Wholesale Distribution of Plush Toys: Teddy Bears
In a bid to address the challenges posed by oversized items causing cost and customer satisfaction issues, a new entrant in the general merchandising business has implemented a strategic shift. The company's new approach, a pseudo-drop shipping model, aims to streamline supply chain operations and improve customer satisfaction by reducing delivery times.
The company's Category Managers, responsible for expanding product assortments and procuring new products, have been tasked with striking a balance between unique product offerings and supply chain considerations. This balance is crucial in retail, and the company is strategically aligning its product breadth and depth with supply chain capabilities and constraints while leveraging data-driven analytics and collaboration with suppliers.
Key tactics include optimising assortment breadth and depth, using analytics for granular assortment and inventory planning, implementing hybrid inventory models, collaborating closely with suppliers, maintaining inventory accuracy with cycle counting, building flexibility into trade and inventory plans, and investing in Category Management skills and tools.
The implementation of this new strategy, however, was not without its initial hiccups. The Category Managers failed to communicate effectively with the Supply Chain team about their procurement decisions, leading to the arrival of a multitude of oversized items, including giant stuffed teddy bears, backyard slides, swing sets, bicycles, and mountain bikes.
To address these issues, the company set up a temporary operation in Vancouver to handle the oversized items and avoid shipping them to central Canada and back to western Canada. This decision is expected to reduce the costs associated with shipping oversized items back out to consumers, provide space relief in the central Distribution Centre, and reduce delivery times, thereby improving customer satisfaction.
The pseudo-drop shipping model, similar to Costco's drop shipping model, involves keeping a lot of the product in Vancouver and fulfilling orders from there to cut down on outbound shipping costs. This approach is expected to improve customer satisfaction by reducing delivery times and providing a more efficient supply chain system.
As the retailer continues to navigate the challenges of the general merchandising business, it is clear that a data-driven, flexible, and collaborative approach is key to balancing unique product assortments with supply chain considerations. Category Managers are urged to consider net margin, which includes all costs involved in moving products, not just gross margin, to ensure profitable operations without excessive inventory risks or operational inefficiencies.
- The company's Category Managers are strategically aligning industry trends, product breadth and depth, with supply chain capabilities and constraints, leveraging data-driven analytics and collaboration with suppliers.
- In the new supply chain strategy, the retailer is using logistics and distribution tactics, such as optimizing assortment breadth and depth, analytics for granular assortment and inventory planning, implementing hybrid inventory models, and collaborating closely with suppliers.
- To manage risks in global trade, the company's Category Managers should consider net margin, which includes all costs involved in moving products, not just gross margin, to ensure profitable operations without excessive inventory risks or operational inefficiencies.
- The pseudo-drop shipping model, a cost-cutting approach, involves finance management, keeping a lot of the product in Vancouver and fulfilling orders from there, reducing shipping costs and improving customer satisfaction by reducing delivery times.
