About Kmart's CMI Program
CMI Requirements
CMI EDI FLow
The CMI Partner
CMI Vendor Survey
About Kmart's CMI Program
Kmart's Strategy
Extend Kmart’s leadership position in the industry in the area
of Vendor Managed Inventory Programs. Focus on
Kmart/Vendor alliances to identify and further expand
opportunities for our mutual advantage with the overall
objective of reducing cycle time, lowering logistics cost and
maximizing return on investment.
In pursuit of becoming the discount store of choice, Kmart has implemented
several strategic and operational initiatives impacting the fundamental way we
do business. Improved assortment and better in-stock positions as well as
sparkling and orderly stores are the expected result. While this proactive
approach is essential to satisfying customer requirements we recognize it is not
enough. We believe additional opportunities exist within the Kmart/Supplier
framework.
To achieve a competitive advantage we must relentlessly integrate management
of all activities related to the supply chain. It is essential that we provide the
right items at Kmart stores in time to meet customer requirements. We view an
enhanced Vendor Managed Inventory (CMI) process as a key ingredient in this
effort. With that view in mind, we propose a joint effort to identify a common set
of goals to support the areas in which we both have a vested interest built upon
a foundation of mutual trust and willingness to share information. This approach
may include significant changes for both the vendor and our own processing.
However, we believe the effort is well worth the potential gains which include:
- Increased sales and profits
- Reduced inventory levels
- Improved inventory flow
- New product opportunities
- Decreased stockouts
The Benefit of CMI
CMI is a program that merges the
strengths and resources of Kmart and it's Vendor partners. This
resource usage is designed to add profitability to both companies
through improved efficiencies.
A few of the CMI benefits are:
- Vendors can tie Kmart
turn and promotional forecasts into their production schedule
for better usage of their own equipment and financial resources.
This also enables them to spot future product problems and reserve
merchandise for future Kmart needs. This improves service level.
- Through improved forecasting,
suppliers are able to cut inventory levels at their
facilities while also reducing the inventory at the retailer.
This increases their own profitability while improving the GMROI
for the retailer.
- Vendors handling CMI
for multiple chains are able to forecast needs for
raw materials. This is primarily due to the Vendors doing their
own forecasting and extrapolating it for a large block of retailers.
This also provides for a higher service level.
- When Kmart places
an order, Kmart depends on the product being available to optimize
the truckload. The merchandise is not always available
at a single shipping point meaning the vendor must partially ship
or request a new purchase order. With CMI, vendors are able to
place purchase orders that optimize Kmart's freight charges based
on product availability and their own handling charges.
- Staffing at the vendor
location is higher for all CMI partners. In addition to being
extra eyes watching Kmart's business, these individuals are tied
into the vast product knowledge of the specific
vendor. This allows the individual to be aware of developing
trends in the product and also allows for the daily monitoring
of merchandise needs. This allows the vendors to maintain or
exceed service level objectives while keeping inventory below
that of Kmart managed codes with the same velocity.
- Vendors are able to
micro-market based on data fed through EDI and the
Partners Information Network. They can then target their
advertising dollars where the will have the biggest return.
- Administrative
expenses are reduced
as fewer, but larger, orders are typically processed. Benefits
include fewer invoices to process but extend to tremendous advantages
at the supplier's distribution or packing center as more layers,
pallets and truckloads are normal.
- By reviewing daily
inventory levels, a CMI vendor can monitor existing inventories
before launching a new or replacement product.
- For multi-category
vendors, CMI provides the ability to combine a balanced
time supply of products on each shipment. This capability
can lead to significant reductions in transportation costs.
CMI Requirements
Criteria were established after
a careful review of Kmart's earliest CMI vendors. By reviewing
what made the successful excel and what hindered the least successful,
we were able to compile the nine key elements for success.
1. A corporate officer must sponsor
this program for the vendor.
- Committed to the implementation.
- Committed to the ongoing success of the program.
2. The vendor's management team
must support maximizing turnover at DC and store
level. Turn and Service Level objectives will be set for each
vendor.
- Eliminate shipping constraints, etc.
- Optimize packing.
- Objectives based on INFOREM strategies.
3. Vendor must have Partner
Information Network (PIN) readily available for the Merchandise
Analyst.
- CMI Performance reports are on PIN.
- Micro marketing at store level is essential.
- Key data is and reports are available on PIN.
4. Must have E-Mail and EDI capabilities for all Kmart EDI programs.
- Critical for the flow of orders and data.
5. The Vendor must have a reliable replenishment system.
Objectives can only be obtained by
intelligently predicting what is most likely to happen in the
future.
- DS Stores from Demand Management, Mike Campbell, 150 N. Meramec,
Suite 400, Clayton, MO 63105, (314) 727-4448.
- INFOREM III and INFOREM 400 from IBM,
Marshall Evans, 3200 Windy Hill Road, Location WG14B, Atlanta, Georgia, 30339, (770) 835-8254.
- Continus Replenishment Service
from IBM, Continuous
Replenishment Service from IBM, Allen Pancoast, 580 Walnut Street,
Cincinnati, Ohio, 45202, (513) 762-2801; or for information on the IBM
CRP Service link to the IBM CRP web site at http://www.disu.ibm.com/discrp.htm.
NOTE: These software companies have working relationships
with Kmart. They are committed to enabling their users to meet
Kmart's CMI objectives today and have the resources to meet new
objectives as the ever-increasing world of replenishment technology
progresses.
6. A sufficiently trained Merchandise Analyst must be assigned solely to the program.
- Two day training class at KIH.
- Semiannual training meetings (two days in duration).
7. There must be a trained back-up person for the Merchandise Analyst.
- Ready to fill in during the absence of the Merchandise Analyst.
8. The Replenishment Team must report independent of any sales organization.
- Conflict in direction is assured if reporting lines are not separate.
- The Merchandise Analyst should coordinate with
sales, marketing, logistics, distribution, customer service, plant
facilities, Kmart merchandising and Kmart Logistics areas. This
requires strong coordination of internal Vendor objectives and
Kmart.
9. The Kmart Merchandising Team must fully support participation by
the vendor in CMI including supporting the objectives and the
elimination of any obstacles impeding merchandise flow.
- Kmart Merchandising
Team must be willing to completely turn over responsibility to
the vendor for authorized SKUs.
- Buyer direction should
not be given unless the vendor is above inventory goal
or under service level goal.
CMI EDI Flow
EDI is an intricate part of the
CMI process. This section is designed to outline the flow of
EDI transaction sets.
Transaction Sets for Hardlines DC
| Set |
Frequency |
Direction |
Utilization |
| 830 |
Weekly |
To Vendor |
Used to compare the Kmart forecast to the vendor's forecast |
852 |
Monday-Friday |
To Vendor |
Provides high level activity data and purchase order numbers |
855 |
As required |
To Kmart |
Actual Purchase Order, must be received by 22:00 Eastern. |
856 |
As required |
To Kmart |
Notice of what's being shipped to Kmart |
Hardlines Promotional Ordering Note
Promotional quantities are fed to the CMI partner via the daily 852 approximately 12
weeks prior to the ad. Rain check and special store request quantities are also
transmitted. The date merchandise will be shipped to stores is also transmitted in the
852.
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It is the vendor’s responsibility to isolate and evaluate these quantities and ship
required quantities to the DC to arrive on the date the merchandise will be shipped to
the stores. The vendor must be able to transmit the promotional order along with the
event number and special PO Type indicator.
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Transaction Sets for Softlines DC Cross Docked:
| Set |
Frequency |
Direction |
Utilization |
| 830 |
Weekly |
To Vendor |
Used to compare the Kmart forecast to the vendor's forecast |
852 |
Sunday-Friday |
To Vendor |
Provides sale, return and inventory |
855 |
By 22:00 Friday |
To Kmart |
Suggested order quantity |
850 |
Sunday |
To Vendor |
Purchase order |
810 |
As required |
To Kmart |
Invoice |
Transaction Sets for Softlines Direct Store Shipping:
| Set |
Frequency |
Direction |
Utilization |
| 830 |
Weekly |
To Vendor |
Used to compare the Kmart forecast to the vendor's forecast |
852 |
Sunday-Friday |
To Vendor |
Provides sale, return and inventory |
855 |
Daily |
To Kmart |
Suggested order quantity |
857 |
Daily |
To Kmart |
Purchase order/Invoice |
The CMI Partner
Ingredients for success
In reviewing the most reliable CMI
partners ten traits were identified as consistent with success.
- Capable and Qualified
Merchandise Analyst(s) dedicated 100% to Kmart, monitoring
Kmart items daily, reacting when necessary to insure service level
without over stocks.
- Ongoing training of the Merchandise Analyst
through participation in Kmart's initial
two day training, all semiannual group meetings and software training sessions
and meetings.
- Use an approved replenishment package.
- Uses an accurate lead time when calculating orders to allow for the time to
process, ship and receive the merchandise.
- Consistent and effective
communications between the vendor's Merchandise Analyst
and the Kmart Buyer, Logistics Analyst and Vendor Development.
- Use Kmart velocity strategies in their replenishment system.
- Commitment to sacrifice an order in view of maintaining flow.
- Tailoring down ad orders when too high.
- Not following poor direction (i.e., will ship a two week's supply of every item to build inventory).
- Works with Kmart Logistics Analyst to insure proper identification
new code profiles, DD's and links are correct. Also
using the profile and DD from the discontinued item for the new
item.
- Reliable production facilities and consistent production schedules.
- Normal production flow is sufficient to
cover a minimum of two weeks of their Kmart forecast, available for immediate shipment.
Vendor Survey
This section continues the Vendor Survey, which is your next step in forming a CMI partnership with
Kmart. Please complete the vendor survey and send it along with
the CMI contract (see next section) to Rick Weaver,
Kmart International Headquarters Office C235, 3100 West Big Beaver,
Troy, Michigan 48084.
Upon receipt Kmart's Vendor Development
Department will formalize a game plan for a CMI partnership.
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The Comanaged Inventory Program information and Survey are available in Adobe Acrobat
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To download CLICK HERE 47k.
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The survey can also be filled out online below.
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