Inventory Management
Nike Factory Store at Tinton Falls, New Jersey has used the S&R department since it first opened in 2005. S&R simply stands for shipping and receiving. It is one of the most important departments of the store. Its functions include receiving shipments, handling shipment, inventory management, and the process inventory undergoes before it is put on the sales floor. What is also an essential tool that is used by the S&R department is the Hand Held Terminal. (HHT) The HHT is a machine that holds information on the entire S&R department including inventory, audits, bin storage, and item inquiries.
Nike Factory Store uses their S&R stock room as the main area for their inventory. Nonetheless, the HHTs are used to help look for item or determine the quantity. At this Nike Factory Store, a continuous review system is used by having the HHTs which will be discussed later on how this occurs. Also, the store has independent demand items which are defined as items for which demand is influenced by market conditions and is not related to the inventory decisions for any other item held in stock or produced. (Operations Management) This type of inventory is common in retail merchandise stores. Nike has a great amount of inventory that is influenced by market conditions. For example, cold weather has a lot to do with Nike’s inventory on winter hats, warm running apparel, and warm accessories that customers expect to buy. Therefore, Nike must have enough inventory to meet their customers’ needs.
(HHT)The S&R stock room is about 1,000 to less than 3,000 square feet. The inventory consists of many types of shoes, apparel, accessories, and equipment. Shoes consist of men, women, and children. Men’s apparel consists of men’s training, sportswear, Jordan, basketball, and running. Women’s apparel is the same minus Jordan attire. The stock room has space for bathrooms, desktop with computer, and can fit up to about 3 tables where employees can process the shipment. It also has space for shipment when received and equipment such as footballs, basketballs, water bottles, etc.There is a door as well that leads to the outside where shipment is brought in.
There is an entire process that occurs when S&R receives shipment. First, Conway is the trucking company that handles the shipment coming into the stock room. According to the Operations Manager, shipment is received five days a week. Therefore, the reorder point is based on five days which is also determined by the registers. The registers contain a system called Point of Sale. When items are scanned and sold, the information gathered is directly linked to corporate. Corporate then decides how much inventory to send to the factory store. This is an example of a continuous review system.
For example:
The demand
for the Nike Free Flyknit sneaker is about ten shoes a day and the lead time is
5 days. The Flyknits were just restocked in the aisle which left 35 on-hand
inventory. There were backorders but the open order consists of 100 more pairs
of Flyknits. Therefore,
R= Total
demand during lead time= 10(5)= 50 Nike Free Flyknits
IP= OH+SR-BO
= 35+100-0= 135 Nike Free Flyknits
This concludes that there should be
no reorder of the Nike Free Flyknits because there is already an open order for
them. Unlike our example, corporate receives this type of information
automatically through computer systems. With technology, inventory management
has improved on having the correct amount of inventory on-hand.
Shipment is
received in boxes. Usually footwear contains the bigger boxes, but is easier to
process. The entire S&R process
consists of about two to three workers plus a manager. The manager will scan
the boxes into the HHT and that determines if the right amount of boxes came
in. While that occurs, the employees bring in the shipment and place them in
accordance with their PO number. Since footwear is easier and faster to
process, it goes first. Equipment needed are box cutters, price guns, censors,
hangers for apparel, tables to fulfill the process, and carts/rolling racks to
hold the apparel or footwear that will go out on the floor.
There
are usually about two to three employees working in the stock room during the
receiving of shipment. It also depends what day of the week it since more
shipment is received by the end of the week. This occurs in order to have
enough on hand for the weekend. Customers’ demands are a lot higher during the
weekend, especially when there are events or special promotions. Two employees
will work on shipment while another back stocks the extra inventory that cannot
fit out on the floor.
To
start with footwear, an employee cuts open the boxes, the HHT is used to
determine the correct price. Then the correct price is applied to all shoe
boxes. They are placed on the table and one has to apply censors to each pair
of shoes. Applying censors can reduce shrink rates. Finally, a size run of the
shoe will be put out on the floor. Usually thirty pairs fit out, sometimes
forty seven depending on the space made available in the aisle on the floor.
For
apparel the same process occurs. However, after the apparel is censored then
they are placed on the appropriate hanger. Men’s clothes go on men’s hangers;
the same applies to women and children.
One the clothes are fully processed they are then placed on rolling
racks to take out on the floor. A usual size run consist a total of fifteen of the
item. An example would be with graphic t-shirts. Fifteen t-shirts are to be
displayed; therefore, each size must be put out but it has to equal fifteen.
Finally, however much inventory that is left must be back stocked. This means
the extra on hand inventory is to be placed in bins for storage until what is
out of the floor has to be refilled.
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