Kmart has made a commitment to all its customers that the items they want to buy will be on the shelves of the Kmart in their town every day. How can Kmart make a commitment like that and ever hope to fulfill it? One way is to educate the Kmart associates involved in moving merchandise in modern supply chain theory and implementation.
Enter APICS.
In November 1994, I joined the APICS Greater Detroit Chapter at the recommendation of some business associates. I was aware that APICS is an educational society, but I was not sure how applicable the APICS body of knowledge is to retailing. I attended a couple of meetings and asked a few questions of knowledgeable people in our chapter. My recommendation to my boss was that we attempt to get a few of our people involved in the Certified in Production and Inventory Management (CPIM) program. As I explained in my recommendation, professional certification for our people appeared to me to have no down side. My boss agreed, with the stipulation that I be the first involved. I earned my CPIM in July 1995, and as of this date, Kmart has sponsored more than 100 associates attempting to achieve certification.
So, how does the APICS body of knowledge relate to retailing? Although I studied the materials recommended in the CPIM Study Guide, the best preparation I had for taking and passing the CPIM exams was running a Kresge store.
Let me explain how the CPIM modules directly relate to a retail environment and are critical to the success of a retail operation.
Inventory management is what we do. Customer service, inventory investment, profitability, and return on investment are all important to retailers. At a store level, most of the demand a store manager deals with is independent, but dependent demand is not alien to us. There are some items that always sell in conjunction with other items. For example, the demand for hot dog buns usually equals or is close to the number of hot dogs sold. This is not the type of dependent demand discussed in the inventory management readings, but this example and others like it clarify dependent demand for us. The functions of inventory are the same, with one important addition. Presentation stock is necessary in many cases to show a customer that a store is in business. Consider a shopper entering a store to buy a carton of milk. That shopper is not likely to make a purchase if there is only one damaged carton of milk on the counter. Customers are more comfortable selecting the exact carton they wish to buy, hence the need for presentation stock.
Just-in-Time is not just a manufacturing concept, it's a business concept. As a store manager in the 1980s, I knew that my order schedule was right if my new shipment arrived as I was putting out the last cases of the last shipment. Retailers embrace the concepts of quality espoused in the JIT. If a customer does not like something for any reason, the customer will return it. With Kmart's liberal return policy, we also have found out what customers do not like about Sears, J.C. Penney, Montgomery Ward and Wal-Mart merchandise.
Master planning is not just manufacturing. This module contains most of the thought process behind retail replenishment. Fully one-half of this module deals with forecasting. We use IBM's Inventory Forecasting Module (INFOREM) to replenish our basic items. Master planning details how INFOREM uses a forecast to place orders. Both systems look to the forecast for visibility of future requirements. The terminology is different, but the concepts are the same. Retailers use time-phasing and projected availability as tools to manage their businesses.
Material requirements planning (MRP) and capacity requirements planning (CRP) look at demand and the satisfaction of that demand. In that respect, MRP and CRP are clearly applicable to retailing. In some departments, retailers time-phase orders in ladder plans, which are the retail equivalent to time-phased order points. The capacity that we measure at store level is the number of customers that can pass through the checkout counters in a given amount of time. We also measure the amount of freight we can receive and put out or away. Bottlenecks are commonplace in stores. How many of us have ever waited in checkout lanes? Alternate routing is what happens when a checkout operator opens an additional checkout lane.
Production activity control is running the sales floor of a retail store. Retailers schedule staffs to maintain customer flow, regardless of store type; that is, Kresge store (job shop), a Super Kmart Center (continuous), or a Kmart (batch and line). We put advertised (high priority) merchandise out first and fill it often. We also stage flatbeds of merchandise to go to the counters in the stockrooms. We schedule our merchandise associates to keep the merchandise flowing to the counters as customers buy it.
Systems and technologies manages a business, whether that business is in the manufacturing or in the retail sector. All businesses select the strategic drivers they use, the facilities they purchase or lease, the supply chain structure they use and the information technology they need. They all address employee issues and use business planning processes.
Kmart benefits now from our involvement with APICS. Our associates who are studying to achieve CPIM have a clearer picture of the ways to manage inventory and use it to our advantage. They also teach the people with whom they work about the costs of inventory and the need for continuous improvement in all of our processes.
The Blue Light Special we have put together is the result of implementation of techniques Kmart associates are learning through APICS. That special is increasing customer satisfaction and continuous improvement for the Kmart Corp., and it is happening now.