For Kayo, Everything Counts in Wal-Mart’s Successful Stocking

0

Leon Kurzweil is in a Wal-Mart store every week, and it’s not because he can’t get enough detergent and paper towels.


As the regional vice president of Los Angeles-based clothier Kayo of California Inc., he’s studying how the company’s denim leggings, stretch pants and capris are selling.


Lately, they’re doing pretty well. In fact, Kurzweil estimated that Kayo has been able to push up sales in Wal-Marts by 10 percent all while maintaining 20 percent less inventory in the 3,200 stores it supplies.


Kayo’s trick is disciplined analysis of the sales data provided by Wal-Mart. In fact, the company’s gotten so skilled at inventory management that it not only meets, but anticipates consumer demand.


If size 8 stretch capris are being snatched up, Kayo will determine how many are expected to be sold and supply that amount to satisfy Wal-Mart shoppers. And if they are not, the company will realize that a different product is what’s desired.


“The big thing now is to do more business on less inventory,” Kurzweil said. “What you do by putting the right inventory in the right stores is you end up doing more with less, this way you are not overstocked on the bad-selling sizes.”


Kayo’s inventory skills haven’t gone unnoticed, even at a place like Wal-Mart, whose inventory prowess is well known. Along with its behemoth, all-purpose stores, the company supply chain advancements are what propelled the retailer to the top of its industry. But Kayo has especially stood out, garnering supplier of the year awards five times in ten years.


“It is a significant award that is recognizing them as the best of the best in their category,” said Karen Burk, a spokeswoman for Wal-Mart Stores Inc. “We are talking about meeting the needs of our customers. That is going to cover a variety of different things, including keeping products on our shelves when customers want them.”



Satisfying customers


Wal-Mart’s attention to inventory is based on a basic premise: efficient inventory management drives revenues by ensuring that no sales are missed because a customer can’t find a product. Speedy product delivery takes on even more importance as Wal-Mart tries to get trendier.


Last year, Wal-Mart introduced a fashionable apparel line called Metro7 to woo customers who might consider the retailer’s apparel dowdy. To stay on top of trends, clothes must get in and out of the store before getting stale.


Even Kayo, which typically sells White Stag and Faded Glory brand pants to the over-25 crowd, is seeing its clothes change. Last year, for example, the company tested stylish gaucho pants in 25 Wal-Mart stores before a wider release. (Its staple stretch denim jean costs $16 at Wal-Mart.)


“How do we know whether the Wal-Mart customer is going to understand a gaucho? For years, she didn’t understand boot-cut,” Kurzweil said. Today, he added, “she doesn’t want to look like yesterday’s stuff.”


Kayo gets the nod to experiment with fashions because it has set itself apart from its peers, also proficient at filling Wal-Mart stores. Two Arkansas-based Kayo employees, one who used to work at Wal-Mart, focus on crunching the numbers to best predict the need for Kayo’s items.


“We have a human being that sits and analyzes what is in the store and what their sales are and what their sales will be and what the potential outs are,” Kurzweil said. “Everybody else waits for the orders to get generated, and they just ship them.”


In its number crunching, Kayo investigates Wal-Mart sales on a store-by-store basis. That gives the company a better handle on what to sell: stores in Midwest locations with heavier people must be supplied with larger sizes.


Out of all the Wal-Marts Kayo supplies to, it concentrates on 400 to 600 stores that are especially high volume. At those stores, Kurzweil said, “Even the Wal-Mart replenishment system can’t generate enough merchandise to generate stock fast enough to stay on the shelves.”


Kayo is considered a replenishment specialist. Kurzweil estimated that only 30 out of hundreds of apparel suppliers to Wal-Mart perform a similar function. These specialists, using Wal-Mart sales data, replenish orders directly, rather than having them filled by Wal-Mart warehouses.



Attention to detail


After submitting proposed orders to Wal-Mart, Kayo receives official, specific orders four days a week from the retailer. The company is required to fill reorders in five days, and makes its clothes domestically, as well as in Mexico and Asia, to keep them constantly in stock.


With replenishment, “you will always find your color, your length, your size in stock. In other stores, if you don’t get in there, you may not see it again,” Kurzweil said.


When Kurzweil started working at Kayo in the early 1990s, the system was far less sophisticated. Orders were handwritten and keyed into computers. Replenishment was handled exclusively in the warehouses, not by suppliers.


Now, Kayo receives data quickly from sales that occurred the day before. Eventually, Kurzweil believes that Wal-Mart will speed up the process so the company will get information almost immediately after a sale is rung up.


Sales to Wal-Mart make up 50 percent of Kayo’s business. The other half is to stores owned by Sears Holdings Corp., J.C. Penney Co. Inc., Kohl’s Corp. and Nordstrom Inc. as well as to the shopping network QVC Inc., owned by Liberty Media Corp.


Before Wal-Mart was its major account, Kayo created a niche for itself handling catalog business for Penney and Sears. To do catalog sales, Kayo had to be ready to fill orders months before apparel suppliers who worked only with brick-and-mortar stores.


“It is a real specialized thing, the catalog,” said Jonathan Kaye, whose father Stanley founded Kayo in 1968 with partner Jack Ostrovsky. “That was what gave us the jump on all these disciplines and systems.”


With its inventory skills finely tuned, Kayo has found a winner in Wal-Mart. As long as it is hitched to the large retailer, its sales grow accordingly. Over the last 10 years that it has done the replenishment work, Kayo’s business has increased 300 percent, according to Kaye.


And it doesn’t look like Kayo’s business should be slowing down in the near future. Last week, Wal-Mart said it plans to open more than 1,500 stores in the next several years.

No posts to display