PriceSmart-new answer to old issue--Pet products

[Dottie Atwater]

I go to David as seldom as possible and when I do go, I have numerous places to go. Usually at PriceSmart, about half the items on my shopping list are not available. Some of the "not in stock" items aren't a big inconvenience, but It really hacks me off when they're out of Kirklands AND the new Member's Select...like they had no puppy chow of either brand on my last visit. There's absolutely no excuse for this, and it's not available anywhere else.

[Sassy Blake]

I have asked Melissa about the inventory control and other things mentioned in the comments above.  She travels a lot for PriceSmart, so when there are questions on the table, she has to catch up with whomever it is that is in charge of the department the questions pertains to.  if that makes sense...  I'm waiting for answers, and will surely forward them when they come.

one thing she has mentioned is that a lot of times, the "only once" items are things they got a special buy on, or are wanting to see how well they're received.  THEN, they have to figure out, if it's any item they'll carry, where they'll put it in their limited shelf space.  And that means having to delete something else which isn't moving so fast, and replacing it with the newly popular item.

It's always a gamble when they introduce a new item that is popular at first.  Because they have to try to determine whether the popularity is because of novelty or because it's going to be a good seller.

Grey Poupon for instance:  when I first came to panama, they had it.  then, I never saw it again.  I contacted them and plead the case for more.  they said it wasn't a good seller so they discontinued it.  I begged.  I said the expat population is very fluid and so you never know whether there are folks here now who would buy it.  So they told me, "ok.  just this once.  So when it comes, stock up because it's only a one time deal".

I stocked up.  A lot.  And it's still there.  I asked, "what's up with that?".  They said it was such a good seller, they decided to keep it...until it stops selling...  So I have an overstock of Grey Poupon.  funny!  But they had to delete something else in order to carry it.  I have no idea what got deleted.  but I guess it's not missed, what ever it was.

Retailing is a tough business.  Just like the restaurant business.  Tastes/likes change.  PriceSmart tries really hard to introduce new things, and balance it with the tried and true.

About the napkins, and other inventory control issues, I don't know, but I've asked and am waiting.

[Sassy Blake]

I'm trying to get you some answers Dottie.

 

[Dottie Atwater]

Thank you, but the issue/answer is the lack of competent (or non-existent) inventory control. If course it's not only about the Kirkland/Members Select dog food. The lack of inventory control allows many items to be out of stock. Bud mentioned two more, and including the absence of dog food during my last visit, there was no avocado oil (which I had bought not long ago) and no frozen 5-lb turkey rolls. There are many things I've bought there in the past that have disappeared forever. Because they DID have those items and they sold, it means that people want them!

Of course none of this is your fault, Sassy, and we all appreciate your efforts.

Edited October 3, 2018 by Dottie Atwater
addition

[Keith Woolford]

Here's an interesting article I found about product supply management and inventory control in the Costco organization.

Paragraph 4 refers to 'stockouts' and folks like Dottie.

in Tough Times...

Published on April 16, 2016

April 16, 2016 • 2 Likes • 0 Comments

When consumers reduced their spending in 2008, traditional stalwarts like Circuit City and Linens ‘n Things wilted under the weight of their own massive inventories. They could not turn their inventories quickly enough to pay suppliers and were forced to close their doors when
cash ran out.

At the same time, Costco continued to thrive! How? By intentionally stocking fewer items than its competitors—and employing inventory management practices that successfully reduced costs throughout its operations. While the average grocery store carries around 40,000 items, Costco limits its offerings to about 4,000 products, or 90% less! Limiting the number of products on its shelves reduces Costco’s costs of carrying inventory.

Costco also employs a just-in-time inventory management system, which includes sharing data directly with many of its largest suppliers. Companies like Kimberly-Clark calculate re-order points in real time and send new inventory, as needed, to replenish store shelves. Costco also works to redesign product packaging to squeeze more bulky goods onto trucks and shelves, reducing the number of orders Costco needs to place with suppliers.

Occasionally, the company leverages its 75 million square feet of warehouse space to reduce purchasing costs. For example, when Procter & Gamble recently announced a 6% price increase for its paper goods, Costco bought 258 truckloads of paper towels at the old rate and stored them using available capacity in its distribution centers and warehouses.

These inventory management techniques have allowed Costco to
succeed in tough times while others have failed. Costco turns its
inventory nearly 12 times a year, far more often than other
retailers. With many suppliers agreeing to be paid 30 days
after delivery, Costco often sells many of its goods before
it even has to pay for them!

Inventory management is important because materials costs often account for more than 40% of total costs of manufacturing companies and more than 70% of total costs in merchandising companies.

Costs Associated with Goods for Sale Managing inventories to increase net income requires companies to effectively manage costs that fall into the following six categories:

1. Purchasing costs are the cost of goods acquired from suppliers, including incoming freight costs. These costs usually make up the largest cost category of goods for sale. Discounts for various purchase-order sizes and supplier payment terms affect purchasing costs.

2. Ordering costs arise in preparing and issuing purchase orders, receiving and inspecting the items included in the orders, and matching invoices received, purchase orders, and delivery records to make payments. Ordering costs include the cost of obtaining purchase approvals, as well as other special processing costs.

3. Carrying costs arise while holding an inventory of goods for sale. Carrying costs include the opportunity cost of the investment tied up in inventory (see Chapter 11, pp. 403–405) and the costs associated with storage, such as space rental, insurance, obsolescence, and spoilage.

4. Stockout costs arise when a company runs out of a particular item for which there is customer demand, a stockout. The company must act quickly to replenish inventory to meet that demand or suffer the costs of not meeting it. A company may respond to a stockout by expediting an order from a supplier, which can be expensive because of additional ordering costs plus any associated transportation costs. Or the company may lose sales due to the stockout. In this case, the opportunity cost of the stockout includes lost contribution margin on the sale not made plus any contribution margin lost on future sales due to customer ill will.

5. Costs of quality result when features and characteristics of a product or service are not in conformance with customer specifications. There are four categories of quality costs (prevention costs, appraisal costs, internal failure costs, and external failure costs), as described in Chapter 19.

6. Shrinkage costs result from theft by outsiders, embezzlement by employees, misclassifications, and clerical errors. Shrinkage is measured by the difference between (a) the cost of the inventory recorded on the books in the absence of theft and other incidents just mentioned, and (b) the cost of inventory when physically counted. Shrinkage can often be an important measure of management performance.

Consider, for example, the grocery business, where operating income percentages hover around 2%. With such small margins, it is easy to see why one of a store manager’s prime responsibilities is controlling inventory shrinkage. A $1,000 increase in shrinkage will erase the operating income from sales of $50,000 (2% $50,000 $1,000).

Note that not all inventory costs are available in financial accounting systems. For example, opportunity costs are not recorded in these systems and are a significant component in several of these cost categories. Information-gathering technology increases the reliability and timeliness of inventory information and reduces costs in the six cost categories. For example, barcoding technology allows a scanner to record purchases and sales of individual units. As soon as a unit is scanned, an instantaneous record of inventory movements is created that helps in the management of purchasing, carrying, and stockout costs. In the next several sections, we consider how relevant costs are computed for different inventory-related decisions in merchandising
companies.

Source: McGregor, Jena. 2008. Costco’s artful discounts. BusinessWeek, October 20.

[Sassy Blake]

For Dottie:  I just got back from PriceSmart and the 5 lb ground turkey rolls are in!  go get them.  I only bought 1 so as to save some for you!!  lol

[Dottie Atwater]

Thanks, Sassy! I'll go as soon as I can. I hope there will still be some when I go.

[Dottie Atwater]

My shopping experience at PriceSmart yesterday: When a friend in Boquete saw my "hope" that ground turkey would still be available when I could go, she went last Wednesday and paid for 8 rolls that I could pick up yesterday (Monday). She sent me the receipt, which I printed. She gave me the "manager's" name and phone number (Ariel).  After asking for him, It turned out that someone else was the "manager of carnes." Well, after talking with three other people, including the "manager of carnes," someone retrieved the 8 rolls for me--fortunately from the back in boxes, 4 to a box. Then I tried to find out how I'd exit the store with only a printed copy of the receipt. Finally someone (it turned out to be Ariel) beckoned to me. He had kept the original receipt and finally found it. OK, turkey molida to my car, and then back in for other things. 

No one can accuse PriceSmart of having a smidgen of organization.

NO Kirklands or Member's Select puppy chow--again. No frozen blueberries. No avocado oil, which I had bought a few months ago, never to be seen again. No flax-chia mixture that I had bought VERY long ago, never to be seen again. (I keep these things on my list, just in case...)

At least I was able to get the turkey rolls in boxes. Much easier to transport. They did still have a large supply. Ariel said sometimes a company buys a lot of them. I suggested that they keep track of their inventory and order more when they have only a small supply. Good luck with that!