Business

North West Company

Executive Summary

North West Company is facing a unique situation where inventory turnover is way below the industry average, and there are gaps between actual customer demand and procurement process. The result is aging inventory and stock outs during peak season. Heavy discounts of up to 75% are provided to push the products to the customers. This contributes to revenue loss and decline in profits. Long lead times from 3 to 6 months also contribute to low inventory turnover as replenishment orders cannot be fulfilled during peak season. The localization strategy is helpful as it address issues of actual demand by the store managers, but there would still be a gap between actual customers and company and threats arriving from bullwhip effect. Also, long lead times would still exist after implementation of localization strategy. This issue would need to be addressed as well as fulfillment of orders during season needs to be done in case of stock outs. Accurate forecast development with collaborative efforts with customers would help reduce some dead stock and help in planning future stock products.

Issue Identification

Consistent low inventory turnover at North West Company is the primary issue which is way below the industry average that concerns the company decision makers to work on localization strategy or some other way which might help the company to reach target company turnover of 3.0 to 3.5. Currently the strategic focus is on push side, where the category managers are responsible for procurement. There is a high cost of holding inventory (1.83% per month) and aging inventory is increasing. Long lead times are another major issue, where orders need to be placed at least 4 months in advance. For general merchandise, being sourced from China had a lead time of 3 to 6 months. The products would arrive 2 months prior to the selling season, which is too early for products to arrive, provided that products took anywhere between few...