Executive Vice President, Supply Chain Merchandise Planning and Allocation (retired)
DSW gets the right fit with SAS® Size Optimization
Shoe retailer DSW Inc. knows exactly how you feel when you find the perfect pair of shoes – just not in your size. That's why the second-largest shoe retailer in the country chose SAS® Size Optimization, including SAS® Size Profiling and SAS® Pack Optimization, to stock the right shoes in the right location at the right time.
DSW is seeing early indications that customized shipments can reduce lost sales from stock-outs, increase customer satisfaction, and reduce the percent of stock marked down.
DSW has 363 stores in 41 states and runs an additional 344 shoe departments for other retailers. The company is growing fast – with 37 new locations in a single year in addition to online and mobile shopping platforms.
While shoes are an age-old product, the way they are marketed has changed a lot, notes Harris Mustafa, DSW's Executive Vice President of Supply Chain Merchandise Planning and Allocation (retired). "Customers want to transact at their convenience, not yours.''
Seasonal sales and overseas suppliers create additional challenges.
Finding a better way to stock stores
For years, DSW stocked its stores based on a national average size profile, even if the tastes and shoe sizes of customers varied from store to store. That meant lost sales when boots sold out too quickly at one store – and lost profits when those same boots had to be marked down at another store.
Our out-of-stocks are fewer, our markdowns are fewer and our margins are higher – which, at the end of the day, is what every retailer wants.
"It wasn't the most efficient way to run your inventory management,'' says Mustafa.
Meanwhile, DSW was learning a lot about the 20 million customers who are part of its loyalty program and account for 85 percent of the chain's revenues. It was already doing targeted marketing – why not targeted inventory management?
In looking for a solution, DSW considered developing its own system and looked at a solution designed by a firm whose software was being used by DSW for other projects.
DSW ultimately chose SAS because of its "long, great history of statistics-driven solutions," Mustafa says. "Ease of use was also important.''
A key factor for DSW was the SAS solution's "true demand" calculations. Relying solely on historical sales data can be misleading because it misses the demand for items that weren't in stock.
True demand estimates size, store and weekly sales data for situations when there is not enough useful data because of those significant early season stock-outs.
DSW hosted a trial of SAS and one other finalist, giving both solutions sales data to create size profiles and recommend pack configurations for the next product/inventory buying cycle. The recommendations were compared against what actually sold in the next sales cycle. The SAS results were much more accurate.
Moving the solution into production
Mustafa has been involved in deploying eight major solutions in the last six years. "I would say the SAS implementation is in the top one or two for the least number of problems. The SAS team was very responsive. It has, frankly, exceeded our expectations."
In addition, DSW has had great success convincing suppliers to work with the new solution. In some cases, suppliers managed the size packs, so Mustafa wasn't certain how they would respond to requests for a more customized approach.
"These are big companies that are fairly set in how they distribute their product," Mustafa says.
But they're on board – 90 percent of DSW's partner shoe companies are using the customized pack recommendations.
The result? "Our out-of-stocks are fewer, our markdowns are fewer and our margins are higher – which, at the end of the day, is what every retailer wants," Mustafa says. "We were looking for a robust solution that was simple to use, and that’s what we are seeing."