Inventory Management At The Heart Of Replenishment Management

Evaluate the role their inventory plays in the company’s performance, operational efficiency, and customer satisfaction.

In addition increases the costs due to out of date and damage lots of inventory, which are also leading to high shrinkage level for the retailer. It is possible to overcome these barriers and enhance the company’s reputation, increase customer satisfactions including high level of profitability by practising good inventory management system in place (Warren, Reeve, & Duchac, 2013).

In this final paper for Managerial Finance I will attempt to show how the supply chain inventory management method can be affected depending on the situation of the retailer. Studying the control method for problems in inventory, which would include both, excesses in inventory as well as shortages, and hoping to minimize loss.

Office Depot uses multiple inventory strategies to order products. 90% to 95% of goods are ordered through automatic replenishment, manual replenishment, pull replenishment, and global sourcing are also used depending on channel, volume, velocity and cost. (Office Depot, 2015). The accuracy of the inventory from both a DC and store perspective is critical to the organizations success. Heizer and Render (2014) state that record accuracy is a prerequisite to inventory management, production scheduling, and sales. Accuracy is maintained by either periodic or perpetual systems (p.479). In Office Depot, the stores are required to cycle-count technology items such as laptops, desktops computers, and tablets five days a week. Discrepancies are entered in the system and bounced off the local DC’s on-hand inventory discrepancies. Office Depot is a “blind receive” organization meaning the stores receive pallets of products and simply unwrap and put them away. The only way a store knows if a product is missing is through the cycle-count program. This system was put into place to speed up the receiving process and eliminate unnecessary steps once the product was received at the store level. Office Depot conducts a full physical inventory once a year through a third party and trues up the inventory shrink at this time.

As three of America's leading retailers, Home Depot, Nordstrom, and Cold Water Creek, are responsible for over $80 billion in annual sales. Retail industry analysts look for commonalities in inventory management reporting in order to track company's ability to move inventory and maximize pricing strategies and avoid having to discount obsolescent inventory thus affecting profit. Through analysis of a company's inventory management ratio, outside investors and inside management can track the number of times each year a company turns its inventory. Industries such as retail are extremely sensitive to inventory management as many retail products have short shelf lives due to cyclical inventory and technological advances.

To order new bottles the purchasing manager would review stock control sheets that indicated empty bottle stocks, finished goods stocks, as well as new bottle purchases and delivery records. The stock control sheets would be compared to the sales trends to determine the new bottle order quantities for the next year. Realizing the bottles were coming from Germany the lead time for orders was 4 months ahead of required delivery date. Greaves annual order were broken into two shipments: one in March that entailed 75 percent of annual bottle needs; followed by remaining 25 percent in August. Changes to orders were permissible, but cancellations came at a price and any increases had to be executed at minimum quantities.

Assume HQ is responsible for replenishing inventory at the stores. a) What information is needed and how is it used to decide what to send to each store? b) Where does the information come from? c) Why didn’t we have each store decide what to order from the warehouse?

A marketer is constantly pressured to meet projected sales, therefore they should not have a large percentage of inventory in stock because it means they are not selling a sufficient amount of items. They will simply not be making a profit. It is healthier to have less in the inventory because you want to convert the inventory into cash. The inventory can be broken down into many sections. For example, a retail business such as Macy’s can manage one item of their inventory by different categories, such as color and size. This will let the marketer know what items are being sold the most so they can order more of the popular item or less of the one not being sold as often. This has to be examined constantly as the item of clothing might be more

| 1) Shipment of products directly to individual 2) Direct delivery to retail outlets &retail establishments

We became aware of this problem when we saw a decrease in the sales orders and smaller quantities on the orders that were replenished. After brainstorming, considering the facts and generating ideas, we narrowed down our suggestions to two possible solutions (Adair, 2013). We feel either would be simple to

Getting other store managers on board with a new and improved better system of logistics for a continuous pull of replenishment to receive items on time. (Pg. 166)

3. Reimbursements for unsold stock: Retailers raised inventory level, due to striving for high-volume sales, transfers the risk of carrying inventory to their clients. These high value products with short life cycles suffer from rapid drops in retail prices, resulting in unsold inventory that requires reimbursements.

To combat these problems, Procter & Gamble proposed a new replenishment process in which the retailer keeps inventory in their distribution warehouse, provides daily data to Procter & Gamble about warehouse orders received from the stores, and then Procter & Gamble determines warehouse replenishment volumes needed. This process, presented in Figure 1, became known as the continuous replenishment program (CRP), and enabled lower retail pricing through decreased product acquisition costs and truckload volume purchases.

Tasks:  What should Alison do? o Develop plans to improve the inventory management o Develop time-based supply strategies to bring competitive advantages to the organization  Identify the functions and forms of inventory  What are alternatives for inventory management? o ABC classification o Supplier-managed inventories (SMI) o Just-on-time or Just-in-time (JIT) o Enhance the forecasting system (factor correlated with inventory variation)  Provide training programs for current and new hiring employees 1

With recent declines in transportation and shipping costs, it is more advantageous for a retail business to have a centralized distribution model/system. This hypothesis has been explained throughout many sources starting with scholarly journal article, “Logistics Systems and Management” by Navee Chiadamrong and Rigzin Lhamo. The article goes into depth explaining how having easy access to inventory replenishment when it comes to redistributing clothes can make for a better outcome financially than a store that doesn’t. It states that there are many cases where stores and franchises lose money and customers when a customer is not able to obtain the inventory that they are looking for in a timely manner, this is highly caused by