Question

On an early July morning a crowd has gathered for the opening of Trader Joe's newest store location, in Manhattan's Chelsea neighborhood. As shoppers stand in line for the store's opening, they chat about their favorite Trader Joe's foods and discuss the ben- efits the store opening will bring to the area. Why the excitement? Trader Joe's is no ordinary grocery chain. It is offbeat and hip, having elevated food shopping to a cultural experience. Trader Joe's has developed an almost cult following and is one of the hottest retailers in the United States, with 344 stores in 25 states and Washington, D.C. They see themselves as a national chain of neighborhood specialty stores, stocking shelves with a winning combination of low-cost, yuppie-friendly goods. This includes staples such as cage-free eggs and organic blue agave sweetener. They also carry the exotic, such as Belgian butter waffle cookies and Thai lime-and-chili cashews—items difficult to find anywhere else. What is most remarkable about Trader Joe's is that they have found a unique way of addressing the problem that has traditionally plagued grocery stores: carrying large numbers of highly perishable food items in large varieties. A typical grocery store carries about 50,000 stock-keeping units (SKUS), while Trader Joe's carries about 4,000 SKUs. As a result, its stores sell an estimated $1,750 in merchandise per square foot, which is more than double that of Whole Foods. The company doesn't carry much inventory and has little backroom space for storage. However, the inventory that it does carry is carefully selected. Trader Joe's pursues a limited-selection, high-turnover inventory model. One example is peanut butter. Trader Joe's sells 10 varieties, compared to most supermarkets that sell about 40. This has huge implications for inventory turnover. Imagine that a typical super- market and a Trader Joe's both sell 40 jars of peanut butter a week. Trader Joe's would sell an average of four of each type, while the supermarket might sell only one. With the greater turnover on a smaller number of items, Trader Joe's can buy large quantities with deep discounts. It also has lower losses due to shelf life. This makes operations—from stocking shelves to checking out customers—much simpler. Customers accept Trade Joe's limited variety trusting that the company will stock only the best. For example, there are only two kinds of pudding or one kind of polenta. As one

Please read the opening Vignette about Trader Joe's inventory practices. How has it helped you comprehend the dilemmas and practical issues of managing supply-chain inventory.

Please explain in great detail. Thank you!

Answer 1

answer-

Managing supply chain is not an easy task to do. Management of supply chain requires meeting the demand of customers in low cost manner but in effecient way as well. The case of trader's joe put light on dilemmas and practical issues that traditional stores face in supply chain management are over strocking of inventory, wastage of inventories, wide variety of goods but poor selection of them, increase storage or holding cost of inventory and leftover stock which perish in less time.

We can manage remove these dilemmas by focusing in optimized supply chain management where we can focus on forecasting the demand of customers then see what products are in demand so we only buy those products. This will help us to reduce inventory turnover, holding cost and we will be able to meet the demand of customers in efficient and responsive way.

for example- if we customer likes two brands of peanut butter in the past which has been high on sale then buy only those two brands instead of buying 10 different brands which would be left in stock at the end of the year causing increase in holding cost.

We also focus on nature of goods like highly perishable goods must be purchased in less quantity in less variety because they have low shelf life and it would be costly for us if they did not purchased by customers. This will help us to restock the shelves where we can get discount from suppliers on buying again and again while reducing inventory turnover and warehouse cost.