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North West Case Report

1304 words - 6 pages

Executive Summary

North West Company will move towards a “pull strategy” within its supply chain. Pull production is based on actual or consumed demand and individual store managers will monitor this. The benefit of localization for North West will be a higher inventory turnover rate. The benefit for customers will be a more customized shopping experience based on their community. The potential risks are there are high costs involved in implementing a new database system and procurement decisions will be divided between category managers and store managers. We will implement a new database system and train store managers to purchase inventory based on local and regional needs. This ...view middle of the document...

The relationship with suppliers is streamlined because orders are placed in large batches and way ahead of time. The lack of customization allows suppliers to respond quickly and production is ahead of schedule.

Product Receiving and Shipping – Reducing Cycle Time

Products arrive at the distribution center approximately two months prior to the selling period. Inventory is separated between temporary and regular on two floors. Space is optimized because of the tight managing schedule or receiving and shipping however the lead-time to distribute the merchandise is too long. Excess merchandise is “pushed” to stores and eventually ends up being marked down.

Merchandising and Selling – Interorganizational Information Systems

Once merchandise arrives to the stores it is immediately put on display. Rural stores often sell out of popular items and customers are left with no choice but to shop at a competitor or substitute for other items. Demand for particular stores is not forecasted and this is an opportunity cost. The product assortment is kept fresh throughout the selling period by splitting up shipments throughout the period. There is a lack of information between stores and what each store/region requires.

Store Managers – Preference Implications

Category managers currently make all procurement decisions. Individual stores have no say in what they will be selling and cannot combat customer demands. Although a costly process, if managers are given the ability to customize their inventory stores will be able to cater to their specific communities.

Alternatives and Options

Forecasting and Procurement – Inventory Turnover

Pro: Forecasting and procurement is a fairly simple process because orders are placed in large batches and way ahead of time based on historical data.

Con: It takes longer to respond to changes in demand, which results in overstocking.

Alternative: Dividing inventory into two categories – General and Seasonal/Customized. General merchandise with consistent sales will maintain the “push strategy” as the process is less costly and decisions are based on data. Seasonal/Customized inventory will adopt a “pull strategy” where store managers will have the opportunity to make decisions based on their immediate environment.

Product Receiving and Shipping – Reducing Cycle Time

Pro: The distribution center is already divided into two floors – one for immediate shipping and the other for storage. This makes for easy access to what needs to be shipped right away and what does not.

Con: Two months is a long time to be housing inventory that is projected for a specific period. Demands can change in this time frame and the distribution center is left with no choice other than to “push” inventory to store warehouses. This is what leads to unnecessary markdowns.

Alternative: Placing orders with suppliers at a later date will reduce the time inventory sits at...

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