About Nordstrom..

• 1901- started as a small shoe store in

Seattle
• With a Motto- “ offering quality,
value for money merchandise and
better customer service even
though there is stiff competition”
• From shoes to apparel to specialty
stores…
 About the case…
• Shareholder’s return and net profits
start declining
• Board Meeting Chaos
• Scaling Down growth plans
• The problem???

“Reluctance in adopting a proper

inventory
management system”
• More problems
What is Inventory management???
• Inventaire- a detailed list of
goods
• The single largest asset in many
retail and wholesale operations
• “When the customer spends, you
have got to be ready with the
goods”.
• Inventory Control and
Management
Perpetual Inventory Management

• Continuous real-time tracking of

quantities of a product
• Exact inventory status!! At any given
time!!
• Integral aspect of the ‘Q’ system of
Inventory management
• Perpetual V/s Physical Count
• Perpetual Inventory Modules
Back to Nordstrom - sliding down…
1990s- Nordstrom’s “ superior
customer service” got outdated in
the 2000s
Reluctance to invest in Inventory
Management
Lacked the tools to support
inventory management and pipeline
management
Operations personnel unaware of
 And the slide continues…
Over confidence on “Nordstrom image”

Decentralized- Key decisions to low-

rung employees

To avoid customer disappointment-

huge inventory

Huge holding cost, inventory carrying

cost
 Realizing the mistakes…
Ø Withdrew the wrong marketing initiative
called " Reinvent Yourself“
Ø Made large scale changes in the top
management
Ø Importance of INVENTORY MANAGEGMENT
Ø Shift to Perpetual inventory-react to changes
in fashion
Ø Focus shifts to 3 core activities—
Ø Drive top line growth
 Corrective Measures..
• Productivity to be increased by—
– Inventory Management
– Inventory Allocation
– In-stock Position
– System Leverage
– Expenses Leverage

• Training on the New Inventory

System- Mandatory
• MONTHLY RECORDS OF
– Sales and Gross Margins
– Inventory Quality and Efficiency
– SCM
– Labour Savings
 The Nordstrom revival…
Initial glitches
vDeclining profits

vFall in share prices

vCustomer service!!!!

vSevere Competition

BUT!! The new inventory system was

showing its results…
vImproved MERCHANDISE tracking

v
 BENEFITS OF PEPETUEL INVENTORY
MANAGEMENT SYSTEM

More time for Merchandise Buyers to

plan.
Planning regarding Discounts and
Markdown.
Reduction in time required to attend
the Customers.
Information about availability of goods
 AFTER EFFECTS
Ø Increase in 2nd Quarter Profit from $36.3
Million in 2002 to $65.9 Million in 2003.
Ø Sales per square foot increased from $319
in 2002 to $325 in 2003.
Ø Net Income: $242.8 Million in 2003
Ø Revenue: $6.4 Billion
Ø Ranked No.1 by Fortune in 2005 in General
Merchandise Category.
Thank You….