Managing Supply Chain and Operations 1st Edition by Thomas Foster ,Scott Sampson,Cynthia Wallin,Scott Webb

Exercise 22

Many companies have implemented on-line shopping but Nordstrom has combined on-line shopping with inventory management to better serve customers.
While Walmart allows customers to buy on-line and to pick up items at nearby stores, and Target tells customers if products are available in a particular store, Nordstrom went with a slightly different approach. Managers at Nordstrom combined on-line shopping capabilities with modern inventory management systems to better accommodate customer needs.
Here's how Norstrom system works. Lets say you want a certain pair of Prada shoes. You go on-line to check if they are at your local store. While the shoes may be available in some stores, they may not be available at your city's Nordstrom. You are in luck, however. Those Prada mules can be overnighted to you from any Nordstrom store. Even if your closest store is out of the shoes you want, you can still wear them the day after your order them.
This has had a powerful effect on Nordstrom financially. Shipping items to other stores and customers means that fewer products are discounted at the end of season, as on-line customers can search inventories from anywhere. Also, customers can access bargains at Nordstrom Rack (their discount arm of Nordstrom) on-line.
One drawback to this system is that if a store clerk enters inventory data incorrectly, the entire systems will be in error and customers will be left dissatisfied.
Besides adding to Nordstrom's bottom line, the web-based sales system has increased inventory turnovers from 4.8 to 5.4. Faster inventory turnover is very good for the retail world. According to a Nordstrom manager, "we can sell more without having to buy more inventory. That plays through to margins and ultimately, earnings."
Questions
1. How was Nordstrom's approach different from that of other retailers?
2. Briefly describe the different costs associated with inventory in retailing.
3. How did Nordstrom's approach enable their stores to increase same-store sales?
4. How was Nordstrom able to increase customer service without increasing inventory?
5. Did inventory turns improve for Nordstrom as a result of its new strategy? Why is increasing inventory turnover important for a retailer?