Supply chain management: Assignment 1_Nordstroms case study

September 19, 2016

Ashish Sanjay Menkudale

UIN: 656130575
Amenku2@uic.edu

1. Characteristics of Nordstroms competitive strategy

1. Quality paramount in customer service
i. The strategy is more about engagement than revenue.
ii. Employee handbook is summarized to emphasis that employees should
use their own good judgment while serving customers which in turns
empowers employees to go extra mile with autonomy to respond to
customers needs.
iii. Personalized customer service. Employees make customer feel that they
are royal and special thorough their routine work. They do normal things
like billing, handling over the purchased goods, assisting with honest
feedback to customer with new shopping material like clothes etc. in
special manner rather than doing special things.
iv. Ultimate customer and delivery experience, even when store is not at fault,
e.g. no-questions-asked return policy. Customer centralized work culture
pays off to assist their goal- to provide excellent customer service, so
people not only buy more at one time, but come always back for more.
v. Nordstrom is very selective for its staff and choose the people which dim fit
to serve the customer oriented culture. They are consistently retrained and
well paid to stay motivated.
vi. Their stores / retail outlets are exemplary in offering the utmost luxury
experience of shopping. Music and ambience, in store amenities, strategies
for attractive product displays and on-the-toe service staff marks the
benchmark in customer service.
2. Strategically evolved complementary business venture of Nordstrom rack store
along with Nordstroms full line store. (Rack store provides off price market for
inventory of full line store which becomes outdated after a season). This strategy
gives Nordstrom a competitive edge over others in terms of inventory turnover ratio
(Turnover against number of days the inventory was outstanding).
3. Heavy investment in overall growth.
i. Even though Nordstroms growth numbers show higher debt to equity
ratio, it has highest debt-to-EBITDA (or earnings before interest, tax,
depreciation, and amortization) ratio compared to its competitors. (Debtto-EBITDA is a key indicator of a companys ability to pay its debt.)
ii. Nordstrom has also aggressively invested in e-commerce, investing in
mens brands Bonobos and Trunk Club and its own flash-sale site,
Hautelook.
4. Omni channel retailing.
i. Nordstrom connects shopping channels in many ways. One being that
customers who purchase a product online have the option to pick that item
up in a nearby store. This connects their online customers' experience
with an in store experience all in one purchase.
ii. Nordstrom exposes their full inventory to customers through their stores,
the Internet, mobile devices, and catalogs, to reach customers on all
channels. They are giving their customers a full picture of what's for sale.
Nordstrom makes a clear point that "you can't sell what you don't have, or
what your customer thinks you don't have."
5. Nordstrom has two reportable segments Retail and Credit.

i. The Retail segment comprises Nordstrom full-line stores, Nordstrom.com,

Nordstrom Rack, HauteLook, and Jeffrey.
ii. The Credit segment provides customers several payment products and
services, including a Nordstrom private-label card, two Nordstrom VISA
credit cards, and a debit card for Nordstrom purchases. This segment
generates revenues from finance charges and other fees on these cards.
iii. Credit segment evolution depicts engagement with its customer who
purchase high end products and receives special treatment.
6. Targeting millennial customers.
i. The outlet business gives Nordstrom exposure to young customers who are
seeking a deal.
ii. The young customers forms the largest source of revenue for online
7. Effective inventory and product life cycle management
i. Nordstrom uses extremely sophisticated inventory and product life-cycle
management capabilities to move products through its channels in half the
time of its competitors, cycling through each seasons new fashions more
efficiently and effectively than its competitors.
8. Agility for changes in e.g. adopting new technology like e commerce and integration
with advanced ERP tools.
i. Theres obviously a great deal of supply chain optimization going on
Nordstroms back office, provided by enterprise resource management
software. Inventory management, central price lists, product information
management, customer relations software (CRM) and integrated POS
software are all essential tools for getting these results.
ii. Where others have failed, at Nordstroms online and offline retail business
co-exists
iii. Extensive use of social media sites like in interest to track latest trends and
being one step ahead to use the databanks generated on these sites.
Customers can buy featured items on Instagram and pininterest instantly.
They get the edge to stay with latest fashion trends.
2. What are key customer needs?
Nordstrom customer is paying the price for its responsiveness and exceptional
customer service. They expect the quality service and quality products in return.
Typically, customers expect the high end products which give them edge over other
fashionistas. They expect the inventory of items which reflects latest fashion trends.
For online customers they expect the good visualization of products before buying.
3. Placement for demand
spectrum. Justify.

forced by customer or demand uncertainty

A high-end department store chain such as Nordstrom falls on the high end of the
implied demand uncertainty scale. The consistent changes in the fashion trends and
the target customers needs bolster this uncertainty.
The fashion items that Nordstrom stocks have extremely high product margin, they
are kept in inventory with high forecast errors and stockout rates are considerable,
and as the trend gets over, the excess stock is sold at rack stores with massive
discounts competing in off price markets.

4. Level of responsiveness for Nordstrom that will be appropriate.

The consumer centered business model of the Nordstrom is based on

responsiveness of its supply chain. The customer at Nordstrom expects the
promptness and satisfaction of availability of the latest trending items. And for that
level of responsiveness, the customer is willing to pay the price.
Supply chain orientation towards responsiveness involves frequent rollover of the
inventory according to the latest fashion trends. And this is where Nordstrom beats
its competition. Nordstrom performs its level best to be highly responsive however
with the quantity of the inventory it has, it is little difficult to attain the best.
Also, the highly responsive supply chain will make it difficult for the Nordstrom to
keep the prices competitive. Hence on the spectrum it passes the mark somewhat
responsive and tends towards highly responsive.
5. How can Nordstrom expand its scope of strategic fit across its supply
chain management?
To assist their growth plan, franchising can be considered as a viable option. This
will accelerate their presence in market and grow their network at an accelerated
rate. The quality should be ensured to be maintained up to Nordstroms standards
by its franchises.
Also, by getting actively collaborated with its vendors, the risk in uncertainty can be
reduced at Nordstroms end. However, associations should be developed such that,
vendors will be assured and awarded for absorbing this portion of the risk. Active
collaboration might include sharing the seasonal forecast numbers and expected
trends, assisting suppliers to become a brand in itself which have outlets exclusively
in Nordstrom. This will help in optimizing the inventory providing customers more
exclusiveness while being loyal to Nordstrom.
Vendors particularly can absorb some of the risk as the seasonal raw material can
be bought at higher quantity at suppliers end and quantity of inventory can be
increased overall to avoid frequent stock outing of trending fashion items. It is more
beneficial to maintain the inventory of the raw material than the inventory of the
readymade goods. The same raw material can be used for different seasons and the
depreciation cost of the raw material is lesser than the depreciation cost of the
ready goods. To optimize the increase in inventory, Nordstroms rack stores can be
used as good supplementary business.

References
1. https://erply.com/case-study-how-you-can-copy-nordstroms-secrets-tomassive-retail-success/
2. http://nordstromfinalproject.blogspot.com/
3. http://brandchannel.com/2013/07/05/nordstrom-capitalizes-on-the-socialshopper-with-in-store-pinterest-tie-in/
4. http://www.strategyand.pwc.com/media/file/Strategyand-Capable-SupplyChain-Strategy.pdf
5. http://marketrealist.com/2015/02/overview-nordstroms-growth-story/
6. http://www.strategy-business.com/article/07103?gko=fe31c
7. http://dealbook.nytimes.com/2012/04/11/stores-go-online-to-find-aperfect-fit/?_r=0
8. http://www.enterrasolutions.com/2010/09/supply-chain-helps-nordstromsbottom-line.html