Making Every Foot Count

CASE STUDY
Making Every Foot
Count
Shoe Retailer DSW Optimizes Fixed Store Capacities With
Help From JDA
OBJECTIVE
Better plan and allocate merchandise by class,
subclass and item across the company’s fixed
store capacities.
SOLUTIONS
• JDA® Allocation
• JDA® Enterprise Planning
ALLIANCE MEMBER
• Columbus Consulting
REAL RESULTS
• Increased sales and margins in an economic
downturn
• Lowered inventory levels across all
merchandise subclasses
• Improved customer service by matching local
assortments to consumer needs
• Improved buyers’ productivity and efficiency
Since 1991, DSW Inc., a leading U.S.-based footwear retailer, has built its
brand by offering a unique combination of assortment, convenience and
value that provides a competitive edge while appealing to a broad range of
consumers. The company opened 20 stores in 2010 and an additional 10 so far
this year.
At an average of over 20,000 square feet each, DSW retail stores feature
approximately 24,000 pairs of shoes and accessories such as handbags and
hosiery. While this store format seems large, the fixed capacity of its branded
retail locations — as well as its leased shoe departments — has created a
strategic challenge. For DSW, this means specifically targeting assortments to
the needs of shoppers in each market. With limited back rooms in which to
keep excess merchandise, store inventories must be managed to an exacting
degree.
Further complicating this challenge, DSW dramatically shifted its product mix
in the mid 2000s. Previously a close-out retailer — with close-out merchandise
representing the majority of its assortment — DSW evolved into a large
footwear specialty retailer, with only a small percent of its overall sales volume
coming from close-outs.
“When we recognized that DSW had made this fundamental shift, we quickly
realized that we needed a new toolkit to manage our business from a
technology and systems standpoint,” said Harris Mustafa, executive vice
president, supply chain, DSW. “When our business was focused on selling
close-out merchandise, we didn’t have a lot of choice or control. The need for
planning, allocation and replenishment really didn’t exist. We received
merchandise, sent it to the stores, and then we received new merchandise.”
“JDA supports a very granular
level of both planning and
execution, which allows us to
meet our higher-level
financial goals and targets.”
Harris Mustafa
Executive Vice President, Supply Chain
DSW
“But now we needed to do planning and allocation
better. We needed to manage our merchandise by
class, subclass and item. We also needed to be able
to integrate these activities in a way that made sense
for our business objectives, our established processes
and our merchants. We realized that we required
state-of-the-art tools that would support both our
financial planning and merchandise planning goals,”
said Mustafa.
Managing a Complex Retail Environment
DSW chose JDA Enterprise Planning and JDA
Allocation, from JDA’s Retail Planning solution, to
support this transition. “We were looking for a
partner we could rely on over the long term, who
would support our current and future needs. As we
studied the history of JDA, it became very apparent
that the company has tremendous leadership. All of
the acquisitions that JDA has made obviously speak
to how well it can integrate different businesses. We
made a very quick decision that JDA was clearly the
company that was going to be able to help us meet
our technology needs. It has now been three years
into this partnership, and I couldn’t be happier,”
noted Mustafa.
“Previously our planning was done in dollars, and it
was done at the department level,” said Canada. “We
saw a real opportunity to drop down to a deeperlevel planning solution and realize significant
benefits. JDA solutions would allow us to review our
history, forecast and plan. We would get a look at our
actual performance at very detailed levels
of the business.”
Linda Canada, DSW’s vice president of planning and
allocation, had already used JDA solutions in
previous positions with other retailers. “When we
looked for software providers for DSW, I was able to
fall back on my past experience with JDA. They had
been a tremendous partner to me in the past, and
the flexibility of the JDA solutions allowed our team
to customize those tools to accommodate our
processes at DSW. Since every organization is unique,
that was a huge benefit.”
As the implementation began, one of the primary
challenges was managing the many complexities of
DSW’s business model. Existing supply chain
processes and technology tools only focused on the
highest levels of the business and overall metrics,
but DSW executives realized that optimizing financial
results meant drilling down deeper into daily
performance.
“By implementing JDA Enterprise Planning, we
established a much more robust planning system that
goes all the way down to the subclass level,
measuring performance in both dollars and units.
Because our stores have fixed capacities, we looked
at all of the categories across our stores and created
optimal inventory levels for all merchandise
subclasses. We factored in a markdown process so
that outdated styles could be strategically addressed.
As a result, we are much more capable of controlling
our sales, inventory and forecasting. That has
significantly improved our margins,” said Canada.
Today, DSW uses a core item planning system
within JDA Enterprise Planning that allows the
company to project the right inventory levels, keep
stores optimally stocked and purchase the right
products — even the right mix of shoe sizes. “JDA
has provided us with technology capabilities that are
robust enough to manage the complexity of our
supply chain, while also supporting our critical
business processes,” noted Canada.
DSW has also used JDA Allocation to impact its
day-to-day performance by keeping individual stores
at the right inventory levels and matching local
assortments to consumer needs. “Our stores have a
fixed capacity, but new merchandise is arriving
continuously,” said Canada.
“That means we have to target our stock levels and
product assortments very specifically. To accomplish
that, we needed allocation variables that were very
robust and based on logical mathematical concepts.
JDA Allocation provides the sophisticated algorithms
that reflect the way we need to do business every
day.”
“The constant flow of our merchandise must be
matched to changing consumer preferences,” said
Mustafa. “The JDA tools allow us to recognize those
shifting preferences and integrate them into our
capacity constraints. We can review actual
performance versus planned performance, and make
changes on a running basis. JDA supports a very
granular level of both planning and execution, which
allows us to meet our higher-level financial goals
and targets.”
“Our productivity has improved from a user
standpoint, and our efficiency has improved,” added
Mustafa. “We are now working off a single platform,
which means that the integrity of our data is much
better. The benefits are very clear, and we have met
or exceeded our internal goals for the return on our
JDA investment.”
Looking Toward Future Performance
With its impressive results to date, DSW plans to
implement additional JDA solutions over the next
few years. “We’ve been very satisfied with the results
we’ve achieved from our existing JDA solutions,”
noted Mustafa. “Our people are very happy, and the
systems are doing what we expected them to do.
Going forward, we are very excited about partnering
with JDA in the area of assortment planning. Once
we’ve accomplished that, then we have other
projects where we will want to partner with JDA,
including demand planning and markdown
optimization.”
“I feel strongly that, as a result of the JDA solutions
we’ve used, we have significantly improved our
business over the past three years in a time when the
economy was really tough. While most retailers really
struggled through the past two years, we have had
significant increases in our business. We’ve had
increased sales, lower inventory and increased
margins. A lot of the success that we have had, in
addition to our great merchants who buy a great
product, is due to the JDA solutions and our ability
to get efficiencies and productivity out of those
tools,” said Canada. “Based on that success, we’re
excited about what the future holds.”
According to Mustafa, the changes at DSW have been
fundamental and highly visible. “We went from
having a mosaic of Excel worksheets, Access
databases and numerous other independent pieces of
technology to relying on a unified set of JDA
solutions that are customized to our unique business
needs,” said Mustafa. “That has made a world of
difference for DSW.”
jda.com
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