At School Specialty, staff are responsible for delivering all the supplies a school needs—more than 75, 000 products, from pencils and desks to lab equipment, sporting goods, and curriculato 90,000 schools before the next academic year begins. It’s a huge three-month push: typically teachers write orders before school lets out, and around July 1 (when the school budget year begins) districts begin submitting purchase orders (POs) to School Specialty’s sales team. The supplies need to be in classrooms by August or September.
“It’s like a tsunami, ” says Mike Killoren, vice president of purchasing at School Specialty, noting that filled order lines jump from 100,000 per week in December to more than 800,000 per week in July.
Employees at School Specialty use Oracle E-Business Suite to plan for and execute the company’s response to this extreme seasonal fluctuation, both in the back office and the warehouse. Oracle tools are also used after the rush to evaluate performance and refine models and processes. The resulting automated, nimble operation also helps people at the company react to the shrinking budgets affecting many school systems today.
Smart Operations Demand and Supply
School Specialty employees prepare all year for the summer rush. Planning begins with sales data from previous years, pulled weekly from the company’s Oracle Order Management system and passed to a demand-planning application from Logility.
The resulting demand plan estimates how many units of each product School Specialty will sell; this figure is adjusted to account for the 5, 000 or so products in School Specialty’s catalog that chum annually (about 20 percent), economic conditions, and other factors. School Specialty buyers also use the demand plan to begin discussions with the company’s 3,000 vendors about needs for the coming season.
“Logility does the math and then passes the information back into Oracle as a forecast, ” Killoren explains. “Then we use Oracle MRP [materials resource planning] functionality to calculate what we should buy based on the forecast. We refer to that as a supply plan. ” The supply plan incorporates not just hereby solving critical supply chain problems), already allows Lojas Renner staff to measure customer behavior and modify product offerings based on local tastes. Now managers can clear stock (avoiding markdowns) and accurately meet market demand (avoiding out-of-stock situations). In fact, managers have been able to reduce markdowns by as much as 20 percent through better demand planning. This, in turn, has lowered inventory costs and enabled inventory managers to focus on the right products for each store. As a result, Oracle Retail applications have helped Lojas Renner increase gross margins by 2 percent, a significant improvement.
On the supply side, the company needed to be flexible with its suppliers. “Supply chain excellence, ” Simone says, “goes directly to the bottom line. ” According to Simone, Lojas Renner’s suppliers are a key to the company’s continued success, because one challenge that comes along with Brazil’s growth is competition. “Suppliers have more options now for whom to work with, ” he says. “We need loyalty from our suppliers. ”
To help ensure that fidelity, Simone says, Lojas Renner is trying to give its suppliers more visibility into its demand forecasts so they can adjust their capacity in advance. Simone and his team built a portal with Oracle iSupplier Portal (part of Oracle E-Business Suite) to give suppliers visibility into the company’s demand system. “We have between 700 and 800 suppliers, both big and small, from LOréal to Chinese suppliers to suppliers with home-based businesses, ” Simone says. The portal enables Lojas Renner to give all of them “the big picture of their future with the company: volumes, order anticipation, a working partnership. We can say to our suppliers, ‘Let’s start booking production for next year. ’” That, in turn, enables the suppliers to perform with greater efficiency and keeps them doing business with Lojas Renner.
Smart Operations and Retail CloudBurst
Lojas Renner’s greatest technological leap forward was its decision to move into the cloud, taking advantage of Oracle’s SaaS offerings. According to Balbinot, the advantages of the SaaS model are multiple and substantial.
Most importantly, Oracle’s SaaS solutions can provide his company with best-in-class applications on a continuing basis without incurring the time lag (and costs) that typically comes with upgrades implemented onsite. As soon as a new tool is developed, it’s available to Lojas Renner through the cloud. “A service can be updated by Oracle immediately after launch, ” Balbinot says. And along with instant upgrades, the SaaS model ensures higher service levels than onsite applications. “High system availability is a great benefit of SaaS, ” Balbinot says.
The CIO also stresses the cost flexibility SaaS can provide. Because in the SaaS model, the company’s IT costs are based on actual usage rather than on a fixed number of licensed seats and a fixed estimated usage of computational power, Lojas Renner can save money by reducing the number of users and cutting back on computing power if demand falls. And it can do so without a price penalty. Costwise, Balbinot says, “it’s a very flexible model. ”
Along with its ability to save money over the course of the year, SaaS has a similarly low cost of entry. “You don’t need to invest a lot in the beginning, ” says Balbinot. “You pay only for what you use. ”
Finally, Balbinot points out that Lojas Renner not only is growing organically but is also looking to grow through mergers and acquisitions. Given that aspect of its strategy, SaaS enables the company to implement its Oracle applications in acquired stores and integrate them into its enterprise system much faster than if it had to rip out each store’s old IT system and install its own.
One reason the company was able to move relatively easily into the cloud, according to Balbinot, was that its core systems were all on the Oracle platform to begin with, so Lojas Renner could be confident that it would have the best Oracle experts working on each of its software tools. But first, all of the company’s business processes had to be mapped so they could be integrated with the SaaS applications they needed to talk to. That task of mapping the businesses processes and old applications fell to Simone, who had to take into account all supply, IT, maintenance, and supply chain processes—and then all the processes for designing stores, doing architecture and construction, and opening stores. Says Simone, “We want to create a platform for growth, and our plan is very fast. ”
Smart Operations in Brazil and Lojas Renner
The pace of Brazil’s economic growth—-although it improves the nation’s overall standard of living and generates optimism inside the country and enthusiasm in global financial markets—does not come without challenges for the nation as a whole and for Lojas Renner in particular.
There are, according to the Monitor Group’s Rizzi, two big threats to Brazil’s continued prosperity, one external and one internal. Although Brazil’s economy is still growing in the wake of 2008’s global financial meltdown, neither the U.S.’s nor the European economy is growing. “Right now the world is continuing to buy what Brazil produces, ” says Rizzi, “but if the global economy worsens and the world moves to a more protectionist model, it will be bad for Brazil. ”
Internally, Rizzi says, Brazil’s economy is still being driven by government investment in infrastructure. “We’ve had good government for the past 20 years, ” says Rizzi, “but we’re starting to see some complacency. ”
Right now at Lojas Renner, complacency is certainly not an issue. Even as it thrives along with Brazil, the company is bent on improving its processes and looking for efficiencies.
Simone says the company is “working on basic execution inside our stores. When we launch a new process, we launch it not with just KPIs [key performance indicators] but also with performance monitoring enabled by the automation provided by Oracle business intelligence solutions. We’re always asking ourselves, ‘What is the best way of working to guarantee that our customers are comfortable in our stores, and what is the best way to improve our selling? ’ “We’re working to motivate store personnel, ” Simone continues. “We have daily meetings to create a focus on indicators. We analyze our SKUs. We walk around the store, and that creates a positive psychological core that gives our people the power to sell. ”
As Lojas Renner pushes into new territories, opening new stores in malls and points of sale throughout Brazil, Simone stresses the importance of standardizing stocking processes and stock layouts. “If a customer doesn’t find a product, we can’t sell it, ” he says. “We want to automate the positioning of SKUs with alerts from RFID tags, supported by Oracle Retail. We hope to begin implementing this by 2011. We need to. ”
“The economic growth in Brazil and the investment the government is making in infrastructure are pushing the whole market and driving our growth, especially in the regions hosting the World Cup and the Olympics, ” says Balbinot, “We have to be prepared for all this growth, and Oracle will help us do that. ”
In a country as vast as Brazil, where the long-hoped-for future of sustainable prosperity seems finally to have arrived, “we have a lot of space to grow, ” Balbinot says. “Our brand is strong. The opportunity is here, and it is very large. ”