What does a company do when sales go through the roof? A success company will plan ahead to enable them to stay ahead. Most companies are able to predict the company sales for at least three years in advance. Most success companies use a lot of data to help them determine their prediction for future of the company. However, there is something that a company cannot predict that is the acts of God known as tornado storm The year of 1966, Richard M. Schulze and a business partner opened up a store. The name of the electronics store was Sound of Music.
The store main items they specializing in are high stereos equipment. The store was located in Saint Paul Minnesota. Schulze used a lot of his personal savings and he took out a second mortgage on his home. He was able to opening up his first store in 1967. His first fiscal year he made one million dollars in revenue which is good for his first fiscal year. The profit for his first fiscal year was $58,000. A couple of years later he bought out his business partner. According to company history, “Sound of Music had three stores and the company became a publicly held company listed on the NASDAQ exchange”.
The location that Sound of Music predicts to be the most profitable store was hit with a tornado storm. This tornado storm upper management did not foresee this coming. The store’s roof top was taking completely off. The stockroom was left safe, but Schulze did something to make sales go through the roof. Schulze decided to have a “Tornado Sale” of damaged and excess stock in the store parking lot. This could have broken Sony Music or taking the specific location a longer time to rebuild. However Richard M. Schulze used this storm as a game changer for his company.
The wind blew the Sound of Music in another direction. He used remainder of his marketing budget and dispenses it into advertising for his company. This storm created a good sale that generated more revenue for the company. They had a four-day sale that made more in those days than any usual month. Two years later Sound of Music changed their name to Best Buy. Best Buy expanded their product offering in wide range. Their target customer was young males from the age group of 15 to 18. The reasons why I choose Best Buy as my project are for the following reason.
Best Buy is my father favorite place to shop when I was younger. The older I got and my needs for music, laptop, and other accessories for the laptop. I also when back to my father favorite story. However, the older I grew the less interested I was in Best Buy. They have a lot of different electronics items available but their database is not accurate. I started shopping online but most of the sale item or the hot items would be out stock. The methods that I listen below if best buy would implement this would help bring old customer back and draw new customer in.
Inventory management known as planning and controlling of inventories in order to meet the competitive priorities of the organization. Inventory plays a big part in the company business. Best Buy inventory manager knows the important of making sure inventory database is correct. The company wants to have enough inventories available to meets the consumer needs. There is no need to keep plenty of products available to customers if it is not consider as a hot item. The space can be utilizing for a hot item known as a popular items. Inventory manager uses the data to determine what to order and when to order.
Best Buy used a system to control their inventory. The name of their system is Retek Support System known as RSS. The system is design to control inventory so there will not have excess of different items. The goal is to keep inventory to a minimum. Best Buy does not have raw goods on hand. The merchandise they carry is complete goods from different vendors. For example, they carried IPhone, computer, stereos, printers, and etc. The goods they offer to consumers are not raw goods but finished goods. Best Buy also use another system called the (P system) to help control their inventory.
The system is design when a product is sold the system takes it out the inventory. Then the system automatic generates an order for the upcoming shipment. Best Buy is running into so problems with their inventory system. Customers are ordering products which show that the merchandise is in stock. The system can only order what the sales associate take out stock. The problem that best buy is running into is not on the big items like computers. It is the items that are counted as accessories for computer. For example, a customer comes and buy there different types of computer cords.
The cashier scans the first part three times knowing that the system is going to take three out stock. However, the cashier should have scanned all three parts. The parts were made from the same company but different lengths. The quantity on hand will not match the number that (P system) correct count. This is an issues of one of the complaint customer are having. According to textbook, Process analysis is known as the documentation and detailed understanding of how work is performed and how it can be redesigned. It begins with identifying a new opportunity for improvement and ends with a revised process.
Best Buy was predict to go down a few years ago just like one of their competitor Circuit City. They when through years of losses, and eventually when bankrupt, but best buy had a plan in mind that need to be execute. Most consumers and even I were thinking that best buy was about to go out of business. Best buy is one of my favorite stores but I’ve soon lost interested because their price was higher than some other retailers. Another one of the competitor came in as a strong force and consumer beginning to order from Amazon. Amazon had the best price for the same exact product.
Best Buy ROE which is return on equity was a negative 8% at the end of 2011. Best Buy had to turn their operations around if they want to stay in business. They implemented a plan to match their competitors on price and to focuses more on providing outstanding customer service experience. They had to cut cost down by shut down low-performing stores. They had to use those stores as distribution center for their online sales orders. Three year their ROE was a positive 8% verse a negative 8%. They agreed to match their competitors on price. When they agree to that it put their gross margins under pressure.
Their revised plan draws their customers back to the store. They announced their strategy as the Renew Blue strategy. The end of 2014, they had exceeded their cost reduction goal of $725 million dollar. According to the textbook, a supply chain is the interrelated series of processes within a firm and across different firms that produces a service or product to the satisfaction customers. Best Buy is experience a big payoff from their supply-chain processes. This plan is helping lower pricing and opening up more space on the sales floor. There were several areas that they were overlooking that can help with saving.
They have a system in place that has help to shorten up truck trips by reallocating inventory so that shipments are ship from a distribution centers nearest the customer destination. They also are redesigning their website online. The new website online is going to help with their customer service level report and help resolve some of the complaint. The order that is created online if the distribution centers is out of the selected item the customer chose. If a store near them has the item the system will generate an order for the store to ship the order to the customer.
The company does not want to have an item in stock in the store and cannot ship to the customer. This will help to keep customers and attracted new customer. Forecasting is a prediction of the future events used for planning purposes. Forecast is very vital for Best Buy or any company in general. These methods are resourceful for managing and processes and managing supply chain. There are times when the forecast predict for sales to be high but in reality they are low. There is a demand patterns but sometime they are not accurate. For example, around the holiday the items that Best Buy is having on sale or items that maybe consider hot.
These items have a limited on it most customers’ ends up get the item after holidays. They have a good sale but low inventory which makes the item out stock. Best Buy is known as a multi-national retailer of consumer electronics. Most popular items they carry are computers, mobile phone, TV, appliances, and much more. The SWOT analysis that I did on this company is as following. Best Buy strengths are listed as following: Over two decades of brand presence, with at least one decade of extremely strong brand recognition within the US, longstanding relationship with vendors, and well-known brands.
Their weakness is an area they must improve if they want to stay ahead of their competitors. For example, too many brands, poor inventory management, recent senior Leadership turnover, and weakening financial situation. Their opportunities are as following: lower overhead costs, online retailers are poised to, experimenting with, offering same-day delivery via courier, and increasing need for IT Outsourcing. The threat best buy is facing are as following: low frequency of television upgrades, cheap retailers such as Walmart, and exchange rate fluctuation. Their top competitors are Amazon, Digital River, and Google.
