTV’s, and perform buybacks. HDA took over the management of the book and magazine business for this specialty retailer (approximately 7000 SKU’s) in the summer of 2006 and began using its dedicated Merchandisers. Store associates only verified receipts and returns while HDA Merchandising Team performed all other retail tasks. In the first 18 months of business, the program comparable store sales for books were +15% and magazines were +25%. At the same time the client realized a significant chain-wide savings in personnel hours (364,000 man hours).

2nd Largest Home Improvement Retailer Ranks 1st in Media Sales

HDA’s retail client ranks second for total sales within their respective market channel. Nine years ago this national retailer also sold half in retail dollars per annum versus their main competitor. In late 2007 this HDA client outsold their competitor in total retail dollars of books and magazines with approximately 700 fewer stores. Furthermore the average store of HDA’s retail client outsells their competitor’s stores by 25% with less "program" merchandising space than originally dedicated to the book and magazine media program nine years ago.