Table of Contents
Two Perspectives on Merchandise Planning Dangers of Overstocking Dangers of Understocking Conclusion Bibliography
The objective of retail management is to increase sales and guarantee customer pleasure. As a crucial element of a retailer's performance, it involves a variety of responsibilities and demands qualitative and effective management. Procedures such as keeping and monitoring inventory, counting things, and predicting demand can increase a business's sales capacity. According to Berman et al. (2018), one of the key responsibilities of the merchandise manager is to establish and implement the optimal inventory plan. Others believe that insufficient stock can hinder them from making a sale, whilst some merchants view excess inventory as problematic because it can lead to steep markdowns. The purpose of this article is to investigate the hazards associated with retailers having too much and too little inventory.
Two Perspectives on Product Planning
A case study on merchandise planning gives two contradictory perspectives based on distinct arguments. To determine the efficiency of each plan, it is essential to evaluate the considerations a retailer must keep in mind when designing a functioning business strategy. Innovativeness, forecasts, allocation, timing, assortment, and branding are among the factors to consider (Berman et al., 2018). In this sense, shops that do not carry extra inventory rely heavily on projections and creativity, as they must anticipate client demand and maintain stock freshness to attract customers. Those who wish to avoid empty shelves must rely heavily on brands and timeliness to ensure client engagement and high sales rates in order to avoid negative seasonality impacts. According to Wako (2018), the scope of inventory management is so extensive that it includes responsibilities such as defective goods returns, future price forecasting, and asset management in addition to merchandise control and replenishment. Without a doubt, every merchant must take into account all criteria, although different strategies prioritize different aspects.
Regarding the argument over the quantity of merchandise, I feel that a corporation cannot fulfill its objectives without a well-balanced planning approach. Nonetheless, if I had to choose one, it would be "buy less, produce more." The appropriate inventory amount is determined by the company's sales capacity and environmental responsiveness. Both Stu and Karen from the case propose considering the customer's demands in this situation. While Karen cautions against reducing inventory levels and encourages always having exciting products available, Stu proposes the notion of fewer, higher-quality items. The strategy of "buying less" appeals to me more because it aligns with the current volatile market environment. In the era of sustainable development and conscientious consumerism, it appears prudent not to plan too far in ahead to prevent overstocking with obsolete, unpopular, or seasonal items that will not sell. Even if some sales will be lost as a result of having less inventory, this strategy is less damaging than having unsold items that have already incurred costs.
Risks of Overstocking
Numerous experts warn shops against overstocking and the associated consequences, among which are big markdowns. Companies with an excessive inventory are unlikely to sell all out-of-date fashions. In other words, a portion of their inventory loses liquidity. Other than decreasing the price, there is no other means to compensate for sales failures. However, reducing prices does not guarantee sales and still poses a risk to the product and distribution costs of the organization. According to the "you can't be a merchant without merchandise" tenet, a store should purchase enough things to attract and impress clients. However, poor planning and forecasting can result in inventory obsolescence, which is particularly undesirable for technology-focused companies (Berman et al., 2018). For instance, maintaining obsolete products is difficult and often impossible, and excess inventory of such items may result in losses for a business. Another disadvantage of overstocking is that it consumes too much space in warehouses, storage rooms, and inventory checks. Many businesses are aware of the risks associated with excess inventory and take steps to avoid them.
Similarly, some businesses adhere to the notion of maintaining adequate inventory levels. Amazon is an example because it strives to provide superior customer service, and its rules reflect this idea. As an online department store, the company maintains adequate inventory in order to maintain production and supply chain flow (Wang, 2020). Amazon nevertheless carefully plans its inventory levels and hunts for ways to prevent or reduce overstocking (Berman et al., 2018). A successful merchandise management procedure is essential to the success of the business.
Risks of Undersupply
A retailer faces substantial risks when they have insufficient inventory. Losing a sale is one of the most obvious negative effects of insufficient inventory and the worst in a retail setting. It is always simpler to maintain an existing customer than to acquire a new one, and understocking is a factor that is likely to lead to buyer discontent. A retailer’s reputation is harmed by a recurring inability to meet client requirements (Wang, 2020). In addition, a shop with insufficient inventory may miss out on advantageous rates and discounts on supplies or completed goods whose prices tend to rise over time. Shipping costs can be lower for occasional large orders than for frequent small sales, which is a risk associated with inventory. In this aspect, the "buy less, make more" method advocates making fewer valuable products available to customers. The strategy tries to attract customers with a steady stream of limited-quantity items. However, not all customers will tolerate the absence of products, thus it is in the best interest of the store to design an efficient plan and maintain an inventory that is neither excessive nor insufficient.
Apple is a corporation that shares the principle of avoiding overstocking. As a manufacturer brand, it anticipates demand for its inventions and products and adjusts its wares to the most recent technological trends. Apple relies heavily on its well-developed supply chain management (Lockamy III, 2017). The corporation obtains components and raw materials from several vendors, and then ships finished goods to customers. Amazon's strategy attempts to cut shipping costs and reduce the chance of losing out on advantageous prices or discounts.
Conclusion
This study concludes with a discussion of two contradictory inventory strategies and the accompanying dangers of having excess or insufficient inventory for merchants. To deliver enticing offers, a business need intelligent inventory planning, which comprises having the proper quantity of product available at the right time. Maintaining the correct inventory level is a continuous process that requires regular oversight. A retailer's primary responsibility is to balance the risks, consider the environment, and select a plan that aligns with the company's objectives.
References
Berman, B., Evans, J. R., & Chatterjee, P. (2018). Management of retail: a strategic approach. (13th ed.). Pearson.
Lockamy III, A. (2017). An analysis of external risk variables in the supply chain of Apple Inc. 18(3), 177–188, Supply Chain Forum: An International Journal.
Wako, E. (2018). The evaluation of inventory management procedures at the Hawasa Textile Factory in Ethiopia. 7(1), 1-8, Journal of Supply Chain Management System.
Wang, B., Wang, H., Yin, D., & Yu, X. (2020). Empirical evidence between unionization to inventory management inside a business. Business Review, 40(2), 53–74.
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