Sunday, November 9, 2014
Best Buy: Online Inventory Dilemma
Inventory represents one of the most vital assets of a business. It is essential in performance and is often hard to calculate the amount of inventory needed. Inventory is mostly items intended for sale, but some can be raw materials needed to go into the final product. Thus, this is a critical part of any company.
Inventory can be a deciding factor between success and failure. In an article on Best Buy's inventory methods of 2012, an example of potential failure is brought forth. Like most other large companies, Best Buy has a website in which customers can order products online. However, this website failed to have the correct inventory management in place. Best Buy's inventory dilemma surfaced during the holiday season of 2012, when customer's orders were not being completed due to the products being out of stock. This example ties together two important principles in any business: forecasting and inventory management. The holiday season is predicted to be busier than most other seasons, so the forecasting for most businesses change to accommodate this increase in speed. However, Best Buy failed to accommodate and in turn failed to update their inventory to keep up with the increase in demand. This failure left many customers with false expectations and may have affected Best Buy's reputation for future sells.
As a potential customer, especially during holiday season, this lack of inventory would have left me angered and doubting Best Buy's reputation. When customers are relying on a product, the disappointment of not receiving it may be greater than any satisfaction received from previous products. Although calculating the amount of inventory can be quite difficult, Best Buy should have had a plan in action due to the amount of experience and years the company has.
Question: Would it have been better for Best Buy to overstock on products for the holiday season and be left with excess inventory? Or would the out-of-stock option be better for the business?