Mt 400 - Stakeholders, Metrics, and Quick Wins

Stakeholders, Metrics, and Quick Wins

Mary Brickley

Kaplan University

MT 400 – Unit 4

November 14, 2016

        In retail, good inventory management is critical to maximize profits and reduce losses.  A system with too many variables or a vague process often leads to a messy system that has serious flaws and can incur large losses every year.  My former employer had a very poor inventory management system and wrote off hundreds of thousands of dollars in inventory losses every year.  The management often held employees responsible for these losses but if they would perform a root cause analysis, they would find that the system is flawed from the beginning.  Too many departments or management levels are putting inventory into the stores at various times.  Every advertisement flyer, special sale event, holiday sale, inventory is sent into the store often in massive quantities that may not sell in that store.  Often deals are made with the supplier to sell a minimum amount to each store but in the end, it often causes a lot of inventory issues at the store level.  On top of that, the local management orders inventory when the shelf inventory reaches a pre-determined level in the computer.  However, there are often when the computer shows inventory but none can be found in the store.  This issue causes customers to go elsewhere for their desired product.  

In the inventory management process, there are many stakeholders.  The corporate executive buyers, the regional and district management, the local store managers, the receiving manager who has control of the incoming merchandise, the employees who stock the merchandise, and the customers who eventually purchase the merchandise.  This project would increase profits and improve product availability for the customers.

The store managers have the most to gain from an improved inventory control system.  Their bonuses are affected by the profit and loss statements and inventory losses directly impact the profit margins.  Managers also control the process of the store employees including managers who are responsible for making sure that inventory is stocked on a regular basis.  Trucks often deliver daily and it is expected to be put out onto the floor within twenty-four hours.  

The store employees would benefit from an improved system as they are the one responsible to restock the inventory as it sells, label all the overstock, locate the overstock if it is not put in the proper aisle, and the employees provide the service to the customers who seek merchandise for purchase.  The employee must deal with a disgruntled or unhappy customer if the inventory numbers are wrong and they cannot locate the merchandise that is supposed to be in stock.  Often the night stocking crew does not take care in where they put the overstock and the employees must search everywhere in the department as well as other areas to see if the merchandise can be found.  This is a great waste of time and appears to be disorganized to the customer who often gets upset while waiting on the employee to locate the product.

By completely reorganizing the inventory and purchasing process, it would improve the amount of loss that the store suffers on an annual basis.  It would also create greater customer satisfaction and the employees would not waste as much time looking for a product and determining that the inventory is incorrect or the product is well hidden until the annual physical inventory.  The success factor would be reduced losses, improved profits, and customer satisfaction of product availability.  Even a reduction of twenty-five percent would add millions of dollars to the bottom line of the entire organization on an annual basis.  This would improve bonuses and profits for the company and the employees.  Customer satisfaction level would improve because they would not have to go to another store to find a product that they believed would be available to them at their local store.

Metrics:

The first metric to set would be to establish justifiable inventory levels.  This would require a review of the inventory level of every item.  The local management must be involved in setting the proper inventory level to ensure that the product doesn’t sell out but that there is not a huge amount of overstock that must be stored.  Items that are brought in for special sales should be reviewed with similar items to determine how much to send to each location.  By adjusting the inventory levels, it will help the store with their overstock levels that often get lost or shoved behind other inventory and forgotten until it is no longer an inventory item and must be put on clearance or thrown away.  It will also allow the employees to be able to locate the stock because there is not a huge amount of slower moving inventory in the way of the more popular products.  An example of would be the five gallon bottles of week killer.  These cases are very heavy and cannot be handled by most employees.  This is a slow-moving item and there are often several cases in the overhead storage area.  Most stores will only move one to two cases in most months.  Reducing the inventory level will provide room to store the weed killer that is in smaller containers and purchased by most customers.  This is the inventory that sells best and must be restocked daily.