Last week we discussed how important it is to effectively manage inventory levels for any business.  Inventory can dramatically affect the bottom line (profits) of a business. Sometimes businesses may have too much inventory and end up having to absorb cost such as holding or carrying cost. At other times, businesses may encounter stockouts or shortages which can also play a vital role in the loss of profits.

When businesses encounter potential profit loss due to holding/carrying cost or stockout/shortages, they often look towards some type of ABC analysis.  ABC analysis provides business with the ability to provide certain items different levels of inventory based on the importance of the item. So how is a an item classified as important?  Items are assigned into 3 different buckets, A, B or C.   A items are usually those items that are most important to a business and provide higher annual dollar volume when compared to other items within the manufacturers portfolio. B items, are usually items that provide the business with medium annual dollar volume and C items are those whom fall into the lower annual dollar bucket for a business.

So your next question is …….  (What does this have to do with the Retro Air Jordan Concords?)

On December 23, 2011, two days before Christmas 2011 and the beginning of the NBA season,  Nike re-released the Air Jordan XI Concords shoes.   Masses of sneaker head fans camped out at stores throughout the United States in hopes of getting their hands on a pair of the coveted Air Jordan XI Concords.  However, quantities were very limited and only a few of those whom stood in line for days/hours were able to purchase a pair.  A few hours after the release, stockouts sent sneaker fans into outrage and stories of violence due to the lack of inventory of the Air Jordan XI Concords began to spawn in different areas of the country.  People were literally killing each other over a pair of theses shoes. There was even a story of a mother who left her two young children in the car alone, while she stood in line waiting for the possibility of getting her hands on a pair. 

 This scenario really got me thinking of the different effects that inventory can have not only on the bottom line of a business, but on the safety of the community itself.   From a business standpoint, I’m sure Nike did very well (in terms of profit and inventory) by releasing only a limited amount of the Air Jordan XI Concords.  However, many of its loyal customers/fans were left with the short end of the stick due to the limited quantities.

Based on the ABC methodology, what bucket do you think Air Jordan’s fall under within Nike’s inventory model?  Do you think Nike intentionally sets stockouts on Air Jordan’s to make them more attractive to consumers?  Do you think Nike ever considered the trickle effects that stockouts would pose to the community? 

 Below is an article from the Charlotte Observer that covered the story of the Air Jordan XI Concords release within the Charlotte area: 

http://www.charlotteobserver.com/2011/12/23/2871323/area-mall-shoppers-squabble-over.html

 

When you think of professional baseball what is the first thing that comes to mind? For most, I would probably say it is your favorite team or favorite player. What is it exactly about that team or player that makes them your favorite?  Are they your favorite because they are a winning team or could it be because they are the lead home run hitter?

 

 I recently watched the film Moneyball and became intrigued by Billy Beane (General Manager of the Oakland’s A’s) and his new way of judging players and managing the team. In the film, Billy Beane hand in hand with a Yale economist transformed the way that players were recruited within Major League Baseball.  Unlike other big league teams whose main focus was to recruit star players, Billy and his assistant focused on recruiting players based on their statistical performance, their on base percentage. The strategy they used was pretty simple and involved forecasting wins. 

 

They recruited players who were undervalued by other teams whom did not recognize that winning games involved getting on base, not stealing bases, etc. At the end of the day it didn’t matter how the player got on base, whether it was a walk or a hit, what mattered was that they got on base. In 2002, Billy Beane took the Oakland A’s on a 20 game winning streak breaking a three-way tie for the longest winning streak in AL history by utilizing this strategy.

 

Soon after the 2002 season other teams like the Boston Red Sox’s began to utilize Billy’s strategy and the game of baseball would be changed forever. The Boston Red Sox who were said to have had the curse of the Bambino went on to win the World Series in 2004 for the first time in 86 years after implementing Billy’s strategy under the management of Theo Epstein

 

The success of the Oakland A’s under the management of Billy Bean was attributed to quantitative forecasting.  I believe quantitative forecasting is vital to the success of any organization as it enables managers to foresee/forecast the future and ensures proper development of strategies.

 

What is your opinion of quantitative forecasting?  Will the Chicago Cubs end the curse of the Goat and win a World Series under the management of Theo Epstein in the near future?

 

I became so intrigued by the film that when it was over, I powered up the laptop and googled to see what other information I could find about the film.  The link below provides a descriptive analysis about the film and explains the strategy that was utilized by the Oakland A’s

 

http://www.pcs-partners.com/tools-and-job-aides/55-moneyball-and-talent-strategy.html