Believe It or Not
With a roster of more than 50 stores and a thriving online business, Ripley has been a fixture in the Chilean retail industry for more than 50 years, and one of the key players in the hotly contested department store segment in Chile and Peru.
Now, thanks to its 660,000-sq.-ft. automated distribution center near its headquarters in the capital city of Santiago, the chain has entered an era of growth and profitability. The DC and new warehouse management system have sharply improved supply chain efficiency, warehouse capacity and productivity while significantly cutting operational costs.
Back on track
Ripley has begun to bounce back from the severe recession that had a stranglehold on Latin America throughout 2008 and 2009, during which Chile suffered a severe drop in exports.
With the economic clouds lifting, consumer expenditures are increasing and growth picked up in the second half of 2009. The earthquake that hit Chile in February 2010 caused some temporary disruption in economic activity, but public and private sector support helped with reconstruction and got the country back on the right economic path, according to Euromonitor International.
The downturn did leave retailers and consumers somewhat more cautious, but growth is forecast as consumer purchasing gains momentum. Among the leading categories are Internet retailing, clothing, footwear, housewares and home furnishings — all segments in which Ripley is engaged. The company, which serves some four million customers and racks up sales of about $2 billion annually, is the third-largest department store chain in Chile with a 22.6 percent share. In Peru — a far different socioeconomic marketplace — Ripley has a 46 percent share.
Ripley’s thriving online business made increasing warehouse efficiency that much more urgent, says CIO Gustavo Pardo. In-store and online business resulted in a net profit of $103.5 million in 2010, a tenfold year-over-year increase.
Revamping warehouse operations
Even before the recession, Ripley management knew that increased competition in both Chile and Peru meant revamping warehouse operations.
“Our competitors were providing one- to three-hour delivery windows which put us in a very tight spot,” says Francisco Irarrazaval, the chain’s retail operations manager. “This level of service was nearly impossible to provide in our existing facility.”
Additionally, Ripley did not have a warehouse management system and had to retain a large staff to run the three separate warehouses — former factories that were not designed for distribution.
“We wanted to consolidate and automate the whole operation,” Pardo says. “We saw how much more efficient it would be if we could reduce expenses and increase capacity.”
The heart of the Redex DC, and one of the principal reasons for its success, is the warehouse management system developed by Manhattan Associates. Advanced communication software from LogFire links the facilities’ warehouse management system, conveyors and sorters.
Redex also included the most advanced technology in South America, enabling the facility to increase inventory turnover and improve customer service — even though the consolidation resulted in less net space. (Ripley is considering an addition to Redex in 2012 to meet growing sales.)
"Today we work with about 40 percent fewer people than in the past,” Pardo says. “We’re moving more SKUs to market [70,000 daily] in far less time than in the past.”
Manhattan’s warehouse management solution was chosen for its ability to run different operations simultaneously. For example, the Manhattan system integrated with Ripley’s materials handling equipment and other systems to manage receiving, store delivery and the company’s burgeoning home delivery business.
Easy, incremental upgrades
The chain opted for a phased approach to implementation. All warehouse employees were required to complete two weeks of training on the new system, after which they took an exam. The project also included four months of extensive quality assurance testing to ensure that all processes were running smoothly.
LogFire participated in every step of the implementation process and was an integral part of modification design and testing, training end-users, operations improvement and post-implementation support, Pardo says. The company also provided its state-of-the-art Productivity Tracking System, giving managers greater visibility into the number of hours employees were spending in different functional areas.
The result was a vast improvement in productivity levels – from 62 percent to 98 percent — and a 99 percent order accuracy rate. Overall, the chain has achieved cost savings of 40 percent, including a reduction in expenses from 33 percent to 3 percent, according to Pardo. A second automated warehouse in Lima, Peru, also uses the LogFire solution.
Meanwhile, the company has expanded the WMS to several regional distribution facilities in Chile. Each of these handles less volume, but will be more efficient in terms of reducing costs associated with expensive hardware, implementation maintenance and upgrades.
“The flexibility offered by LogFire’s warehouse management system on-demand model is really attractive,” Pardo says. “With this approach there’s no expensive hardware to purchase, no client/server implementation to manage and no hefty maintenance fees to pay year after year. Plus, we benefit from a constant flow of incremental upgrades and never have to divert our energies to a massive upgrade.”
LogFire’s WMS also features a scalable pricing model that enables Ripley and its vendors to benefit from the depth and breadth of a Tier 1 solution from the outset, rather than having to work with limited functionality caused by budget restraints.
“LogFire’s flexible transaction-based pricing model is a perfect fit for our business,” Pardo says. “It means that we don’t have to worry about the number of users or the number of sites, and it enables us to cost-efficiently deploy a single solution across our regional logistics network.”
Web-based applications will also improve upstream visibility by enabling the chain’s vendors to collaborate online in order to create advanced shipment notices, barcode labels and shipping documentation, he says.