As the new millennium loomed, the back-office functions of many retail establishments remained entrenched in outmoded systems. While fashion is driven by today and tomorrow, back-office functionality for smaller apparel retailers was relegated to the distant past. Beyond point-of-sale POS and bar coding technology, inventory management and control largely remained as it had since the leisure suit was the fad at discos during the Carter administration.
"We had a manual system" for inventory management, recalls Rocky Taylor, CFO/COO, of Beach Street of Park City, Utah, a retailing outlet for sports apparel manufacturer Quiksilver USA. "We had quickly expanded to 10 stores by late 1997 and were still doing everything manually," he said. Timely inventory management and control was imperative for an expanding outlet center with inventory that may not be replenished in kind.
With a vibrant growing retail business, Beach Street knew that an integrated database system was required to centrally and individually manage the inventory and distribution processes of the stores. "We were looking at the traditional approach to buying a system but had all of the questions about how we were going to run it, staff it, provide a help desk, all of the things that are a nightmare for a retailer," recalls Taylor. Not only was it not a core technology, it was a foreign technology.
Taylor met Sam Kliger, founder, president and CEO of Kliger-Weiss Infosystems (KWI) of Long Island, New York, at a trade show in early 1998. KWI had been providing outsourcing solutions with relational databases to meet this need for retailers since 1984. Kliger recognized the Beach Street dilemma by asking, "How can you possibly consider doing this yourself?" As an analogy, he said, "I can go out and buy the finest state-of-the-art Indy racecar and never win a race because I don't have the expertise to drive it."
Kliger pointed out that there were factors beyond the costs of obtaining and staffing the system and the never-ending road of technological upgrading. The system required reliable proven expertise in the technology accompanied by knowledge of the specific needs of small to mid-size apparel retailers.
Taylor concurred, "We shouldn't and probably can't do it on our own. We should focus on what we know -- which is retailing -- and let an expert handle the technology end of it." Combining this with the KWI track record for trust in meeting the needs of retailers, Quiksilver outsourced to KWI in January of 1998.
What Do You Want To Know?
KWI rolled out its solution within three months. As it implemented the Beach Street system from ground zero, new processes unique to the needs of the retailer caused some incremental integration challenges. Fixing these was relatively simple as KWI had faced these challenges many times before. Its scalable infrastructure design helped, too.
Based on a UNIX platform that easily integrates a variety of hardware/software configurations, the KWI database servers remotely capture data from the Beach Street computers and POS systems at night after closing. Beach Street can assimilate the data as desired to deliver reports on whatever area is chosen as early as the next morning. As Kliger points out, "It is just a matter of the retailers discovering what they want to know to meet the individual needs of their stores. Then we can give them the answers easily."
Outsourcing Enables Proactive Back-Office Functionality
Even though the rollout corresponded with the launch of four more stores, the results were immediate. Taylor witnessed back-office functions, many largely unchanged in his lifetime, become state of the art. "It completely changed what we were doing in the back office."
Kliger finds the concept of providing service to a select market quite simple. "IT people don't understand retailing. Retailers don't understand IT since it is not their core industry." KWI bridges this gap with proven long-term performance in retailing IT solutions, the core business of KWI.
In the span of six months, the system generated back-office reports to meet the unique needs of not only the corporate office, but also individual stores, departments and staff members. KWI provides report display tools to easily present the data to suit its buyers' desires. Enhanced capabilities became available in areas of exception-based analytics to alert users for potential fraud/theft and customized data reanalysis for increased reporting capabilities. Taylor appreciates the value of easily providing unique customized reports "on the fly."
Outsourcing Provides a Path to Accountability
Today, Beach Street has 26 stores. When asked about managing them without the KWI outsourcing solution, Taylor shuddered, "I don't know, near impossible." With expansion, KWI became more valuable, due to the individual nuances of the market for each store.
"We manage our inventory more effectively. KWI allowed us to have more stores with more dollars with less back-office people than when we started this new process. We estimate the cost of doing this internally at triple. The proof of their value is we have stuck with them. We don't have a long-term contract; we don't need one."
KWI services are easy to budget with no issues concerning technology upgrades or procurement costs. "We don't have an IT person, the fee to KWI is only about the salary of an IT person. From day one, we have never had worries about the system being up. If we did it ourselves, there would be."
Lessons from the Outsourcing Journal:
- Outsourcing enables acquired expertise for small/mid sized companies.
- Outsourcing harnesses new technology to produce additional data for strategic business planning.
- Outsourcing provides increased efficiency in inventory management in less time.
- Outsourcing produces proactive back-office contributions to growing a business.