Company prole and business context Missing office supplies slows down business. Torn Stemberg grew so tired of business supplies delays that in 1985 he left his career as a supermarket chain executive and turned entrepreneur. Stemberg struck upon the idea when his typewriter ribbon broke on Independence Day weekend as he was preparing a business plan and he was unable to nd a store that stocked the ribbon. From his vantage point in the supermarket business, Stemberg also noticed that ballpoint pens were selling for 52 retail despite selling for 30 cents at wholesale establishments. Opening its first store in 1986 and its first Canadian store in 1991, Staples led the ofce superstore market explosion throughout the 19805 and 19905. Staples' approximately 50,000 employees have served individual customers and businesses ranging from home- based entities to Fortune500 companies in 27 countries. The company operates more than 2,000 office superstores and also serves its customers through mail order catalog, e-commerce, and contract businesses. Its strategy of making it easy for customers to buy the products they need has fueled Staples' highly successful expansion around the globe. But for this high-performance business, market leadership was not guaranteed. Past supply chain capabilities As competition intensied in the retail office supplies market, Staples looked for ways to sustain is leadership position. Through its Staples Advantage program, the company publishes white papers and blog entries on topics like supplier performance analysis and supplier consolidation negotiations. Much of this knowledge publication and sharing was achieved by third-party market trend analysis. For example, in discussing supplier consolidation programs, the company cited research by The Hackett Group that world- class companies relied on 55% fewer vendors than less successful companies; and ndings by AMR Research that organizations spend as much as $585 to $760 annually per supplier. Retail Systems Research reported that multi-channel supply chain visibility and network optimization would be key supply chain management challenges going forward. Staples hoped these trends would favor them, but competition was putting pressure on both the top and bottom lines. For instance corporate customers recognized that supplier consolidation meant additional bargaining leverage - in terms of additional volume discount opportunities and more strategic-level attention and relationship management. Retail consumers were also electing to shop at competitor establishments, and increasingly looking to the Internet for their shopping experiences. Seeing these trends, Staples recognized that improvements in service levels and profitability in general required improvements in their supply chain management in particular. Delivering on their \"Yeah, we've got that" promise protably was becoming more challenging. Staples CEO Ron Sargent acknowledged, "We were far from world-class in managing the supply chain so we did something about it..." Yeah, we got that In 2002, Staples kicked off a supply chain transformation effort and brought in an international STAPLES consulting organization to spearhead the analysis. Processes across the value chain would be redesigned - from circular advertising, to in-store promotion, to store space management, to replenishment merchandise flow, and to in-stcre inventory management. The goals of this transformation effort were to increase supply chain visibility, improve supply chain reliability and costs, and improve effectiveness across the value chain. In terms of visibility, analysis showed that a disconnect existed between the inventory that Staples' systems showed as cut-of-stock and what was actually available in stores. Through extensive internal research, the company learned that what it thought was a 98% in-stock level was, in fact, only 94.5%. A big opportunity for Staples was in ensuring that inventory was not just in the store but that it was on the shelf and available for sale. In addition to IT changes, Staples redesigned processes - including a new end-to-end inventory management process that addressed virtually every stage of in-store inventory management. Information systems were revamped and processes improved to enable the scheduling of precise times when inventory would be unloaded from trucks and the times when store shelves would be restocked. Sta ples' senior executives and their direct reports were directly involved in the change effort to ensure the program remained a priority across the company. Eight months into the program, Staples sponsored a "Summit Fair" to showcase the innovations and results that already had been achieved. The Fair was part of an overarching Summit program, which had the goal of ma king the supply chain a competitive asset. To do so Staples wanted to achieve three outcomes: 1. Decision-making: move from intuition-based decision processes to data-based ones by building better fact bases and establishing processes to use those facts; 2. Process-orientation: Stop acting in isolation, and design processes that not only create synergies across business units, but also don't assume everyone else will screw up; and 3. Change-management: Understand the concept of the flmheel build momentum for continual improvement, because change is difficult. The Summit Fair event, which included a dozen ideas and capabilities championed by respected internal personnel, involved 500 members of the Staples management team and helped generate widespread enthusiasm for the overall Summit change program. The results were promising. After two years Staples achieved a 15 percent reduction in inventory - eliminating over US$200 million in working capital. The remaining inventory was made more productive and supply chain programs contributed over US$100 million in incremental sales. The resulting effect was that inventory turn improved from 4.5 to 5.6 times. Customer-oriented improvement was also dramatic. Customer in-stock levels rose from 94.5% to 97.5%. Customers were finding products when and where they wanted ("yeah, we really do got that now"), and Staples had a high-performing supply chain that was positioned for growth. That was easy I I Staples continued its investment in driving supply chain performance. Avariety of interacting technologies would need to work together in harmony to provide insight about product movements - products from high-end office furniture all the way to, well, staples. One major, yet experimental, technology was implemented in 2007. Staples implemented an inventory management system called intelliTRACKER that was centered on reusable, active RFID tags. The tags were initially used to track higher-end individual items like laptops and printers. Jeff Williams, vice- president, Information Systems described the level of tracking detail, "The goods are tagged not only at a SKU level but also at an individual item level so it's not only an HP computer, it's this particular HP computer, and we can associate the serial number of the computer with that tag." To reduce the risk typically associated with a major change program, Staples piloted the implementation in its Staples Business Depot stores in Canada prior to global rollout. In addition, based upon IT vendor partnership relationships Staples secured forthe program, the demand the new inventory management system put on internal IT resources was modest. The first year achievements for the program were highly encouraging to Staples leadership: 0 Increased gross margin and comparative sales for the tagged inventory categories Page 2 of 4 Eliminated shrinkage on tagged inventory 21 percent reduction in out-of-stock merchandise 100 percent read rate with no system issues after a full year (deemed I'trial without error") Low cost per use of approximately eight cents (5-year tag lifespan) The increase in sales and gross margin had been a pleasant surprise for Staples executives. Williams believed that those increases were due to the fact that the system made inventory search and location easier for in-store sales associates. In the past, if a customer was looking for the last laptop of a certain type in the store and the associate didn't know that the laptop had been moved to a different in-store location then the sale would have been lost. With intelliTRACKER, the item could quickly be located and the sale saved. Williams predicted that an improved inventory management system may have other merchandising net benets, especially with reductions in RFID tag prices. "If you add an accelerometer to these chips then the system could tell you when customers are picking things up and putting them down. Did somebody pick up these two cell phones and compare them? And which one are they walking out with?\" Having that level of visibility could provide insights regarding customers' product feature and packaging preferences. Make more happen Fast forward, and Staples is reaping the rewards of their past supply chain transformation efforts. For instance, they received the 2013 Supply Chain Innovation Award (presented by the Council of Supply Chain Management Professionals). Continuing improvements in SCM would be required given Staples' competitive environment. Increased multi-channel purchasing meant that Staples faced new challenges to their in-store sales revenue stream. Traditional channel-specific operations worked when consumers investigated, selected, paid for, and took possession of their purchases in one physical place (the store). Replicating in-store operations (i.e., aligning the supply chain to a single channel's needs) to the online shopping experience would not be sustainable. For Staples to successfully address the multi- channel challenge, they must be able to have visibility into the customer's preferences and behaviors across the entire retail experience - what consumers are looking for vs. what they buy, and their path to purdrase. Staples would need to understand and then anticipate consumer expectations for a seamless, "channel-less\" experience in order to move from supply chain management that "saves the sale" to supply chain management that "drives the sale. " This is also often referred to as an \"omni-channel" approach to sales. As a large clicks-and-mortar retailer, Staples would need to overcome internal concerns from their stores in three areas: expensive modernizing for existing front-end systems and processes; suspicions of increasing investments in e-commeroe cannibalizing more traditional in-store sales; and the difficulty in measuring enterprise-wide benets for improving customer experience when no single group owned the whole customer experience. In the midst of these concerns, Staples announced plans to expand its online offerings beyond office supplies, funding the expansion by cutting $250 million in costs by the end of 2015. The savings would come in part from the closing 30 U.S. stores, the reduction in size of 30 other U.S. stores, and the closing of 45 stores in Europe. Additional information systems capabilities would be required to support SCM efforts going forward. A multi-channel order fulfillment {\"buy anywhere, get anywhere\") operating model could not suffer from redundant, bloated inventory levels and be sustainable. Staples needed wider availability of real-time, cost-efficient enterprise-wide inventory visibility in a consistent and reliable fashion. Improvements were needed in inventory management, in-store point-of-sale (POS) systems, as well as Staples.com, and buy-in from brick-and-mortar leaders would be critical to ongoing success. Sources 1. Corporate Website, Staples.com 2. Editorial Staff, "Staples Revs Supply Chain with Unifying Metrics," SCDigest, October 28, 2005 3. "Fujitsu Installation of AbsoluteSKY RFID System Is Successful at STAPLES Business Depot," Corporate Press Release, Fujitsu, October 17, 2007. http://www.fujitsu.com/usews/pr/ftxs 20071017.html 4. Carey, David, " Staples Business Depot's new RFID system hasn't made a single mistake..so far, " IT Business, December 2nd, 2008. 5. "Staples Transforms Supply Chain Process to Maintain High Performance," Mojica, Michael and Hajjar, Fred. Accenture , 2009. 6. "IBM and Staples customer success story, " IBM case studies, http://www- 01.ibm.com/software/info/television/html/N627483A64458G86.html, accessed Feb 1, 2014. 7. Baird, Nikki and Kilcourse, Brian, "Omni-Channel Fulfillment and the Future of Retail Supply Chain Benchmark Report," March 2011. 8. Zimmerman, Ann, and Banjo, Shelly, "New Web Victim: Office-Supply Store Staples Will Reduce Retail Space to Focus Online, " Wall Street Journal, September 25, 2012 9. "Staples and Packsize Win 2013 Supply Chain Innovation Award," Corporate Press Release, Packsize International, November 7, 2013. Case Questions 1. Describe the process (from Staple's perspective) of purchasing and obtaining office supplies through Staple's online / e-commerce channel using a process flow diagram. Your process diagram should address L.O.L.A. considerations and have at least five steps. Do not submit an image of a hand-drawn flow. You are free to use whatever flowcharting application/tool you wish (MS Visio, LucidChart, MS Word by inserting shapes, etc). [Hint: You might find it easier to build the process flow diagram in another application, then copy/paste it into a table in a MS Word document or pdf (otherwise the images can take on a life of their own and move around on you without warning). ] 2. Describe the likely SCM IT architecture supporting intelliTRACKER implementation. Separate your answer into the following categories: IT hardware, application software, data bases, and networking components. 3. Describe three SCM planning and execution information problems Staples faces going forward with the move to multi-channel and then ultimately omni-channel integration. Address all three levels of information processing and at least three channels in your answer. 4. Describe your recommendations for an upgraded IT architecture to enable and support SCM at Staples going forward. Separate your answer into the following categories: IT hardware, application software, data bases, and networking components. Describe the expected benefits for your recommendations (i.e., give business justification for information systems investment)