Co-Op Wants To Be Tops At Inventory ManagementCo-Op Wants To Be Tops At Inventory Management

Do it Best Corp., a hardware store cooperative with 4,100 locations nationwide, is about to replace a proprietary inventory-management system designed two decades ago by an employee as a case study for his master's degree in business administration. The retailer says new software from E3 Corp. will help it make the leap to conducting collaborative planning and forecasting with its suppliers within a year.

The goal is to help the company save $30 million on inventory and improve annual turns, the ratio of sales to merchandise in stock. Instead of keeping $25 million in inventory for every $100 million in products sold, for example, the Fort Wayne, Ind., company envisions increasing sales to $150 million without increasing the amount of inventory, a 6 to 1 ratio, says Ed Zoller, VP of hardware products.

Do it Best had considered developing another proprietary system that would have cost about $2 million and taken 18 months to create and deploy. But Zoller decided the company couldn't build a homegrown system with the necessary collaborative planning and forecasting sophistication, features that competing chains Ace Hardware and True Value already are taking advantage of via E3's technology.

The retail industry is putting an intense focus on inventory management, both distribution and replenishment, says Janet Suleski, retail applications senior analyst at AMR Research. "That's all value that drops to the bottom line."

Do it Best, which had $2.2 billion in sales in its last fiscal year, consists of independent, member-owned stores that sell hardware, lumber, and building materials. The company, its stores, and its suppliers communicate via electronic data interchange. Suppliers get forecasts and can monitor stock levels--all 70,000 stockkeeping units--in Do it Best's seven distribution centers, but E3's True Replenishment for Inventory Management also lets vendors immediately address problems and dynamically replace stock. And if an item is suddenly in demand--think duct tape during hurricane season in South Florida--the system will know on a daily basis to arrange more inventory.

"We won't have to rely on the perspicacity of sales reps to call us; we'll have an automatic exchange," Zoller says. All in all, he says, "It will be like going from silent movies to Technicolor overnight."

Do it Best wouldn't disclose the price of the new system.