North West Case Essay

803 Words4 Pages
North West Company B


The North West Company is a leading retailer of food and everyday needs to rural and urban neighborhoods across Canada, Alaska, the South Pacific islands and the Caribbean. In early 2003, North West had negotiated a master franchiser agreement with Giant Tiger Stores Limited (Giant Tiger) with the objective of opening stores west of Winnipeg. In contrast with North West's ""push"" system of product replenishment, Giant Tiger had developed a successful ""pull"" system that gave individual store managers tremendous leeway in ordering decisions. Inspired by Giant Tiger’s example of a “pull” system in action, North West management was considering giving store managers more control over their inventory
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For example, a greater percentage of a store manager’s pay would become variable, linked to the store’s operating margin. A store manager could decide to expand the store’s fresh food assortment, the store’s toys and gifts section could be tailored to meet different festive periods, or double the standard allotment of oak furniture and closets could be ordered if a new road works project was expected to pump additional funds into the community in the coming months.

On the cost side, North West would need to invest less than $10 million to develop a computer-based Advanced Ordering System (the appropriate computer hardware and software) to support the “open-to-buy” (OTB) process. The OTB process would spur store managers to clear out aging inventory in order to free up dollars to purchase new inventory. The upside potential of localization may include higher sales and reduced inventory levels as merchandise is tailored for each community. Currently, the North West Company has not been able to increase their inventory turns over 2.2 times. They expect that with localization, they could achieve inventory turns in the 3.0 or 3.5 range.

Risks However, there are risks involved. Current supply chain processes will have to change. North West will have to invest in information systems and technology. There will be 147 different store managers making decisions on
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