RSM Resources

Integrated business solutions help overcome growing pains

New Jersey-based Home Décor Products offers consumers an array of premium-brand home products at competitive prices through 10 distinct Web sites. Featuring items such as luxury kitchen and bath fixtures, mass-market home goods, decorative hardware, and outdoor living products, the retailer averages more than 1.5 million site visits each month and had revenues of more than $100 million last year.

Founded in 2000 by a group of kitchen and bath industry veterans, the company enjoyed exponential growth as two trends, online shopping and home improvement, converged into a new market niche.

Outpacing old processes
After four years of double-digit revenue growth, Home Décor Products, like many startup companies experienced growing pains due to business process weaknesses in key areas of the company’s operations.

“We had problems interfacing the Web site with our enterprise resource planning (ERP) system, which led to frequent order-processing delays,” says Jonathan Pearl, Home Décor’s chief information officer and executive vice president. “We hadn’t yet automated our warehouse, so order processing was inefficient. And our purchasing agents often had to scramble to get out-of-stock merchandise because they couldn’t track orders in real time, which led to increased shipping costs.”

Another key concern was the company’s cash reconciliation process. With multiple Web sites in operation, money was flowing in from a variety of sources. Yet the back office lacked the ability to identify entry points for cash.

Home Décor purchased a well-known ERP software package through a reseller, but the software needed significant customization to meet the company’s needs. With only limited technical support available from the reseller, implementation stalled and problems continued.

Although there were no easy answers to these challenges, the company moved forward, making plans to relocate to a new 270,000 square-foot combined office space and warehouse.

Post-holiday blues
“We knew what the problems were,” says Pearl,“but in e-commerce, your customers are only a click away from your competition,so we had to keep focused on meeting delivery schedules and day-to-day demands.”

In the wake of the 2004 holiday shopping season, however, one systems-related weakness became impossible to defer. Product returns — routine for every retailer in January —presented a serious problem for Home Décor Products.

Scores of returned items were arriving daily in the warehouse. But without a formal returns process and supporting systems, employees had no means of determining whether to put products back into inventory for resale or to return them to the vendor for credit.

With unopened, unprocessed returned merchandise creating chaotic conditions in the warehouse as well as the back office, the time had come to take action.

Home Décor Products turned to RSM McGladrey.

RSM McGladrey lends a hand
To address Home Décor Products’ immediate concerns, RSM McGladrey consultants developed a few quick fixes to get the retailer through the post-holiday season. Working alongside the company’s employees, consultants did whatever was necessary, including opening boxes, restocking bins and entering merchandise back into inventory.

But it was clear to the RSM McGladrey team that only significant reengineering could provide a lasting solution for the client. The consultants presented Home Décor Products with the benefits of an integrated approach to running their business.

With the company preparing to move into its new space, management agreed it was time for a fresh start. Discussions about short-term fixes transitioned into planning for extensive process and system redesign.

Phasing in the future
The first phase of the project, functional design, involved learning about Home Décor Products’ business goals and designing a roadmap for achieving them.

“The McGladrey team helped us define our must-have issues, including improved and integrated systems for managing cash and receivables, inventory, orders and purchasing,” says Pearl. 

With the roadmap in place,RSM McGladrey developed, tested and installed the necessary applications, and trained Home Décor’s people.

In the end, RSM McGladrey consultants implemented a full suite of integrated solutions, which included upgrading the retailer’s ERP system, redesigning its warehouse and customer service operations, implementing a wireless warehouse management system, and building a new order management and customer service system.

Integrated solutions produce lasting results
With systems and processes in place to support its continued growth, Home Décor Products continues to flourish.

Major improvements to Home Décor Products’ business include:

• Warehouse is completely automated, wireless and integrated with the ERP system — resulting in an almost paperless environment.
• Warehouse ships an average of 1,100 orders per day compared with 200 orders a day prior to systems reengineering.
• Cash can be reconciled on a daily basis.
• New order management and customer service systems provide enhanced self-service capabilities and significantly improved access to timely and accurate order status information,reducing transaction costs and increasing customer satisfaction.
• The merchandising department has  a 360° view of the purchasing, inventory and sales cycle, resulting in higher order fill rates and reduced inventory levels and carrying costs
• Revenue and web conversion rates are both up

The right team, the right approach
“Throughout this process, we were impressed by McGladrey’s team and approach,” says Pearl.  “McGladrey really worked to understand our business and unique concerns. Then they customized solutions based on our situation.” 

Because the team’s capabilities included business process redesign, systems integration and application development capabilities, they were able to deliver a truly integrated solution, says Pearl.

While Home Décor Products’ successful business model led to rapid growth, it was also the catalyst for systems problems, says Charles Riess, managing director in RSM McGladrey’s New York City office. “They simply outgrew their back-office infrastructure,” says Riess.

In the end, Home Décor Products developed a strategic end-to-end solution that integrated their Web presence with their back-office capabilities, says Riess. They are now positioned for continued growth.

“Home Décor’s response to their business challenges is a model for any company looking to succeed in e-commerce,” says Riess.