Shopko and Pamida: Systems Triumph or Tragedy?

1678 Words Feb 19th, 2013 7 Pages
ShopKo and Pamida: Systems Triumph or Tragedy?

I. Time Context

* November 2012

II. Viewpoint

* IT student.

III. Statement of the Problem

* What management, organization and technology actors prevented Pamida’s new distribution center from working successfully?

* What action plans are needed to overcome the challenges that will arise? How they will prevent it?

IV. Objectives

* The main objective is at providing the customer with merchandise which is always available as advertised.

* To make a decision and formulate action plan to solve organization problem.

* Getting rid of overstock items at highest possible price.

V. Areas of Consideration/SWOT Analysis

* Strengths

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The Markdown Optimizer "stores the previous recommendation for each item in each individual store so that it can evaluate past results and then produce recommendations for the closeout of the current cycle." Because of the improved system, ShopKo saw a 25 percent increase in its gross margin, decreased payroll costs by 24 percent, and the percentage of unsold goods was reduced from 7 percent to 2 percent.
As the case scenario indicates, Pamida's strategy is to maintain a high in-stock-rate. However, Pamida's traditional system did not help the company achieve its objective. Stores were out of stock on items, while the same items were sitting in Pamida's warehouses. Although Pamida changed its warehouse from a flow-through facility to a full-service distribution center, it did not update or replace its warehousing software. According to Pamida's CIO Dan Nicklen, the reason the warehouse management software was not updated was because "the software had been working fine under the old distribution system." As a result of the inadequate warehouse management information system, bottlenecks occurred, earnings declined in the first nine months of 2001, and ShopKo lost $6.7 million in overall revenue. As a result of the product supply shortage for the 2000 holiday season, estimated sales losses were $5 million, and lawsuits were filed by shareholders. It is obvious that Pamida's current technology did not support the transition from a flow-through
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