Huge business organizations are charged with the responsibility of the management of inventory turnover. For business to operate smoothly and successfully, investing time on the planning and execution of the inventory is a critical requirement in business organizations. In cases where the inventory is huge, the organization is forced to dispose the excess on a lesser price. The rate of inventory turn overestimates the speed by which an organization is moving its inventory in and out of the store.
The Walgreens chain is the largest pharmaceutical chain of store across the United States of America. According to their website, the company has over 7500 locations and employs more than one hundred workers across all American states. Its headquarters is based in Deerfield in the state of Illinois. It was started in 1901 in Chicago and by the time it only sold pharmaceutical drugs but with time it increased its wares to include soda fountains, milk shakes, ice creams, vitamins perfumes, cosmetics, consultancy, supplements and other nutritionals as well as running of cafeteria business.
The company offers online subscription and delivery of drugs both locally and internationally. Most of its retails are strategically located in almost all cities of the United States .for many years it has led the pharmaceutical market across America but recent moves by serious competitors like the Wal-Mart and Albertson poses a reason for shifting to more aggressive marketing to retain its leadership in the market, Walgreen takes the advantage of its size, location and the economies of scale to maintain its lead in the growing competition. Being the pioneer of online distribution system has placed given the company with market advantage and it experience boast its operations procedures making it the most preferred in the United States. Its project in creating a simple user friendly interface using phones and a website has proved to be successful and up to date the Walgreen remains the most preferred drug store in America.
Inventory Problems and Solution
Walgreen being the largest chain of drug stores in the United States faces the challenge of handling huge inventory. With fluctuating demand of its commodities and unseen challenges like pressure from their competitors, it becomes very tricky to come up with an inventory model that can save on the cost of the organization (Muller, 2011). The cost of storage and shipment is fixed and to pay the cost of these services, the company stocks its warehouses to the maximum in an effort to save on its spaces. The amount of fixed cost is lower than the fixed costs meaning the company does not have to lower the prices of its products to reach the maximum turnover of its inventory.
Initially Walgreen used the First in First Out in their inventory strategy but in 2004 they demonstrated how they saved the cost of inventory by introducing the Last in Last out strategy in order to clear it slow moving goods. The LIFO system ensures that first moving goods are cleared quickly as possible and new orders are place. In their previous method using FIFO, slow moving products were more likely to pile since the amount of stock is controlled by the demand for the product. Walgreen faces the problem of concentrating on fast moving goods and ignoring other significant products which despite having low demand might be of significant to customers who believe that much a reputable company should stock a less used product compared to smaller stores which most likely concentrate on fast moving products only. The solution to this problem would be to integrate FIFO and LIFO strategies and even though the later may carry more weight, the former can be of use in assessing the movement of less demanded goods and hence advice on the order value (Axsater, 2006).
Walgreen being the largest chain of drug stores in the United States strives to still be the market leader as far as this industry is concerned. The organization faces a dilemma that make it to be non operational soon if proper plans are not laid down as far as inventory control is concerned (Wild, 2002). At the moment, there is a serious problem as far as inventory management is concerned and this has led the inventory to be out of control. This is serious as there is no solution that has been offered to enable the company to manage the inventory. The inventory data clearly show that the organization is losing a lot of revenue due to revenue loss.
Non control of the inventory will have a huge effect on the performance of the organization as it will eventually affect profitability and will to some extent have an effect on the level of service the company will offer (Lewis, 1997). This is due to loss of revenue as well as making products hard to sell. It is in the plans for Walgreens to work hard in the tracking of inventory as failing to do this will be a catalyst for doom. It is crucial for the organization to be aware of the seasons and the trends in the market that keep changing every year. If inventory is well controlled, there is a likelihood of better control and management of all warehousing costs (Warren et. al., 2011).