With today being the biggest shopping day of the year for many retailers, the question arises, "How have inventory management practices differed in preparation for this day?"
There is no doubt that many retailers depend on the Holiday shopping season to keep their companies in the black. So, with the importance of this day being so high, it is absolutely imperative that companies not run out of their most popular products. Thus, a great deal of forecasting and planning has, no doubt, gone into the inventory that is in stores today.
Firms that share information freely with suppliers should be more prepared for today than ones who do not. This is the case because of the bullwhip effect. Firms that are transparent with their suppliers will communicate their actual demand figures to those suppliers and will most likely receive that amount of product. However, firms who have a history of shortage gaming and over-ordering are more likely to cause a bullwhip effect in their supply chains. They will either over-order or order from multiple suppliers in order to ensure their receipt of the products. This will cause unnecessary fluctuations in an already turbulent supply chain.
Does anyone else have any other ideas as to how inventory management policies could change as a result of an increase in sales like the one experienced on "Black Friday?"
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4 comments:
I totally agree with you in that there must be great amounts of planning and forecasting as to not have stock outs on Black Friday. I also agree that companies that share information freely between all members of the supply chain will benefit the most during this time of year because they will have the right product where it needs to be at the cheapest possible price. This is the only way that companies can get around carrying higher levels of inventory and still be profitable. Overall, the holiday season is the differentiating factor between companies that will be successful and those that will not and the main thing that will lead to success is the degree of collaboration between members of the supply chain.
Black Friday requires much planning. The whole year leading up to this date is taken into account. It's difficult to determine correct amounts of inventory to stock, but some of the information can come from past data. A popular product high in demand from January through October needs to be increased in quantity. Companies are constantly using groups and surveys to determine this years hot products. Inventory constantly needs to be monitored. It's also nice to establish an agreement with the manufacturer where you can return excess inventory.
I think that most companies use extreme discounts and price promotions during the holidays, and especially on Black Friday. Therefore, they are probably eroding their profit margins by reducing these prices. Furthermore, these discounts would change their inventory policies because it would change their Cu and Co values.
-Andrew Freeman
We all agree that alot of planning and forecasting goes into Black Friday, but then why is there always a mad rush at 4am to Wal-Mart and every other store? It's because even though the company has a decent forecast it's never good enough and the item you want will stock out by 6am. Stores will offer an incredible discount for one or two items, such as TVs, and when they don't have any left people will purchase another brand at a slightly higher price because they are sleep deprived from waiting in line all night.
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