August 25, 2010 Leave a comment
The New York Times recently reported that Nordstrom had increased sales, customer satisfaction, and inventory performance by advertising available soft goods on their website. In this way, customers can reserve an item and pick it up at one of the stores, or the item would be shipped to the customer from the store that had inventory or by the warehouse. This has resulted in increased profitability as well.
This reservation system has been in place in retail for furniture and bedding so this is a natural progression. Other industries, particularly in manufacturing, have employed this type of system. I ran a group at Digital Equipment that tracked and used parts from thirteen plants worldwide and the most important aspect of this type of system was inventory accuracy. At Digital, we would have products reported available that were defective, were missing, were marked as the wrong product, and quantities were typically overstated.
I believe that the retail industry can use a system like this one to get the results reported by Nordstrom, with the following provisos:
1) Implement a lean six sigma approach to inventory management
2) Upgrade all inventory systems and like to website on a virtual basis
3) Train all staff on procedures
4) Carefully evaluate customer experience, and suggest that rather than wait for complaints, reach out to customers once they use the new system.
This is not necessarily innovation. It is using a proven system that has been in place for over 30 years, and using technology and virtual systems to apply the concept to new industries.