The North West Company is a leading retailer of food and everyday needs to rural and urban neighborhoods across Canada, Alaska, the South Pacific islands and the Caribbean. In early 2003, North West had negotiated a master franchiser agreement with Giant Tiger Stores Limited (Giant Tiger) with the objective of opening stores west of Winnipeg. In contrast with North West's ""push"" system of product replenishment, Giant Tiger had developed a successful ""pull"" system that gave individual store managers tremendous leeway in ordering decisions. Inspired by Giant Tiger’s example of a “pull” system in action, North West management was considering giving store managers more control over their inventory ordering by moving to a “pull” merchandise replenishment strategy — also known as localization. Currently, North West employed a “push” strategy in which category managers at North West’s Winnipeg headquarters analyzed trends, placed orders and allocated products to stores. Typically, category managers worked with store managers to review the previous year’s lineup, orders and actual sales. Using historical averages and the next year’s forecast growth rate, category managers estimated demand for products at a company level. Category managers met frequently with suppliers to review the product lineup for the upcoming year, which often differed from year to year. The shift towards localization promised to tap into the local knowledge that resided with store managers, allowing them to better tailor product quantities to preferences in their communities. Under localization, product assortment decisions, which had been previously made at the category manager’s level at Winnipeg headquarters, would become the responsibility of North West’s 147 store managers.
Costs and Benefits
Localization seemed like a great way to enable store managers to take advantage of their knowledge of the community in which they lived....