Case Study 99 Cents Only Stores Corporate

Avis Walton is used to being told where to go and what to do once he gets there. As a "picker" for 99 Cents Only Stores, Walton spends his 5 a.m.-to-3:30 p.m. shift cruising around a 750,000-square-foot distribution center in Katy, Texas, in an electric cart responding to a stream of spoken instructions. "Go to row 12, section 8, bin 31," an authoritative woman's voice in his ear commands, and Walton zips to row 12. Blip-blip. He scans the bin tag with a wireless handheld computer to confirm he's arrived at the right place. "Pick two cases plus four items," the voice continues. Beginning to break a sweat, 24-year-old Walton lifts two cases of vinyl tablecloths onto a pallet, rips open a third box and removes four more tablecloths. "Confirm pick," he says into his microphone, thus prompting the voice to send him zipping off on another assignment. Doesn't her bossiness get annoying? "Nah, she's cool," Walton says. "She tells me what to do and I tell her when I do it."

Perhaps if this voice were that of a human, Walton might take offense. But the "she" that he and his 15 fellow pickers interact with throughout their shifts is actually the computer-generated voice of the distribution center's warehouse-management software. Like a digital flight controller, the as-yet-unnamed voice sends squads of pickers scurrying to gather the items needed by individual stores, all the while quietly calculating the most efficient routes that will also prevent them crashing into one another. At the same time, the voice tells the pickers which bins need replenishment and where they can find the stock to do so. Roaring away overhead is a mechanized conveyor system worthy of any airport's luggage- handling operation. Pickers run along four levels of a massive series of racks, each shoving cases of product into the conveyor system; laser scanners read box tags to verify that each case is following the correct path to the waiting pallets below.
It's not exactly what you'd expect to find behind the scenes at a retailer so frugal that it sells everything for the same rock-bottom price of 99 cents. Expensive computer gear and cutting-edge automation would seem anathema to a company totally driven by the bottom line. Yet the combination of up-to-date technology and a keen eye on expenses has been part of the secret to success for 99 Cents Only Stores. And the company has been mighty successful. Since going public in May 1996 at a split-adjusted $3.12, the company's shares climbed as high as $36.22 this past July, then fell below $25 in mid-December before recouping to a recent $27. The company consistently outranks its peers in the dollar-store retail niche in such measures as sales per square-foot and net profit margins. In 2002, net profit margins were 8.3 percent, which may not sound spectacular, but consider this: In the same period, Kroger Co., the supermarket chain, had net margins of only 2.1 percent, while margins at the super-efficient Wal-Mart Stores Inc. came in at just 3.1 percent.

After reviewing the offerings of major supply chain execution solution vendors, 99 Cents Only Stores selected HighJump’s Warehouse Management System (WMS).


Challenge

In 2003, 99 Cents Only Stores purchased a 750,000-square-foot distribution center near Houston to serve its strong entrance into the Texas market. After deciding that the warehouse management system (WMS) running in its California distribution center would be unable to interface with all of the automated equipment in the new facility, 99 Cents Only Stores began the search for a new solution. Robust, standard functionality – especially in the area of receiving – and a high level of system adaptability headed the list of critical system requirements necessary to drive complex, high-volume operations. And the system had to be implemented quickly. According to Robert Adams, vice president of information systems at 99 Cents Only Stores, the ability to receive incoming goods became a focal area in the selection process. “Our business model is based on a lot of opportunistic purchases. So just as our buyers have to be flexible to quickly purchase the right items, our supply chain has to be extremely flexible to support this dynamic environment,” he said.

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