THE PROBLEM AND ITS BACKGROUND
The success of every business depends on how it is managed, whether it is on the management of human resources, finances, operations or production. Focusing in the production process, one aspect to consider is its proper inventory management. The need for proper inventory management system is indispensable nowadays especially in coping up with global competition. As firms deal with their inventory systems, problems still arises and most of which are experienced worldwide. For instance, Bhattacharjee (2012) attributed the pickup in sales to inventory flow "getting back on track, as they did not flow product appropriately.” This was a statement in his article as it discussed the latest experience of Abercrombie and Fitch, also known as A&F, an American retailer that focuses on casual wear for consumers aged eighteen to twenty two, got a handle on excess inventories that had discounting that worried their investors last year. Said dilemma was due to negligence of identifying excess inventories ahead of time. Thus, inventory management, or balancing orders with demand, has been a major concern for Abercrombie. In recent quarters, it has been compelled to offer discounts to its teenaged clientele who had held back on purchases.
On the other hand, Wal-Mart Stores, Inc. branded as Walmart, is an American multinational retail corporation that runs chains of large discount department stores and warehouse stores. The company is the world's third largest public corporation, according to the Fortune Global 500 list in 2012, the biggest private employer in the world with over two million employees, and is the largest retailer in the world. Walmart remains a family-owned business, as the company is controlled by the Walton family, who own a 48 percent stake in Walmart. It is also one of the world's most valuable companies. The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and publicly traded on the New York Stock Exchange in 1972. It is headquartered in Bentonville, Arkansas. Walmart is also the largest grocery retailer in the United States. In 2009, it generated 51 percent of its US$258 billion sales in the U.S. from grocery business. It also owns and operates the Sam's Club retail warehouses in North America. Walmart has 8,500 stores in 15 countries, under 55 different names. The company operates under the Walmart name in the United States, including the 50 states and Puerto Rico. It operates in Mexico as Walmex, in the United Kingdom as Asda, in Japan as Seiyu, and in India as Best Price. It has wholly owned operations in Argentina, Brazil, and Canada. Walmart's investments outside North America have had mixed results: its operations in the United Kingdom, South America, and China are highly successful, whereas ventures in Germany and South Korea were unsuccessful. ( http://en.wikipedia.org/wiki/Walmart) Walmart is recognized with their continued success in catering the needs of their customers on time. One aspect that makes this success possible can be attributed to their inventory management system. According to Chandran (2008), Wal-Mart was able to reduce unproductive inventory by allowing stores to manage their own stocks, reducing pack sizes across many product categories, and timely price markdowns. Instead of cutting inventory across the board, Wal-Mart made full use of its Information Technology (IT) capabilities to make more inventories available in the case of items that customers wanted most. The Company entered into collaboration with P&G for maintaining the inventory in its stores and built an automated re-ordering system. Also, employees at the stores had the “Magic Wand”, a hand-held computer which was linked to in-store terminals through a radio frequency network. These helped them to keep track of the inventory in stores, deliveries, and back up merchandise in stock at the distribution centers. Another highlight of...
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