We can all recall a time in our life when we walked into a store looking for a product, only to find out that the product is out of stock. Today, the retail market is extremely competitive and thus the slightest advantage can have a meaningful impact. As we discussed inventory management last class, we were presented with our own challenge to see just how difficult it is to manage inventory; however, we did learn that there is an optimal amount of inventory. Optimal is an interesting word, because optimal doesn’t always mean right.
Let us take a moment to examine a few companies where inventory management has taken a sour turn. Research in Motion (RIMM), better known as the makers of BlackBerry products, has had a tremendously difficult time dealing with inventory. As recently as two months ago, RIMM had to devalue its inventory significantly, further hurting their already deteriorating business. The trouble is stemming from fierce competition from rivals such as Apple, and inferior products. The sales of BlackBerry PlayBook have been dismal, forcing RIMM to drop the price 60 percent. This in turn, forced RIMM to cut the value of its inventory, directly impacting their bottom line.
Best Buy has also caught itself in various troubles regarding inventory management, some of which have caused people to be fed up with the retailer. Last year, Best Buy ran out of the popular smartphone Nexus S, but continued to inform their customers that the phone was in stock. Or what about the incident this year, which resulted in many people not receiving their Christmas gifts on time? As we can observe, Best Buy is having a difficult time managing their inventory. From the information I have been able to gather, people are saying that Best Buy’s inventory management system is greatly inferior to other inventory management systems.
One doesn’t have to go further than Amazon to showcase what great inventory management is all about. Amazon shows you how many products are left in stock, and it even goes to inform you when the product will be in stock if it is currently unavailable. When a company is willing to go this far to inform and satisfy their customers, it speaks great volume.
Over supply or insufficient stock are major problems for companies that carry inventory. Take Best Buy’s recent troubles with over supply of HP TouchPads, which forced them to cut the price and take a hit on the value of their inventory. While over supply is certainly a cause for concern, under supply is also a major problem. The recent story about AirBus taking it to Boeing because of the significant delays of the 787 Dreamliner shows how insufficient supply can give your competitors the upper hand. Take a moment and reflect on the times you were shopping for a product and were told it was out of stock. Additionally, can you think of other companies who struggle or thrive when it comes to inventory management?
http://www.foxbusiness.com/technology/2011/11/22/rim-trims-300-from-blackberry-playbook-prices/
I agree that companies have to stay on top of their inventories especially during these tougher economic times. Both of the examples you used were good, clearly overstock can be very costly especially if demand declines rapidly. I think it is even harder to recover from being under stocked because when the economy turns around and consumers start spending more money they will remember which businesses let them down; and I think it is harder to recover from a bad reputation than to make financial adjustments.
You bring up a good point about the drastic levels of customer satisfaction seen between these two stores. When you think of inventory issues, people might assume that the businesses struggling to keep their shelves stocked would be smaller chains that just find it harder to compete with the massive corporate stores. Yet, as you described, Best Buy, who is that massive corporate chain, cannot keep up. When there is so much at stake for such a large retailer, why is there just a lag in find a better inventory solution?
I completely agree with you.. Playbook really became PlayDead.. RIM did not do enough research and development, they wanted a quick win with the new tablet business, so they went and bought QNX and brought their PlayBook on the scene. I think it was a wrong decision to try and compete with the giants like Apple and Google without doing a proper research and proper development.