Inventory Management Case Study
Big Brand – Engagement Results
1.0 The Client
The client is an apparel company with global brand recognition and products available in virtually every country in the world. To keep their competitors in the dark, we will call the client Big Brand. Big Brand has been delivering sports apparel and accessories to customers for most of a century. Big Brand has a simple strategy
– to continuously strengthen brands and products to improve their competitive position and financial performance. The client had annual sales of € 7 billion with ½ billion in annual net profit. Six billion of the annual sales are to Retail Partners and 1 billion comes from Big Brand’s own retail stores.
They have two seasons annually. To remain competitive, manufacturing moved to third world countries to take advantage of low cost labor. Manufacturing lead time is between 2 and 4 months and transportation lead time is between 4 and 6 weeks.
Today Big Brand orders inventory 5 to 9 months before the inventory is introduced to the public.
1.1 Retail Business Challenges
Here are some operational facts that Big Brand was facing in its European retail segment: 1. Big Brand has over 200,000 SKUs overall, when size and color are considered. In any given store, 3,000 to 6,000 SKUs are present at a given time, depending on the size of the store.
2. In-store shortages of about 30% – customers were often not finding what they were looking for.
3. 2.2 inventory turns per year in retail segment stores – this inventory was just what was in the stores, not including stock in the distribution centers or on the way from suppliers.
4. They suffered from too much inventory:
a. Stores shelves were clogged with slow movers – blocking potential sales from faster movers.
Big Brand – Engagement Results
5.
6.
7.
8.
b. Old season’s inventory was sold at discounts directly effecting Big
Brand’s margin.
c. Inventory not sold was returned to distribution centers for aging so
1.0 The Client
The client is an apparel company with global brand recognition and products available in virtually every country in the world. To keep their competitors in the dark, we will call the client Big Brand. Big Brand has been delivering sports apparel and accessories to customers for most of a century. Big Brand has a simple strategy
– to continuously strengthen brands and products to improve their competitive position and financial performance. The client had annual sales of € 7 billion with ½ billion in annual net profit. Six billion of the annual sales are to Retail Partners and 1 billion comes from Big Brand’s own retail stores.
They have two seasons annually. To remain competitive, manufacturing moved to third world countries to take advantage of low cost labor. Manufacturing lead time is between 2 and 4 months and transportation lead time is between 4 and 6 weeks.
Today Big Brand orders inventory 5 to 9 months before the inventory is introduced to the public.
1.1 Retail Business Challenges
Here are some operational facts that Big Brand was facing in its European retail segment: 1. Big Brand has over 200,000 SKUs overall, when size and color are considered. In any given store, 3,000 to 6,000 SKUs are present at a given time, depending on the size of the store.
2. In-store shortages of about 30% – customers were often not finding what they were looking for.
3. 2.2 inventory turns per year in retail segment stores – this inventory was just what was in the stores, not including stock in the distribution centers or on the way from suppliers.
4. They suffered from too much inventory:
a. Stores shelves were clogged with slow movers – blocking potential sales from faster movers.
Big Brand – Engagement Results
5.
6.
7.
8.
b. Old season’s inventory was sold at discounts directly effecting Big
Brand’s margin.
c. Inventory not sold was returned to distribution centers for aging so