Problem 2:
High Inventory Cost
In recent years, Shopko is facing higher-than-average inventory costs due to gross
mismanagement which was the main reason why they are having trouble and not able to
provide the product at an everyday low price compared to other competitors like Walmart.
There are numerous ways for proper management of the inventory with the help of a lean
production system[ CITATION Tom19 \l 1033 ]. Inventory management is a crucial part to reduce
the production cost as well as contributing to its success. We need to introduce some cutting-
edge technology to properly optimize inventory management performance. As there is a lot of
competition in the market their success is highly dependent on the high inventory management
efficiencies and proper approach towards product development. Just-in-Time Cross-Docking is
one such method where effective inventory management is possible thereby increasing
Shopko's efficiency and reduce wastage. This process involves measuring the activities to
minimize storage and relevant costs.[CITATION ROB19 \l 1033 ]
SOLUTION:
Just-in-Time (Inventory Management)
As the Japanese manufacturers were facing many challenges like lack of money, lack of space in
the warehouses, and lack of resources. These factors were limiting the Japanese manufacturer's
potential for industrial success and were necessary to remove for their efficient performance.
Then, Toyota one of the largest automobile manufacturers at that time introduced the lean
production technique, Just-in-Time to their manufacturing facilities to make their production
efficient and reduce related costs and wastage. Their management was built upon just in time
inventory management which is a very highly efficient system that minimizes related cost and
support customer needs. This was not achieved overnight rather for Toyota it took years to
perfect it. Now most popular industries throughout the world are using the Just-in-Time
inventory management practices like Dell, McDonald's, and Walmart. [ CITATION Kan18 \l 1033 ]
This lean philosophy helped some organizations to properly utilize their resource to achieve
sustainability and manage resources more effectively. In summary, Just-in-time Inventory
Management is not a strict guideline and is more kind of philosophy when it is properly
adopted. It also helps the organization to sustain its competitiveness in the market. Just-in-time
helps companies to:
Eliminate nonvalue added activities and Reduction of wastage.
Product quality is improved and its efficiency to produce it.
Efficiently management of expenses and increased productivity.
Just-in-Time Cross-Docking in Shopko’s Inventory Management
Just-in-time inventory is nothing but an application of the just-in-time (JIT) method to inventory
management. The operational objective of this method is to minimize the storage area as well
as related costs to it. It can be in a form of Cross-docking. [ CITATION Kan18 \l 1033 ]
Image 2.1 - Cross-docking Terminal [ CITATION Pau11 \l 1033 ]
This logistics procedure involves distribution directly to the retail chain from the manufacturing
cost thereby reducing the handling time and storage time. The cross-docking which takes place
in the distribution docking terminal usually has the truck's dock door on two (inbound and
outbound) Sides as shown in the image. The name itself explains the process where products
are revised at the inbound dock and unloading, screening, sorting, and reloading is done and
then transfer to the outbound dock after that the truck when receiving the product delivers it
to the Shopko stores across the regions.[ CITATION Pau11 \l 1033 ]
One of the reasons the cross-docking has been used here at Shopko is that it minimizes the
inventory size. Fewer goods can now be stored and the inventory is less costly to maintain.
Also, with the help of cross-docking Shopko can deliver the products in less amount of time
which results in reduce handling cost and storage cost. With this, the most important aspect
fluctuations in demand and changes in the market can be address rapidly. Thus, if this Just-in-
time Inventory Management is applied to Shopko it will definitely increase the operational
efficiency and maintain a competitive advantage over others.[ CITATION Pau11 \l 1033 ]
Once the implementation of JIT is successful thought out the inventory the company will have
an enhanced cash flow due to less inventory and more cash for the business. Just-in-Time is
also helpful to reduce down the wastage. As the wastage is reduced and the cost of goods
declines, it only benefits the business and its customers. The customer can buy the products at
a lower price and the company can sell the goods at cheaper rates compared to other retail
stores.
Conclusion:
In this study, the findings and implementation of solutions to Shopko's problems have both
theoretical and practical implications. It enables a better perception of the complexity of
customer satisfaction, performance, and types of strategic action firms might undertake to
capitalize on improved operations. While a comprehensive evaluation has been considered
these are the three solutions, we have proposed that guide Shopko towards operational
efficiency and business resilience. Firstly, the Lean production system initiates the appropriate
strategy to deal with a competitive market and also benefits the improvement of cash flow and
profitability. Secondly, with Just-in-time implemented successfully thought out the inventory
the company will have an enhanced cash flow due to less inventory and more cash for the
business. Moreover, it reduces the wastage thereby reducing the cost of goods, it not only
benefits the company but also their customers. Lastly, with the proper evaluation, the needs of
the customers can be identified, and it can be implemented in order to attract new customers
and lead the market. All these solutions will help Shopko in a competitive advantage over other
retail businesses and operational efficiency with better business performance and customer
satisfaction.