Over the weekend, I went to a local Texas Target store to buy a Christmas-themed gift card. I checked a few registers and all I could find were for new babies, birthdays, or “LOVE.” Not a single Christmas, winter, or holiday gift card to be found in the entire front of the store, the grocery area, or the greeting cards area.
My point here is not just to complain, but to illustrate some important inventory management points for our own workplaces.
Managing inventory for the holiday season has got to be a tough balancing act for many businesses. When you have seasonal inventory that would expire, you don't want to have too much (the waste of inventory), but you also don't want to lose sales by not having enough.
Target almost lost a sale, had I not found a generic themeless gift card. I would have gone and purchased a card somewhere else. So I wonder – how many gift card sales did they lose on Saturday?
When we look at the balancing act, here's the argument for having way TOO MUCH inventory of gift cards:
- Gift cards are small
- Gift cards are cheap to produce
- Extra gift cards could easily be stored until next year (assuming they weren't printed with “2011” on them)
Target should manage their holiday gift inventory so that they never run out. The same applies in hospital stockrooms. We don't want nurses and other providers being delayed (with the corresponding delays in patient care) because they can't find simple, small, inexpensive things like gauze or other supplies. When items are small and cheap (or urgently needed), hospitals should err on the side of having a bit “too much” inventory without having an infinite amount.
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Im wondering why you would drive to a store for gift card that could have been ordered from the luxury of your home while in your underwear.
Because we needed it immediately. Call it lack of planning on my part, if you must.
We are in a seasonal business, too (like Christmas cards). One of my planners likes to say that even though forecasting is always wrong, our goal should be “don’t run out of hotdogs at halftime”. Seems as though Target did this time. It is one of the challenges of seasonal business – sell out and avoid post-season scrap, but miss the the revenue opportunity.
At least the cards would keep until next season if they didn’t sell (though I’m guessing a lot get thrown out). For anyone who thinks inventory is an asset, talk to a poinsettia grower on Dec 26!
Yes, we’re on the same page. There’s a big difference in the strategy with perishable plants/food than there is with a card that could be cheaply stored until next year.
In the case of this Target, the problem could be in one of two legs of the supply chain:
1) Target didn’t get the cards to the store
2) The local store management isn’t effectively restocking the front from some central supply area
Mark – reminds me of a company I once worked with that was in the habit of running down their inventory at quarter end (definite non-lean behavior). One time during the first week of the next quarter they ran out of connectors and had to shut production down for a couple of days. These connectors were less than a penny apiece.
Moral of the story – it’s not about low inventory, it’s about flowing value through to customers.
Mark, I got quite a chuckle from your post. I went to MY Texas Target store and found an ample supply of gift cards in plain sight about 30 feet from the entrance, and at each register. Hmm, store to store variability. Imagine that!
I am a bit surprised at your suggestion to store unsold cards until next year. Across 100’s of stores? Consuming vital real estate? Track ’em. Find ’em again in 12 months. Aren’t those all the things we don’t want to do? I can imagine shredding unused cards, while balancing availability and wastage cost. I’m hard pressed to store them, especially given Target’s design oriented market positioning–they’ll have different cards next year.
Dale – you make a good point about the Target style factor. I guess my thinking assumed the cards are pretty much the same each year.
Inventory does, at times, serve a purpose, especially in a retail setting where the cost of a lost sale can far outweigh the cost of inventory.
I think shredding the cards might be wasteful, especially if the cost of moving, storing, and tracking them (considering they are small and light) outweighs the cost of shredding and printing. Each store could probably keep a few boxes in their own stockroom for next year, so I wouldn’t think the logistics would have to be that difficult. Shredding the cards isn’t the “green” approach, arguably, even if the cards are recyclable.
Toyota people have said “inventory is the root of all evil,” but I think from a manufacturing standpoint, they meant inventory could be crutch that kept people from actually fixing the production process and supply chain.
When I worked at Dell, the price of inventory fell every day (this was the late 90s when prices were falling dramatically and Dell people would say “that inventory keeps as well as a gallon of milk left outside on a hot Texas day.”
But, I think Target and small, cheap plastic cards are a different story. I’m not saying they should go overboard and have years worth on hand, but just have more “safety stock.”
Maybe Target should move
They got more gift cards back in stock today, by the way:
https://twitter.com/#!/LeanBlog/status/148925102447271936/photo/1