Inventory control can make a BIG difference

rf l(;HT INVI:NTORY control is I the kev to success for home centers, industry economists claim. Companies that overstock or don't stock what the customer wants to buy are in for trouble.

Ilar code scanning with a computerized inventory system can be the difference between success and failure. When National Lumber and Supply, Inc., a Southern California chain, filed forChapter ll protection last month, analysts said that a contributing factor was their slowness to install a computerized inventory system and experiment with new strategies until it was too late.

On the other hand, they point out, strong, successful stores such as The Home Depot, No. I in sales in the nation, and Lowe's Companies, Inc., No. 2, rely on computers for inventory control.

E. Dennis Ross, a Home [)epot senior vice president, said that although he is no economist, based on Home Depot's experience, he agrees with the experts about computer tracking.

Unnecessary inventory buildup is avoided when a manager can monitor inventory on a virtually current basis. With more and more of the retailers committed to bar coding and scanning, the basis of computer controlled inventory, the massive liquidations that historically aid recessions should be avoided, economists explain.

"l do think the technology can help," Ross said, "because I know it certainly does in this company."

Now l0 years old, Home Depot has more than 120 warehouse units with an annual volume of $2.74 billion. Branching out from the parent store in Atlanta, Ga., the chain now has stores on the west coast and in the northeast. Customers are do-ityourselfers and home remodelers.

Inventory at each store averages about 30,000 items. The combination of good management and up to the minute inventory data created by the computer limits stock outs. Customers are rarely unable to find the merchandise they want.

When a customer buys an item, the computer through bar code scanning receives a message of inventory depletion. This information goes from the store's computer to one of three mainframe computers located at regional headquarters in Atlanta, [;ullerton. Ca., and Piscataway, N.J. Merchandise managers at these offices use the information to decide what to buy, how to price it and how to present it on the floor.

Both the merchandise managers and the store managers monitor inventory. Using computer records, they can eliminate slow selling items readily or reorder any items suddenly showing substantially increased sales. Managers can override the computer data in reordering if they feel the sales activity was created by an unusual event. An example would be increased plywood sales in certain areas in preparation for storms.

Computer tracing of inventorY helps control purchases of out-ofseason products. Using sales figures, these items can be kept at a minimum during the months when they are not popular.

IJome Depot will conduct a study this year to see if they can go on line with any of their 1,900 vendors. Using electronic data interchange would allow them to keep inventories even lower with faster stocking.

Lowe's also relies on bar code scanning and computers for inventory control. Ordering for their 306 stores in the south is done by computer hookups with the chain's headquarters in North Wilkesboro, N.C.

The in-store computers automatically place an order when inventories of an item reach certain levels.

ln the northwest, Pay 'N Pak Stores Inc. is implementing a $9 milIion point of sale computer program which will put management information and point of sale computer systems in each of its 102 stores.

The mainframe of an IBM AS 400-700 system is being installed at Seattle, Wa., headquarters. "This will make it easier for the chain to buy right, stock right and be more efficient in merchandise offerings," John Markley, chairman and ceo, said.

Sales audits. distribution and accounting will be simplified by the installation. Six store test sites will be established by September. They expect computerized cash registers to better anticipate what each store needs. whether it is a 12,000 sq. ft. or 80,000 sq. ft. operation.

The entire system will take 18 months to install. A five year PaYback is expected by Markley.

Ralph Siegel, a Deloitte & Touche director of retail services, thinks installing new technology is a smart move.

"This is a real issue for retailers in competitive arenas like home centers. The competition is getting so rough, the margins aren't what theY used to be and picking better technology will ultimately allow better management of inventorY levels, lower dollars invested and increased merchandise turnover," he said.

The second annual Bar Code/EDI Survey prepared by Deloitte & Touche for the National Retail Merchants Association showed retailers strongly committed to scanning vendor provided and internally generated bar codes. They believe point of sale scanning improves their checkout productivity, unit inventorY accuracy and pricing accuracy as well as providing improved marketing information.

Story at a Glance

Ways bar code scanning and computerized inventory keep Home Depot and Lowe's on top...advantages of using the latest electronic technology differences between stores that do and those that don't.