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.