GameStop 2005 Annual Report Download - page 20

advertising space in one of our advertising vehicles. Once we run the advertising, the vendor pays to us an agreed
amount.
As part of our brand-building efforts and targeted growth strategies, in the last three years, we expanded our
advertising and promotional activities in certain targeted markets at certain key times of the year. In addition, we
expanded our use of radio advertising in certain markets to promote store openings. We plan to continue these
efforts in fiscal 2006.
Information Management
Our operating strategy involves providing a broad merchandise selection to our customers as quickly and as
cost-effectively as possible. We use our inventory management systems to maximize the efficiency of the flow of
products to our stores, enhance store efficiency and optimize store in-stock and overall investment in inventory.
Distribution. We operate a 380,000 square foot distribution center in Grapevine, Texas, a 200,000 square
foot distribution center in Louisville, Kentucky and a 315,000 square foot distribution center in Sadsbury Township,
Pennsylvania. Our efforts to integrate the distribution operations of both Historical GameStop and EB will result in
the use of the center in Louisville, Kentucky to support our first-to-market distribution efforts, while our Grapevine,
Texas facility will support efforts to replenish stores. In early fiscal 2006, we intend to discontinue use of EB’s
distribution center in Sadsbury Township, Pennsylvania and move the distribution center operations from that
facility to the facilities in Texas and Kentucky. In order to enhance our first-to-market distribution network, we also
utilize the services of several off-site, third-party operated distribution centers that pick up products from our
suppliers, repackage the products for each of our stores and ship those products to our stores by package carriers.
Our ability to rapidly process incoming shipments of new release titles at the Louisville and third-party facilities and
deliver those shipments to all of our stores, either that day or by the next morning, enables us to meet peak demand
and replenish stores at least twice a week.
The state-of-the-art facilities in Grapevine, Texas and Louisville, Kentucky are designed to effectively control
and minimize inventory levels. Technologically-advanced conveyor systems and flow-through racks control costs
and improve speed of fulfillment in both facilities. The technology used in the distribution centers allow for high-
volume receiving, distributions to stores and returns to vendors. Inventory is shipped to each store at least twice a
week, or daily, if necessary, in order to keep stores in supply of products.
We also operate distribution centers in Canada, Australia, and in various locations in Europe.
Management Information Systems. Our integration efforts in the first half of fiscal 2006, will focus on the
conversion of the point-of-sale system used in the Historical GameStop stores to the point-of-sale technology
developed by EB and used in the EB stores and the conversion of the point-of-sale technology in the EB stores to
report results to the proprietary inventory management system used by Historical GameStop. Our proprietary
inventory management system and point-of-sale technology show daily sales and in-store stock by title by store.
Systems in place now and after integration use this data to automatically generate replenishment shipments to each
store from our distribution centers, enabling each store to carry a merchandise assortment uniquely tailored to its
own sales mix and rate of sale. Our call lists and reservation system also provide our buying staff with information to
determine order size and inventory management for store-by-store inventory allocation. We constantly review and
edit our merchandise categories with the objective of ensuring that inventory is up-to-date and meets customer
needs.
To support our U.S. operations, we use a large-scale, Intel-based computing environment with a state-of-the-
art storage area network and a wired and wireless corporate network installed at our U.S. headquarters, and, a
secure, virtual private network to access and provide services to computing assets located in our stores, distribution
centers and satellite offices and to our mobile workforce. This strategy has proven to minimize initial outlay of
capital while allowing for flexibility and growth as operations expand. To support our international operations, we
use a mid-range, scalable computing environment and a state-of-the-art storage area network. Computing assets and
our mobile workforce around the globe access this environment via a secure, virtual private network. Regional
communication links exist to each of our distribution centers and offices in international locations with connectivity
to our U.S. data centers as required by our international, distributed applications.
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