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SHOE EXCHANGE NETWORK

SHOE EXCHANGE NETWORK. DISTRIBUTORS INVENTORIES SHARING IN PARTNERSHIP WITH MANUFACTURERS.

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SHOE EXCHANGE NETWORK

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  1. SHOEEXCHANGENETWORK

  2. DISTRIBUTORS INVENTORIES SHARINGIN PARTNERSHIP WITH MANUFACTURERS

  3. FEDERCALZATUREis the National Confederation of shoes distributors representing more than 11.000 retailers, major wholesalers, and import-export companies in Italy. It is a member of Confcommercio and CEDDEC European Confederation Of The Shoe Trade Associations

  4. PROJECT GOALS • To build an inventory management system shared among retailers and distributors allowing retailers to: • Exchange slow-moving items with other retailers before they become remainders • Easily renew their stock • Provide to wholesalers and manufacturers visibility of the current stock of retailers • Main goals of this project can be summarized as follows: • Reduction of the out of stock form 40% to 20-25% • Increasing revenues of the distribution chain • Reduction of the amount of remainders • Possibility to globally manage excess inventories reselling these items all together on international markets • Increasing consumer loyalty having the possibility to better satisfy customer requests • Renewal of the stock faster and more frequently

  5. Local differentiation of demand • This is the basic principle on which the project is based: According to different geographical areas the same item can be sold very fast or become a remainder • This principle makes very effective for retailer a tool to exchange during the ongoing season items with other retailers according to their local turnover. • According to this principle items in the inventory of each retailer can be ranked according to their turnover: • Green : the most requested items (usually 20%). Some of them will be impossible to find. • Yellow: regularly requested items (usually 60%) • Red: slow moving items that will soon become remainders (usually 20%). Only few of them will be not sellable all over the country.

  6. Local differentiation of demand • This principle states that according to different geographical areas there would be items that for a retailer have a red ranking while for another have a green ranking. That makes this project an extraordinary opportunity for retailers to increase their inventory turnover and for manufacturers and wholesalers to increase sales volumes • For sure some “Best Sellers” items will have green ranking everywhere and it will be impossible to find them • or • Some items will have red ranking everywhere and can probably be sold only on other international markets • but we expect those will be unusual cases

  7. Current scenario Relationships between manufacturer/wholesaler and retailer are strictly hierarchical. Retailers can only buy from manufacturers/wholesalers who often during the season cannot satisfy requests for specific items. Wholesaler agent retailer retailer retailer agent Manufacturer retailer retailer Manufacturer

  8. The new scenario according to the project Wholesaler Relationships between manufacturer/wholesaler and retailers remain hierarchical. agent retailer retailer retailer agent A new peer to peer relationship among retailers is added. Two different ways to renew stocks now exist for a retailer: 1) ask to manufacturer/wholesaler or 2) ask to the other retailers that have this item available or that have already ordered it. Manufacturer retailer retailer Manufacturer

  9. BENEFITS • This project brings benefits to all actors involved: • Consumers: improved quality of service offered by retailers with availability of a richer stock of products, sizes and colors • Retailers • Excess inventory reduction • Easier sourcing process • Decrease the amount of products to sell “on sale” at the end of the season or to sell during the forthcoming year • Increase customer loyalty by better satisfying his requests • Manufacturers/wholesalers • Increase the total turnover and consequently higher sales volumes (for each shoe pair moved in the network, two more pairs ordered in the following season) • Access to statistics regarding exchanged products for market analysis purposes • Time to market stock selling process for international markets • Both: • Real time visibility of not sold products in the retailer’s inventory increasing the possibility to timely sell them on international markets

  10. SOME PROJECT CONSTRAINTS • Automatic loading of retailers’ inventory data has to be done by the manufacturer or wholesaler when ordered products are shipped to retailer. This way retailers are not forced to manually update inventory data when they receive the products at the beginning of the season. • In order to keep inventory data updated retailers have to update these data at least once a day with the sold products. So a simplified mechanism, based on barcode reader devices, will be provided, to accomplish this daily task easily. • Retailers participating in the project have to meet the following requirements: • 1) having a computer connected to Internet • 2) spending six minutes per day to update the inventory data with the sold products of the suppliers participating in the project.

  11. BUSINESS MODEL Revenue sources for the project will be: • Retailer annual fees (about 240 € per year). Free until July 2004 • Commissions on transactions • Advertising • Manufacturer and Wholesaler annual fee (to be defined)

  12. PROPOSED SOLUTION • Selection of a sample of retailers who already use a computer in their shops • Selected retailers can use an easy-to-use web-based application to submit to the system requests for specific items and review and update their inventories. • Requests are routed to a “Service Center”, a call center that, accessing the shared database, can view which retailer still has the requested item in his inventory, and check using the phone the readiness of the retailer to satisfy the request. • The service takes care of the payment and fulfillment processes including products pick up and delivery using a national courier providing a 48 hours delivery service. • The Service Center will retain statistic information related to all received requests and satisfied requests

  13. PROPOSED SOLUTION Wholesaler Manufacturer/wholesaler updates the service center with data related to shipped retailers’ orders retailer Service Center Federcalzature MPSnet retailer retailer Manufacturer The service center plays an intermediary role acting as single point of contact for retailers to submit requests for missing items and their fulfillment retailer retailer Manufacturer

  14. BENEFITS OF THIS SOLUTION • Benefits • The use of the phone to manage negotiation with retailers allows a faster learning curve for retailer • The easy-to-use web-based application to submit requests for items and to daily update the inventory allows retailers to become familiar with this technology • Manufacturers and Wholesalers can have real time visibility on retailers’ inventories so having an updated snapshot of sales trends and stock availability for each type of item. • Gathered data like the usage of the system, volume of transactions, number of requests, geographical distribution of requests, most requested items and other allows the delivery of useful statistics on the shoe market in the country to all the participants in the project and to Federcalzature.

  15. INVOLVED ACTORS: WHOLESALERS / MANUFACTURERS Manufacturer/ Wholesaler • Manufacturers/Wholesalers will provide to the Service Center: • Details regarding retailers participating in the project • Updated products catalog • Details related to orders shipped at the beginning of the season to retailers participating in the project • Manufacturers/Wholesalers will access a simple web based reporting application to browse the current stock of the virtual shared global inventory

  16. INVOLVED ACTORS: RETAILERS • Retailers will use an user-friendly web-based application allowing them to: • Update the status of their stock with the sold products manually or through a barcode reader • Search in the virtual global inventory the requested item and display its availability (search by item number, name, supplier, size, etc..) • Submit a request for a certain item to the Service Center • View the status of their requests • Get notification for acceptance of their requests form another retailer, and for the payment and shipment of the product .. retailer

  17. MASSIMO DONDA CEDDEC CHAIRMAN FEDERCALZATURE CHAIRMAN PHONE. 0039 40 760.61.44 - 760.61.74 FAX 0039 40 771.776 EMAIL federcalzature@confcommercio.it

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