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management wanted faster inventory updates and easier tracking of the performance measures
that it monitors.
In general, logistics managers track six performance measures. These measures are the
distribution costs per case, percentage of goods shipped by cross docking, number of errors in
“picking” inventory per order, percentage of orders filled completely, and proportion of on-time
arrivals of distribution centre trucks at stores (see Table 3). Performance measures are monitored
weekly for each distribution center. Management examines all measures that fall outside of
expected ranges to determine potential causes and to take corrective action, if necessary. Summary of Stock Management Interviews
Once vendors have been chosen, the stock management group determines the amount and timing
of product orders. In conjunction with logistics and distribution, stock management establishes
inventory levels for each of the distribution centers (i.e., warehouses). The key buzz words for
stock management in the industry are “days supply,” which means the number of days of
inventory in a given distribution center. The most important aspect of managing stock is
accurately forecasting consumer demand for the product. The ability of the stock-management
team of any grocery chain to forecast stock-level requirements accurately has a direct effect on
costs, because of inventory holding costs, which are included in cost of sales, and the opportunity
cost of lost sales, which is potentially even more important.
Loblaw makes three types of purchases, each of which calls for a different type of forecasting.
First, regular buys are targeted to keep inventory in the distribution centers at specified levels.
Buyers use a computerized inventory order support system that automatically suggests orders.
Second, buyers engage in promotional buys of extra stock to meet increased demand during a sale
period. Finally, buyers can forward purchase when a supplier notifies Loblaw that a product will
be subject to a price increase in the near future. Stock managers decide whether to purchase extra
inventory before the price increase.
Stock managers in the industry regularly monitor inventory turnover rates, inventory levels, and
the sales-to-predicted-sales ratio (see Table 3). Some products are monitored daily while others
are monitored less frequently. Summary of Price Management Interviews
The goal of the price management team at Loblaw is to ensure that Loblaw meets its commitment
to competitive pricing while maintaining a profitable, growing business. In meeting this
objective, Loblaw’s price-management team carefully prices each product in a category and
considers relative price relationships within the category (i.e., Loblaw’s private-label products 22 n KPMG/University of Illinois
Business Measurement Case Development and Research Program July 1999o priced below national brands in any category) and for substitute goods (i.e., instant coffee vs.
To ensure competitive pricing, Loblaw carries out a program of extensive price checks at
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This note was uploaded on 01/27/2014 for the course ACCY 405 taught by Professor Staff during the Fall '08 term at University of Illinois, Urbana Champaign.
- Fall '08