Walmart and Best Buy Companies: Inventory Management

Abstract

Inventory management can be discussed as playing a significant role in the work of Wal-Mart and Best Buy because these companies pay much attention to attracting more customers and satisfying their needs and demands. While referring to the idea of inventory management, it is also important to focus on such aspects as the types of inventories managed by Wal-Mart and Best Buy; the role of inventories for the companies’ performance and customer satisfaction; the types of layouts; and the metrics to evaluate the supply chain performance.

Inventory Management

Inventory management plays an important role in organizing the work of the whole supply chain, and it is significant to guarantee the effective performance of such retailing chains as Wal-Mart and Best Buy. Inventory management can be discussed as the complex of specific controlling procedures and operations to organize the process of ordering and to store different types of inventories. The goal of inventory management is to provide the optimum amount of inventories in order to respond to the customers’ demands and needs and to forecast the possible changes in consumption (Evans & Collier, 2013, p. 254). Thus, only constant evaluation of the aspects to influence the customers’ demands can guarantee the effective management of inventories. That is why it is important to focus on analyzing and comparing the approaches used by Wal-Mart and Best Buy to manage inventories to contribute to the companies’ competitive advantage.

The Inventories Managed by Wal-Mart and Best Buy

The typical inventories managed by such service companies as the retailing chains are finished goods which are determined according to the chain and store’s specialization. Thus, Wal-Mart manages such inventories as foods, drugs, different types of electronics, different kinds of home furnishings, and apparel (Walmart.com, 2014). Certain kinds of foods and drugs can be discussed as dependent in relation to their nature of demand when the other inventories are characterized as independent. The majority of the inventories do not depend on selling seasons, and they are sold regularly. The mentioned inventories can also be characterized in relation to the idea of stable demand because of the finished products’ specifics.

The inventories which are managed by Best Buy are mainly different types of electronics, computers, laptops, notebooks, different appliances, cell phones, and video games (Best Buy International, 2014). Thus, these inventories can be characterized as dependent in relation to the nature of demand. The management of these inventories is also associated with long and different time periods, which do not depend on a season. However, demand is not stable. The company also pays much attention to managing the situation of overstocking while addressing the customers’ demands adequately.

The Integration of the Goods and Service Design Concepts

The main concepts associated with the goods and service design are time, place, form, and information. Wal-Mart stores are mostly organized as supermarkets where goods are placed according to their category to attract the target audience. Wal-Mart stores provide large open shopping environments with the rows of shelves where goods are presented according to brands and types. The inventories are stored in separate rooms to save space for customers, but the products are placed or changed regularly according to the analysis of the customers’ demands. The focus is made on the place of goods in order to attract more customers and stimulate their buying behaviors (Boyer & Verma, 2009, p. 177). That is why any situations associated with stockouts should not be noticed by customers, and they are monitored by managers.

The integration of the goods and service design concepts in Best Buy is realized according to the other principle because of the retailer’s specialization. Customers have the opportunity to observe and check products immediately, the items are grouped according to their categories, and inventories that are grouped in special places play an important role while speaking about the online ordering. Much attention is paid to the time during which the buyer can receive the desired product, thus, much attention is paid to the time during which the item can be presented to the customer, and this problem of the service is associated with the idea of the lead time (Boyer & Verma, 2009, p. 149-151).

The Role of the Inventories for the Companies’ Performance, Operational Efficiency, and Customer Satisfaction

Inventories play a significant role in the company’s performance, operational efficiency, and customer satisfaction. Referring to the example of Wal-Mart, it is important to note that inventory is the basic reason why customers can purchase quickly and satisfy their demands appropriately. Situations, when stockouts are observed, cannot contribute to the company’s performance and customer satisfaction because customers can choose to buy products in another supermarket.

That is why inventories are crucial for such retailers as Wal-Mart. The company’s profitability directly depends on customer satisfaction, that is why Wal-Mart inventories cannot be discussed as expensive while depending on the specifics of the stores and products proposed. However, inventories contribute to attracting more customers who know that they can find the desired product in the store (Boyer & Verma, 2009, p. 168). While referring to the idea of operational efficiency, Wal-Mart inventories allow independent operations without depending on the lack of this or that item.

Inventories also play an important role in Best Buy operations, but the lack of inventories cannot affect customer interest as significantly as it is typical for Wal-Mart. Best Buy inventories are important to affect the ideas of the operational efficiency and performance because this company is more vulnerable in relation to the situation of overstocking because the products sold in Best Buy stores should respond to the criteria of innovation and trend (Best Buy International, 2014). Referring to this situation, if the company cannot provide the customers with novel products in the sphere of electronics presented as inventories, customer satisfaction decreases. Thus, inventories are important for all retailers in spite of their specialization.

Different Types of Layouts Typical for Wal-Mart and Best Buy

The four different types of layouts found in such stores as Wal-Mart and Best Buy are the product layout, process layout, fixed position layout, and hybrid layout (Evans & Collier, 2013, p. 112). The product layout is observed in both Wal-Mart and Best Buy because based on the principle of standardized operations and convenient product flow. More products in Wal-Mart are located according to the product layout principle because of the necessity to contribute to the customers’ demands related to finding the necessary products quickly (Walmart.com, 2014).

The process layout is also characteristic for both Wal-Mart and Best Buy. For instance, in Wal-Mart supermarkets, milk products, iced products, and meat products are grouped in order to make the layout more functional and flexible. In Best Buy, the process layout is observed in the stores’ sectors where different types of electronics are grouped according to their functions (Best Buy International, 2014).

The fixed-position layout is rarely used in Wal-Mart supermarkets and stores and can be associated only with the necessity to keep products in refrigerators (Walmart.com, 2014). However, this type of layout is observed in small local Best Buy stores because of the limit in spaces.

The hybrid layout is frequently used by all retailers because of the necessity to respond to the customers’ expectations and to the followed marketing strategy. Wal-Mart traditionally uses the hybrid layout while organizing the rows in supermarkets and combining the principles of the product and process layout. In Best Buy stores, the hybrid layout is used as the basic strategy because of the division of the stores into several sectors in which different principles of organizing the environment and placing the products are used (Best Buy International, 2014).

The above-mentioned four types of layouts are important to influence the companies’ operations because they affect the speed of operations, time the customer spends in the store, and the company’s overall performance. Wal-Mart’s approach to layouts is important because the layout is directly associated with the volume of sold products and customer satisfaction. The hybrid layout strategy is important for Best Buy stores because they are divided into sectors where different layouts can serve effectively, thus, attracting more customers because of the improved services.

The Metrics to Evaluate Supply Chain Performance

To evaluate the supply chain performance of Wal-Mart and Best Buy stores, it is necessary to focus on such important metrics as the lead time and fill rate. The lead time is important to be stated while concentrating on the aspects of the supply chain performance because it is the time between the moment of order placement and the order’s receipt. It is significant to note that the lead time depends on the aspects of transportation, order size, and details of the production schedules (Evans & Collier, 2013, p. 257). The process of determining the lead time to evaluate the supply chain performance is more important for Best Buy than to Wal-Mart because of the stores’ specialization and provided possibilities to order online in Best Buy while requesting the concrete model of the definite product.

The fill rate metric is important for both Wal-Mart and Best Buy because of the necessity to focus on the availability of items to respond to the customers’ demands. Following the fill rate metric, Wal-Mart and Best Buy evaluate their supply chains and determine the elements or links which are weak to meet the needs of the company. As a result, while referring to such metrics as the lead time and fill rate, it is necessary to propose improvements to the operations of Wal-Mart and Best Buy’s supply chains (Best Buy International, 2014). These improvements should be focused on reforming the companies’ logistics in order to respond to decreasing the lead time and on reforming the companies’ communication with suppliers while focusing more on the advantages of the modern communication technologies to decrease the lead time and avoid stockouts.

The Ways to Improve Inventory Management in Wal-Mart and Best Buy

To achieve higher results and competitive advantage, Wal-Mart and Best Buy can improve inventory management without affecting the aspects of operations and the specific customer benefit packages. It is possible to focus on using more effective methods to calculate costs and safety stock levels while referring to the effective statistical formulas. The rationale for this suggestion is based on the idea that the improvement of inventory management is closely associated with balancing different types of inventory costs. As a result, it is necessary to pay more attention to counting costs and to forecasting sales based on effective statistical formulas.

The next improvement is associated with the necessity to pay more attention to avoiding stockouts because they can lead to decreasing customer loyalty. Thus, managers should pay more attention to forecasting when and how much to order while depending on the proper statistical and economic analyses. The improvement is important because of the changing trends in the markets and the necessity to respond to the customers’ expectations.

Conclusion

Companies should pay more attention to their approaches to inventory management because ineffective inventory management can lead to decreasing customer loyalty and to decreasing the company’s performance. On the contrary, successful inventory management is important to guarantee the effective operations and customer satisfaction based on the ability to buy the desired products while following the idea of demands or market trends. Wal-Mart and Best Buy use the developed inventory management approaches and strategies which are effective in contributing to the companies’ competitive advantage. However, it is possible to improve the companies’ approaches and ways to manage and control inventories because of the necessity to respond to market tendencies and changes.

References

Best Buy International. (2014). Web.

Boyer, K., & Verma, R. (2009). Operations and supply chain management for the 21st century. USA: Cengage Learning. Web.

Evans, J., & Collier, D. (2013). Operations management. USA: Cengage Learning. Web.

Walmart.com. (2014). Web.