Rock-solid Inventory Management for Fragile Tableware

By William Atkinson

Replacements Ltd. (Greensboro, N.C.) is the world's largest retailer of old and new china, crystal, silver and collectibles. It had humble beginnings, though. In the 1970s, Bob Page, a state auditor for North Carolina, began buying and selling china and crystal at flea markets as a weekend hobby. He left his job as auditor in 1981 and began the company in his attic. He is now chairman and CEO. In 1981, sales were $150,000. In 2009, sales were almost $80 million (down slightly from 2008 sales of $85 million).

Inbound Supply

The company acquires products from three main channels, including directly from domestic and global manufacturers such as Lennox, Wedgewood and Waterford. "We place orders with them, just like a regular retailer, and they fill those orders," explains Anne Embrey, vice president of fulfillment operations at the company. "In addition, if a manufacturer discontinues a pattern, they may offer us the opportunity to get the remnants of the pattern."

Another source is a network of about 700 independent suppliers that have established a relationship with Replacements over the years. "They pay a nominal fee to be part of the group," Embrey says. "In return, they are guaranteed the best daily prices on selling product to us." Most of these suppliers are located in the U.S. and Canada, and some of them have been doing business with Replacements for more than 20 years.

The third channel is from individuals who don't necessarily have a relationship with Replacements. "They may sell a pattern to us on a one-time basis that they no longer use," says Embrey. They don't get quite as much price-wise as the established suppliers, yet this group accounts for a small, but consistent, portion of the company's buying.

The manufacturers, suppliers and individuals shipping to Replacements elect their own methods of shipment. "We may get shipments from the Near and Far East, and we also get shipments from distribution centers in New Jersey," says Embrey.

While the company does like to keep a comprehensive inventory, it does have limits. "There are some times when we may just say 'No' to a whole offer," Embrey states. "We also have estimates of what we will buy. For example, we may usually only buy 24 of a certain piece, such as dinner plates. However, if there is a large demand, we may break our own rule." Overall, though, the company has metrics in place to keep it from making the wrong decisions.

Inventory Management

Rather than purchase technology from vendors, Replacements' in-house tech staff has written all of the company's computer programs. According to Embrey, this has provided a great advantage. "For example, if we need to change a program or create a new one, we have staff who can do this," she states. "In fact, we don't use any third-party vendor technology. It is all developed in-house."

Currently, company and inventory information is stored on 550 personal and laptop computers connected to two mainframe servers, which store information for over 13.5 million pieces inventory, representing over 300,000 patterns, some of them over 100 years old.

"When we receive product, we already have some history on it, such as how much of it we already have on hand, and what the annual demand is," states Embrey. "This helps us decide where to stock it." If there is a certain level of demand for the product, the company might stock it in the regular shelves, where order pickers can access it easily. If demand levels are lower, the product will probably be stored off-site. "We make these decisions when the product comes in," she notes.

For example, while the company stocks over 100,000 china patterns, about 1,600 of these patterns represent almost 60 percent of the company's china pattern order volume. As a result, about 40 percent of its china pattern order volume is split among over 98,000 patterns.

In the past, the company used to store everything open-stock on wooden shelves with metal uprights. Over the last six to ten years, it began to set up some bulk stock, where it could store excess stock and slow-moving stock. The trend toward bulk stocking continued over the years. "In the past year, we have actually taken stock that doesn't sell and store all of it off-site in bulk stock," she reports. "If it sells, we will go find it. However, we no longer store it open-stock on our shelves."

Seven Football Fields of Tableware

Despite the advanced technology for knowing what is in inventory, warehouse systems are in their infancy at Replacements. "We still move everything manually on carts," states Embrey. "We also don't do a lot of scanning. We have paperwork showing that we have received an order and that it has been shipped. However, there is nothing in between." To address this opportunity, the company is working on a project this year to fill in some of that "gap."

As regards pricing, when the company has had things for a certain length of time and they just aren't selling, it will often reduce the price. Conversely, if something never sold, but all of a sudden is now starting to sell, the price may increase.

Overall, though, the company is pretty comfortable just holding stock, knowing that there will be demand eventually. "Even if there isn't, there is still enough demand for everything else to cover the cost to store something for 20 years that has never moved," she adds.

As inventory levels have grown, so have the facilities. The storage facilities have grown to where they now cover 415,000 square feet, larger than seven football fields. And, doing its part to help the environment, Replacements recycles almost 300 tons of cardboard and almost 30 tons of paper each year.

One challenge related to expansion, according to Embrey, is that the company always thinks it has enough space, but it never does. "We may lease space at another site and think it will be all we need for several years," she says. "However, eight months later, it will be full." The company had planned to do a large expansion a couple of years ago. However, it held off because the economy turned. "We're glad that we didn't make that expansion," she notes.

While the company continues to plan growth, it is taking a strategic approach. "With 13.5 million pieces, we don't plan to go up to 20 million," states Embrey. "On the other hand, we don't plan to drop to seven million either."

Selling and Shipping

On the outbound side, Replacements has almost 10 million customers in 171 countries and territories. The company has received kudos for its Web site. "We have a separate staff that manages that, and our goal is to keep it as simple and easy to navigate as possible," she reports. "We want it user-friendly for people who are Internet-savvy as well as people who rarely use the Internet. Our team has done an excellent job of maintaining the site."

The company offers a "Find This for Me" service that lets customers register pieces and patterns that they need, and buyers will seek the items out. When new items come in, they are logged onto the computer. Specially developed software matches the incoming pieces with customer requests. Combination customer notification/order forms are printed and mailed or e-mailed to customers for the pieces that are available in the patterns they want. The company sends out over 3.5 million of these notifications each month.

While most business is done over the Internet or by phone, walk-in sales also occur. In fact, the Replacements facilities are considered one of the top destination attractions for the Piedmont-Triad area of North Carolina. In addition, Rand McNally selected Replacements as one of the top 25 free attractions in the U.S.

The company ships up to 70,000 pieces of china, crystal, silver and other collectibles each week. "Our main shipper is FedEx," says Embrey. "We fill two trucks a day during non-peak times, and three to five trucks a day during peak times." Peak times are November and December, and even into January. There are also small spikes around Easter, as well as in the summer.
On occasion, based on customer request, Replacements might ship via UPS or USPS. "In addition, about 40 percent of our FedEx packages are delivered by the USPS through its SmartPost program," she adds.

Perspective

According to Embrey, the company's overall key to success is the amount of inventory it maintains. "Investment in 13.5 million pieces of inventory is a big investment to make," she admits. "However, it provides us with a competitive advantage." The company also likes to be friends with its competitors. "We will send customers to them if there is something we don't have," she notes. "Conversely, they will send customers to us when they don't have what they need."

About the Author: William Atkinson is a freelance writer based in Carterville, Ill.

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