Leon - United Furniture Warehouse – Slow Moving Inventory

Leon - United Furniture Warehouse – Slow Moving Inventory

Contents

Executive Summary        3

1.        Issues identification        4

2        Operating Environment        5

3        Root Cause Analysis        7

4        Alternatives/Options        9

5        Recommendation        13

6        Implementation        14

7        Monitor and Control        16

Exhibit 1        18

Executive Summary

As one of the leading retail stores, United Furniture Warehouse is a subsidiary of The Brick which was acquired by Leon in March, 2013.  There are 302 stores nationwide and the company is third in market share according to The Canadian Mattress Industry.

United Furniture Warehouse has an uphill task of improving Inventory management. Currently the company is overstock on king size mattresses and Tim Edwards, the warehouse operations manager recently found out about this. The market seems to be trending away from this size mattress but due to the financial incentive of bulk purchasing, the purchasing department has been employing this strategy as the only way to cut cost. This has compounded the problem. Tim is actively trying to fix this issue and has a management meeting scheduled to outline how he will approach and resolve the matter.

An assessment was done with the information provided on United Furniture Warehouse to find a possible solution to the problem. The following alternatives were made: Implement Vendor Managed System, write policy and procedures on excess, Acquire Sears Home, Vertical Integration, Stronger Research and Development.

In the end, it will be a collaboration amongst purchasers working with suppliers to build relationships, warehouse manager drafting policy and procedure for excess stock management and Leon looking into long term goals such as vertical integration and acquisition. These suggestions seek to build on the company’s current strengths whist working on improving weakness and looking into ways to mitigate treats whist actively working on opportunities.

1. Issues identification

        The main and most urgent issue is inventory management, specifically the issue of king size mattress overstock in the bedding department. From this issue flows a plethora of other issues which shed light on how the company can improve in other areas to alleviate the current issue but also make the company more profitable.

1.1 Excess Inventory – demand variability causes inefficiencies in the supply chain which results in low inventory turnover

1.2 Lack of operating procedure in place to deal with excess inventory allows crowded warehouse  and increased cost for managing stock and storage