GameStop 2006 Annual Report Download - page 27

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 and a 260,000 square
foot distribution center in Louisville, Kentucky. EB operated a 315,000 square foot distribution center in Sadsbury
Township, Pennsylvania which was sold in June 2006. EB’s distribution operations in Pennsylvania were moved to
facilities in Texas and Kentucky. We have integrated the distribution operations of both Historical GameStop and
EB and currently use the center in Louisville, Kentucky to support our first-to-market distribution efforts, while our
Grapevine, Texas facility supports efforts to replenish stores. 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 were completed in the first half of fiscal 2006 and
focused 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 center as required by our international, distributed applications.
Our in-store point-of-sale system enables us to efficiently manage in-store transactions. This proprietary
point-of-sale system has been enhanced to facilitate trade-in transactions, including automatic look-up of trade-in
prices and printing of machine-readable bar codes to facilitate in-store restocking of used video games. In addition,
our central database of all used video game products allows us to actively manage the pricing and product
availability of our used video game products across our store base and re-allocate our used video game products as
necessary.
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