Supply Chain

J.C. Penney is long admired for its quality standards and processes and sets the bar once again in the complicated, evolving era of global supply chain management. JC Penney is the leading pioneer of supply chain efficiency. Known as the retail powerhouse, JC Penney has applied an innovative computer system that directly captures sales data for each of its products at the cash-register level. Rather than making forecasts on what corporate managers believe they will sell, forecasts are now based on real-time point-of-sale data.

"It's All Inside." The JC Penney tune was in the spotlight for a lengthy period of time as part of the retailer's Times Square "JC Penney Experience" marketing extravaganza, which highlighted its growing stable of private and exclusive brands.

"It's Around the World" rather than “It’s All Inside”, might be a more appropriate slogan for JC Penney's supply chain infrastructure--the teams of people, the quality laboratories, the transportation sources and technologies that work in tandem with internal and external resources worldwide to get JC Penney products to market. For this part of JC Penney's business, success is all about quality (supplier management), quantity (global trade management) and speed (time to market).

In 2003, JC Penney established a factory-to-store system for certain products, through which suppliers ship products to JC Penney on a weekly basis, within five to seven days of receiving orders. Through this method, the retailer has established a direct link with many of its private label merchandise suppliers, allowing it to order merchandise as needed in response to demand, instead of at regular, pre-established intervals. The suppliers produce the goods in response to incoming orders in a couple of days, instead of producing apparel far in advance and storing it in their warehouses.

One benefit is a major reduction in stock-outs. Another is a reduction in the time it takes to get an idea for a product into the store. The concept-to-consumer cycle used to take up to two years. That has been carved down to 45 days in some cases, thanks to close ties with vendors created through the direct-ship program. Moreover, direct-ship processes have helped JC Penney save roughly $30 million in average monthly inventory expenses.

This is a process JC Penney has developed with their suppliers. The company has also been expanding it as overseas suppliers have become more sophisticated. In addition, the ships are becoming faster, and technology is letting the company think in different ways than it did in the past.

JC Penney uses the Hong Kong-based manufacturer, TAL Apparel Group is an example. JC Penney outsources responsibility for sales forecasting and inventory management to TAL, which makes the decision on how many shirts to make, in what styles, colors and sizes. TAL sends the shirts earmarked for individual JC Penney stores, bypassing any requirement to store the product in the retailer's warehouses.

TAL began working with JC Penney on this initiative about a decade ago. This early partnership gave TAL a lengthy history of visibility into the retailer's demand, which allowed TAL to synchronize with JC Penney at the warehouse level in the early phases of the direct-ship program rollout. Weekly orders were communicated to TAL from JC Penney via EDI. TAL would then ship the merchandise within a week of the order receipt, cutting cycle time from four to six months down to 30 days.

TAL controls inventory management for its product in JC Penney's stores, including replenishment ordering. It establishes the forecast at store level to drive store replenishment and manufacturing, and its crossdocking system enables it to pack products to individual retail stores. When shipments arrive at the retailer's distribution facilities, they are scanned and routed straight to the appropriate dispatch truck for immediate shipment to the store.

Thanks to the demand planning system, JC Penney's store-level inventory for TAL merchandise is down by 50 percent. TAL's planning system has replaced JC Penney's ordering system. JC Penney's warehouses carry no TAL inventory and it restocks hot-selling TAL shirts within one month.

TAL has better visibility into demand at the store level from POS data and determines its inventory according to each of the individual store's requirements. Inventory levels were reduced from a six-month supply to a seven-week supply. It then packs, barcodes and consolidates shipping orders for delivery directly to the stores, eliminating warehouse inventory. This has led to savings of 15% of cost free on board (FOB).

Fashioning the Right Electronic Commerce Solutions; three GXS solutions help J.C. Penney’s business run more smoothly:
• J.C. Penney uses GXS’s EDI*EXPRESSSM Service, a network that enables companies to exchange business documents electronically with their trading partners. EDI is an integral part of J.C. Penney’s Quick Response program because it eliminates routine paperwork, which reduces administrative costs, product delivery delays and related supply chain inefficiencies. J.C. Penney now uses EDI*EXPRESS with more than 3,000 trading partners, which represents about 80 percent of J.C. Penney’s retail EDI traffic. GXS and J.C. Penney are also in an ongoing process of ramping and expanding documents to J.C. Penney’s trading partners.
GXS’s ASN Plus allows suppliers to simultaneously pack product shipments and produce barcode-shipping labels, as well as electronically generate and send ASNs and invoice EDI documents to buyers. Currently more than 70 percent of J.C. Penney’s shipment volume is processed via this system.
• J.C. Penney also uses GXS’s Global Product CatalogueSM, a centralized, electronic product catalog and data alignment service for universal product codes (UPCs), European Article Numbers (EANs) and related descriptive product information.
The Results
In-Store for Big Savings
Armed with GXS’s EDI*EXPRESS Service, ASN Plus and Global Product Catalogue,
J.C. Penney has:
• Achieved overnight delivery of purchase orders
• Dramatically reduced the number of Accounting Department associates who handle more than 40 million invoices annually
• Reduced operational and personnel staff in the mailroom while cutting printing and mailing costs significantly
• Increased supply chain efficiencies
• Accelerated payments to suppliers
• Delivered merchandise to the selling floor faster, by using EDI Advance Ship Notices
(ASNs), which has reduced receiving costs
• Facilitated the management of UPC data
• Improved EDI data integrity so that both retailer and trading partners have the capability of integrating EDI into their application.
In summary, we are proud to say that our company handles its supply chain management efficiently. After the success they have achieved, we can just recommend them to keep the good job.