Department Store and Supply Chain

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CHAPTER TWO
Discussion Questions

1. How would you characterize the competitive strategy of a high-end department store chain such as Nordstrom? What are the key customer needs that Nordstrom aims to fill?

The Nordstrom web site states the following. Over the years, the Nordstrom family of employees built a thriving business on the principles of quality, value, selection, and service. Today, Nordstrom is one of the nation’s leading fashion retailers, offering a wide variety of high-quality apparel, shoes, and accessories for men, women, and children at stores across the country. We remain committed to the simple idea our company was founded on, earning our customers’ trust one at a time. Nordstrom fills customer needs for high quality fashion merchandise and outstanding levels of customer service. Price is no object for the typical Nordstrom shopper.

2. Where would you place the demand faced by Nordstrom on the implied demand uncertainty spectrum? Why?

Implied demand uncertainty is demand uncertainty due to the portion of demand that the supply chain is targeting, not the entire demand. A high-end department store chain such as Nordstrom falls on the high end of the implied demand uncertainty scale. The fashion items that Nordstrom stocks have extremely high product margin, high forecast errors and stockout rates, and once the season is over, these items are sold at deep discounts at their Nordstrom Rack outlet stores.

3. What level of responsiveness would be most appropriate for Nordstrom’s supply chain? What should the supply chain be able to do particularly well?

Supply chain responsiveness takes many forms, including the ability to respond to a wide range of quantities, meet short lead times, handle a large variety of products, build innovative products, meet a high service level, and handle supply uncertainty. The Nordstrom supply chain must be highly responsive in the areas of handling highly innovative fashion products, customer response, and service level; they are effective in supplying well-heeled customers with merchandise and their return policy is legendary in the Pacific Northwest.

4. How can Nordstrom expand the scope of the strategic fit across the supply chain?

Scope of strategic fit refers to the functions within the firm and stages across the supply chain that devise an integrated strategy with a shared objective. By adopting an intercompany interfunctional scope strategy, Nordstrom will maximize supply chain surplus. Nordstrom can move in this direction by working with their suppliers as if they are actually owned by Nordstrom. Rather than viewing the supply chain as a zero-sum game of inventory cost minimization and profit maximization, Nordstrom must recognize that spreading the wealth and occasionally taking on more inventory than is optimal for them will result in improved customer service. The intercompany interfunctional scope of strategic fit requires more effort than the other approaches presented in this section; Nordstrom must evaluate all aspects of their supply web.

5. Reconsider the previous four questions for other companies such as Amazon.com, a supermarket chain, and auto manufacturer, and a discount retailer such as Wal-Mart.

Amazon.com focuses on cost and flexibility by providing books, music and a host of other household products at low prices. Customers place orders online and expect to receive purchases in a number of days. Customer orders are processed at central warehouses or are drop shipped from suppliers by mail or common carrier. For the most part, the implied demand uncertainty for Amazon.com is low as they cast such a wide net. Amazon.com’s supply chain must be responsive in terms of flexibility; they handle an incredibly diverse range of products. Amazon.com’s supply chain should be able to provide low prices wide variety and reasonable delivery schedules for its customers....
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