Nordstrom's Perpetual Inventory System


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Case Details:

Case Code : OPER025
Case Length : 16 Pages
Period : 1994 - 2003
Organization : Nordstrom
Pub Date : 2004
Teaching Note :Not Available
Countries : USA
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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Setting Things Right  Implementing the New System

Blake Nordstrom withdrew the 'Reinvent Yourself' campaign and made large-scale changes in the top management cadre.

But, like his predecessors, he realized that many of the problems could be controlled by setting right the inventory issue. Talking of how inventory management scored over the other strategic options he was pursuing to set things right, Blake Nordstrom said, "The schedule that was on the drawing boards had little chance of being successful. I did not think the timeline and resources were realistic." By the beginning of the 21st century, reports appeared about how Nordstrom was finally willing to speed up the implementation of a perpetual inventory system, an initiative started by Whitacre (it was reported that had it not been for Whitacre, the Nordstroms would have shied away from investing in this direction).

The implementation of the system was expected to be completed by 2002. Blake Nordstrom said, "We recognize that Nordstrom was founded on the simple idea of taking care of customers. We want to reconnect with them through improved merchandise execution. Our focus is taking appropriate steps toward implementation of a perpetual inventory system in 2002." ...

A Few HICCUPS

The above initiatives made many analysts comment that Nordstrom was all set for a revival. Therefore, the news of profits for 2001 declining by an astounding 50% over 2000 was seen as a very disturbing development. The share price had fallen from a high of $44.81 in 1999 to just $19 in mid-2001.

What was even more appalling was that Nordstrom had not fared well on what it considered to be its core competency, customer service. In 2001, Neiman Marcus was ranked the leader among all department-store chains in the US with respect to customer service...

Some Respite, At Last

Skeptics reportedly felt that Nordstrom was making yet another round of empty promises. Considering that it had been talking of reaping the benefits of the new inventory system for quite a few years without any result, the skepticism seemed quite logical. Under these circumstances, the company's healthy results for the second quarter of 2002 provided a long-awaited respite from a series of negative developments.

Profits stood at $65.9 million as against $36.3 million for the corresponding period in the previous year.

Exhibits

Exhibit I: Nordstrom - Seven Year Financial Summary (1997-2003)
Exhibit II: Inventory Management Systems - A Brief Note

 

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