Home Depot's Inventory Control Problem

Page 5 of 7  


Interesting story. Only thing is, Wal Mart did not do them in, they really did themselves in. At some point, you just have to say, "sorry, no deal"
Now, you are probably thinking, "easy for you to say" and I must reply, yes, not only is it easy we did just that to two of our largest customers. The first was a major appliance manufacturer that accounted for over 25% of our sales and much of our profit. After doing a job for a year, they asked us for a 10% price reduction. The reasoning was that by now we have paid off our R & D and start-up costs, and we probably found better methods to make our parts. They were correct and we agreed and the following year we did well. Year three, they said in order to maintain their market share, they have to reduce costs. They pressured us for another 5% and we agreed, but they also went from 30 days to 120 days payment. That year was OK, but not as profitable as it was in the past.
Now comes price negotiations for year four. They said they wanted a 25% reduction (remember, it was already reduced 10% and 5%). And, if we agreed, they also wanted a 6% rebate for the business from the previous year. That is when we said "sorry, no deal, where do you want your tooling shipped?" We watched as they took truckloads of material from our competitor. We watched as our competitor struggled and finally closed a manufacturing plant when they did not make enough to pay their bills. As for the appliance manufacturer, they closed their plant and now import everything from China and Korea.
Two years later, we were faced with another situation. We walked from that also. We made more profit from less sales. Not every sale is a good one.
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Edwin Pawlowski wrote:

But likely not a response that would work since Walmart is so big and accounted for so much of Vlasics sales.

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wrote in message

Years ago, Sears had a reputation for getting their suppliers to expand to meet their needs. Then once that was done, and they were in debt to Sears or the bank, Sears would insist on big price reductions. If the supplier didn't comply, Sears would give them a choice...lose the business or sell out to Sears. Some businesses, knowing of this predatory practice, would avoid doing business with Sears. I think that eventually WalMart will go the way of Sears. Sears started reducing the products they carried back in the early 70's giving, eventually, WalMart an opening to compete and I see WalMart doing that now. Someone will step in to fill the gap and without the huge complexity and overhead of WalMart will be able to compete. I don't find prices all that much lower at WalMart. If you look closely you'll find marketing tricks like one I found recently....contractor's garbage bags..10 to the container versus exact same product at Sears Hardware..12 to the container. Appeared to be cheaper at WalMart but was exactly the same price per bag. And if gas prices continue to escalate, it's going to be cheaper to buy at the local hardware store or grocery store rather than drive to a WalMart 15 miles away.
Tom G.
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Evidently, saying yes put them out of business, so saying no may have left them better off. They may be a smaller business, but they would still be there, making a profit and paying employees. Sorry, but they allowed themselves to be pushed over the top. Maybe greed, maybe just inept management, but in any case, NO was an alternative.
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I was in business for ten years. I did good, and sold the business for a good profit. Early on, I would take work just to keep the wheels rolling. Basically swapping dollars to pay the help and pay the overhead.
Then one day, I just said no. I'm in business to make money not to break even. If I'm just going to break even , I'll go back to my old job, work only 40 hours a week, cut my Tylenol bill by 90%, and only think about work eight hours a day. Paid vacation, uniforms, meals, health care, and pension.
Then I started concentrating on "gravy jobs". *
* explanation of a gravy job -
I would make a metal gate from scratch for about $150 back then. My profit, about $10 per hour worked - about 5 hours.
Then I got into service welding. I charged $75 per hour to go out and just fix gates. (and other things)
Bottom line ........ I would work less hours and clear more money.
Vlasic should have made the decision to keep selling more quart and pint jars for a better profit than making gallon jars. I read a lot of the story, but can't remember what the profit for a gallon was vs. profit for a quart.
One time, I was thinking of expanding my business. I had a backer for $250k that was looking to shelter some shady money. When I crunched the numbers, everything went up by 100 to 400% except my paycheck. The backer balked when I demanded that my income should at least double.
Gross don't mean squat.
Net is where it's at.
Money comes in ..... money goes out ........ how much stays?
Yes, Ed, sometimes it is smart to just say NO!
Steve
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wrote in message

In which case the blame is STILL with Vlasic for relying on a single customer instead of expanding the market. Bottom line? Brain-dead top management. Lack of leadership.
Albert Einstein defined insanity as doing the same thing over and over and expecting different results. Relying on a single customer is always a dangerous and destructive practice, but people refuse to learn from history.
Mike D.
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I prefer Lowe's-- but I suspect that is because they are the 'New Guy' in our town. The gap is narrowing as Lowe's sinks lower and lower in the customer service, quality, and 'have it onhand' departments.

I don't. I suspect that about 1/2 of the Walmart haters also hate Microsoft, IBM, Disney, Toyota, and any other company that has found a successful business model and made a crapload of money. [is Google soon to be on that list?] Another large segment might hate them for their treatment of their employees.
If I have a choice I prefer to shop at my locally owned grocer- my local hardware store, and my local electronics place. But sometimes it just makes sense to go to Walmart and save myself a bunch of $ and a lot of time.
Jim
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I like Microsoft fine. Good OS, and there's two alternatives. Not a totally good comparison, as using Windows doesn't affect my local economy.
IBM is fine, too. Good machines (now made by Lenovo) and competent services.
Toyota's OK, I guess.
But Disney is just crap. The worst kind of schlock. What horrible movies...
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I love Walmart. Ask any senior citizen on a limited budget.

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On Thu, 17 Aug 2006 21:45:11 -0400, "Kyle Boatright"

Even so, with computerized inventory, they should always have almost full inventory
(unless something unusual happens. I met a guy today who wanted 40 of the all rubber elastic cords. He had about 20 in his cart, and he was looking up at the big boxes 8 feet up to see if there were more. But there weren't, it seemed, so he was going to another store to buy another 20. He said he had a long truck, and he needed 40!

I never noticed that they had that to begin with. Except one guy.

I agree with your uggh. The HD guy I talked to today confirmed that Walmart is really opening a store only a block from the new HD, both only a mile from where I live. I was able to boycott Walborg when they were not nearby, but boy was it nice to be able to go to HD twice in one day today, because I found something else I needed and it was no effort to get there.
BTW, I don't prefer HD to Lowes, but there are a lot more HD's. I only know of 3 or 4 Lowes in extended metropolitan Baltimore, but I know of 4 HD's within 6 miles of me, and more farther.
I don't like Walmart because I think they abuse their employees, and lie about it, and intimidate them so few complain.
When did Sam Walton die? They have been selling Chinese stuff for a long time, I thought.
I used to work for International Paper by the way, but only for 2 months or so on one computer project.
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mm wrote:

Having worked in management for a department store, I can tell you that companies' buying lines rely entirely too much on the computerized sales and restocking figures. They have no clue what customers want, because they have no idea how many customers come into a store looking for something they don't carry.
Example: let's say the big box hardware store (BBHS) carries replacement parts for Char-Broil, Weber and Vermont Castings. That's all they stock, and that's all customers who make purchases at the BBHS buy. Salespeople at the stores know that there are a lot of customers coming in looking for Ducane, but can't buy it so they go elsewhere, and the BBHS loses that business. But the buying line has no idea because they have ZERO contact with the store to know not only what it is customers are buying, but what it is customers would LIKE to buy but can't because they don't carry it.
Having spent three months shopping at Home Depot or Lowe's at least four times a week while renovating a house, and having had both good and bad experiences at both, I can tell you the problem isn't one retailer or the other, it's the entire retail model these days. I wish I had the time to find all the good mom-and-pop stores in my area I need to take care of my house, but the BBHS is so much more convenient...
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They have no clue what customers want,

What really frosts me is HD's corporate policy of not taking reservations for rental equipment--even if I offer to pay in advance. This is so anti-customer. How is a contractor supposed to plan and commit to a job if the equipment may not be available when needed? I wrote to HD's president and got back a meaningless form letter.
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You should have done what Andy Rooney would have done: Go to corporate HQ and ask to speak to Mr. Depot.
On 23 Aug 2006 08:09:15 -0700, snipped-for-privacy@usa.com wrote:

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wrote:

Sounds more like Michael Moore, but I guess he's too busy bashing Bush these days to do something meaningful like he used to.
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snipped-for-privacy@usa.com wrote:

Maybe go to a real contractor rental place that will work with you?
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mm,
Computerized inventory needs to be deigned to include theft and damage. A while back I was at Lowes shopping for a 90 deg stove pipe elbow. There was one mangled elbow on the shelf. There were 3 elbows listed in their computer. The store clerk couldn't find the elbows and left the damaged one on the shelf. A month later I looked again, out of curiosity, and they still had one damaged elbow on the shelf.
Dave M. .
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was looking at a certain bookcase which was on display but none were on the shelf because they were sold out. When the clerk checked the computerized inventory, it showed that they had 3 of them. Nobody could have shoplifted them because of the size and weight of the boxes.
David
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David wrote:

Employee theft out the loading dock with their own forklift...
Pete C.
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wrote:

Or delivered straight to the employees home...I've seen this done too.
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mm wrote:

Well, "yes but..." :)
While true in theory, reality is that there is the overall profitability that is what is attempting to be maximized and that includes delivery costs, manufacturing and delivery costs/timing, inventory costs and turnover amongst other variables. Simply looking at the number of widgets in a bin and sending out more in a purely automatic response might keep inventory on the shelves but wouldn't necessarily bring in more net revenue (and probably wouldn't for most items)...

I don't recall the date, but the shift from "Buy America" to "Buy Cheap" came following his death and that is what precipitated the mass stampede to Chinese and other third-world manufacturers. Of course, Wally-World isn't the only one, just the leader--essentially everyone has had to follow suit in order to compete. Simply try to find common consumer products of the type W-M stocks and see if you can actually find a non-third-world supplier for any of them---usually it can't be done except in really large metro areas with very specialized shops, and even then not necessarily.
When (and if) consumers decide to flock away to somewhere other than W-M, they will either change or (as in Germany) withdraw. I personally avoid them as much as possible because a) they're _not_ convenient--it's too big, takes too much wandering around to try to find an item or two; b) typically it's crowded so it takes longer to get in/out; c) there really isn't that much difference in cost for most items to make it worth the hassle; d) unless it really is just "consumer junk", there really isn't anything there I want, anyway.
PS. Being in what most would consider a small town, there are the occasional instances that there actually isn't much if any alternative any longer as the influence of the BORG-syndrome is most observable on the independent businesses in smaller communities which don't have the population base to support the smaller merchants as well.
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