Inventory Performance Analysis - Essay Example

After conducting an analysis of the store with my manager, we managed to identify the underperforming SKUs to be imported electronics, cheap children’s toys, cigarettes, washing detergent, branded cosmetics and instant noodles. Various factors have contributed to the underperformance of the products with each product being affected by its unique factors as discussed below.

To start with, imported electronics sales are low in the store currently compared to current demand in the market. From the store records, the electronics can be out of stock for up to one month due to shipping delays. The product lead time is longer than the lead time for other products coupled with low back stock quantities in the store.Also, in most cases, manufacturers of these products practice just in time production so that there is no inventory; rather, products are produced as soon as an order is placed. In case of any delay in the acquisition of raw material or in the manufacturing process, the manufacturers are not able to meet the production deadline thus leading to delayed deliveries. Logistical problems affect product performance due to its effects on availability and accessibility of the products (Jaffeux and Wieser 2012). Another major issue causing low performance of the imported electronics is availability of spare parts. Most spare parts are not locally available so that when a part needs to be replaced it must be imported from the source country which is not only expensive but also time consuming. To improve performance of these products, there is need to make better arrangements in terms of shipping to avoid delays and ensure orders are placed in advance before the products are totally out of stock. Also, it may be important to start trading spare parts to avoid inconveniences to customers who need them thus increasing sales.

Cheap children’s toys are also showing a downward trend in terms of sales. Unlike electronics, the toys are widely available in large quantities in the store and are of different varieties made of plastic. There are no delays in their delivery whether locally produced or imported and they are available in a variety of shapes and colors. Given their low cost, it is expected that the products perform better than the more expensive competitors. However, this is not the case; the products are not having repeated sales as indicated by an internal research through customer’s feedback. The toys have been reported to easily breaks thus are a risk to children especially younger ones. As a result, the products have received negative publicity among parents with young children affecting its sale directly. Today’s customers are more interested in quality and safety than quantity thus poor quality products are not widely accepted (Dettmer and Dettmer 2007). Numerous complaints from customers have been received and forwarded to the manufacturer. Competitors have taken advantage of this situation to market their more expensive but durable plastic toys further affecting the sale of the cheap toys. In this case, it may be necessary to request manufacturer for improvement of quality of toys through use of harder plastic that does not break easily and increase pricesto match the quality.

Moreover, Cigarettes are another class of products facing challenges in terms of sales. Cigarettes sales are constant over time with a slight drop experienced frequently; when compared to other tobacco products.This is not expected of cigarettes given tis addictive natures thus demand is not expected to fall. There are no logistic problems in the supply chain as the suppliers are constantly asking to supply more. However, there is a problem with the product facing. In the store, cigarettes are only displayed at one point which is at the corner of the store. The number of packets displayed is also limited plus the glass cover restricting access to the product unless an attendant is present to help access them. The restricted access is majorly due to legal regulations on sale of cigarettes to underage children thus the store is taking steps to avoid free access to them by everyone. In the process, the overall sales have gone down. Though there is competition in the market, the competitors do not have much effect on the product performance due to their large number thus action of one firm cannot affect the whole industry. Further, there are no efforts by the store to improve sales of cigarettes as compared to other products where sales promotion and other marketing activities are undertaken when sales fall low. Another major factor affecting sales of cigarettes in the store is a health awareness campaign carried out by activist informing people of the health hazards of smoking cigarettes. The attitude of the society affects their acceptability of a product which directly affects sales (Lamb,Hair & McDaniel 2010). Though these are external factors, the effects are felt in the store as sale has been affected due to change in societal attitude towards cigarettes. The most that can be done in this case is to display the products in an open shelf then restrict sale at cash point. In this way, the product will be easily accessible to customers while restriction as cash point avoids its sale to minors.

Further, washing detergent is another product not performing as expected. There is no sales growthof the washing detergent for the past three months; instead, a downward trend in the demand is being observed in the store. Although the products are displayed on the first row of the store to attract consumers, the planogram is not being followed to perfection. The product is allocated a shelf of its own facing the entry and the window for a good display; however, the display is not well presented. In most cases, the products are not arranged in the specified order that is required to create an attractive sight that will attract customers. Instead, the products are hipped together on the shelf forming a mass of disorganized products with some of the shelves being empty. Management of product shelving is important to the success of a product in the market thus poor shelving reduces sales (Noonan 2010). Further, there is entry of new competitors in the market who have undertaken intense marketing activities resulting in demand shift to the new product. The competitor is keen to emphasize on the superiority of the new product while having a slightly lower price for the introduction. On the other hand, the producer of the detergent stocked in our store has not responded to the new market entry leading to reduced sales due to shifting of consumers. To correct this underperformance, a corporation between the producer and the store is necessary; the store needs to improve its shelf organization to ensure attractive display while the producer needs to increase its marketing activities to counter new competition.

Branded cosmetics are showing trends of non-performance in the store. This is detected through the rare order placement indicating that the products are not moving fast. The sales in terms of quantity are also low in the store. The problem of branded cosmetics stems from the supply chain where the chain is mostly not present; in most cases, the products are sold directly from manufacturers to retailers. As a result, there is always a problem in the ordering process given the long documentation required by the firm in order to process orders and deliver. The process takes some days thus delays in delivery are common. Moreover, the quantity of products ordered also matter given that the producer has a given limit of quantity it can supplythus an order falling short of the specified quantity is not delivered which is an additional cost to the store management to collect the merchandize through their own means. The additional cost is passed over to customers through higher prices which further discourage purchases. Further, the cost of these branded cosmetics is generally high making them unaffordable to most consumers. Additionally, shelf space allocated to these products is not enough to create a visible display. While other products have upto a whole shelf for display, branded cosmetics are allocated a small space mainly due to their small size thus though the display is good, it is not conspicuous enough to attract customers. Twenty cosmetics arranged neatly on the shelf is not as attractive as twenty packets of detergent due to the size of the packaging; display should be large and visible to as many consumers as possible (Bhalla and Anuraag 2010). Therefore, to improve sales, there is need to consider amount of space allocated to the product rather than the number of products displayed. Further, logistic issues need to be handled to improve access to products on time; for example, placing larger orders that can be delivered and placing orders before the product is totally out of stock. Since prices can be reduced, marketing activities centered on the quality of the product is necessary to improve sales.

Instant noodles are another non-performing product in the store. Fast moving commodities in the store are mostly restocked more than twice a week in the store depending with the demand in the market but the noodles in the store are restocked a maximum of once a week and in some cases restocked once in two weeks. Given that it is a fast moving commodity, noodles supply chain is well established with middle persons to ensure products reach retailers. The products are handled well from the producers through the intermediaries to the store. Poor handling of the product occurs in the store which reduces their quality significantly (Quayle 2006). Given that the store shelves are not big enough to fit all the products supplied, some are displayed while other are stored away awaiting to be displayed as soon as the shelf stock run out which mostly occur about twice a day. In the storage process, the products are kept in a store with many other edible products without consideration of the weight so that some noodles are crushed by the weight of other products in the store reducing their quality. By the time they are placed on the shelf for display, they are already broken thus very few customers are willing to buy them. Therefore, though the product presentation, packaging and display are good, the handling in the store reduce sales of the product. To correct this, it is necessary to improve storage of products in the store having different sections for different products to avoid spoilage.