The North West Company Push vs Pull

The North West Company

Executive Summary:
The North West Company is a leading retailer of food and everyday needs in rural Canada. They are
currently using a push strategy with the category managers at headquarters analyzing trends, placing
orders and allocating products to stores.
Inspired by Giant Tigers pull system, North West management was considering giving store managers
more control over their inventory ordering by moving to a pull replenishment strategy. Barry McLeod,
Director of Procurement and Marketing, has been assigned with determining if this Pull strategy would
be a better fit.
In order to reduce the risk and capitalize on the benefits, North West should localize in the hands of
Regional Retail Managers. This strategic change will be beneficial for North West as they would gain the
required regional/store level knowledge while avoiding giving all the responsibility to local store
managers and investing a large amount of dollars to support the pull system.
Table of contents:
Contents
Issue(s) Identification 1
Environmental & Root Analysis: 2
Alternatives and/or Options: 3
Recommendation: 4
Implementation: 5
Monitor: 6
Issue(s) Identification
The North West Company is experiencing inventory management problems with unsold inventory piling
up as well as experiencing stock outs resulting in lost sales. They have not been able to increase their
yearly inventory turns from 2.2, well short of industry averages.

Popular items often sell out the day they arrive in stores, while excess stock items can be marked down up
to 75%. Items not sold at the 75% markdown are then shipped back to Winnipeg and sold through a
clearance Centre.
This current push model is increasing both sales and inventory/warehousing costs. The lack of accuracy in
forecasting is magnified by the long lead times coupled with the transit times to their remote store
locations.
Environmental & Root Analysis:
* Category Managers in Winnipeg analyze trends, place orders and allocate products to stores. They are
disconnected from customer preferences.
* Historical averages and next years forecasted growth are estimated at company level.
* North West stores are spread thin across the country, including very remote locations.
* Products arrived at the Distribution Centre up to 2 months prior to selling period.
Alternatives and/or Options:
1. Apply localization at the store level. Category Managers to analyze the sales and work with Store
Manager to determine products to stock and markdown options. This option would be trail ran in one
store first and once the Bugs have been worked out expanded to all stores in all categories. Requires
$10M investment in an Advanced ordering system.
2. Apply localization at the corporate level. Category Managers to analyze the sales and work with
Regional Retail Managers who will then determine what products will be offered to which stores.
Regional Retail Managers would then develop product menu selections for store managers to choose
items and quantities from.
3. Keep the current Push system with new innovations such as stock repositioning.
Recommendation:
#1, Apply localization at the store level. Requires a $10M investment in an Advanced ordering system.
While this system does introduce tracking and places the responsibility on the store manager to manage
their inventory it comes at a high cost and an undetermined amount of risk.
#2, Apply localization at the corporate level. This option would introduce more of the required regional
knowledge into head office, while still empowering the store managers to effect change.

#3 Keep the current Push system. This option requires that least amount for change but also offers the
least amount of reward.
The recommendation is to Apply localization/pull at the corporate level. Category Managers to analyze
the sales and work with Regional Retail Managers who will then determine what products will be offered
to which stores. Regional Retail Managers would then develop product menu selections for store
managers to choose items and quantities from.
While it would be nice to decrease the current 2 month time that products arrives prior to sales periods,
given the logistics issues faced, winter roads, storms, sea, air, multiple vehicles, etc. this is a large task
that requires its own project.
Implementation:
* Category Managers to be refocused strictly on purchasing/sourcing/logistics.
* Regional Retail Managers, the new specialized team, responsible for developing product menu
selections for store managers to choose items and quantities from.
* Regional Retail Managers must have in depth knowledge of their regions and products.
* Once positioned, Regional Retail Managers to spend first 3 months travelling their regions to gain
understanding of the people, roads, individual requirements.
* Regional Retail Managers to test this new approach on a well-established medium sized, well managed
store first.
Monitor:
Turns Will increase, but may take some time to gain a large enough sample to analyze
Sales Will increase due to capitalizing on current lost sales due to stock outs
Shipping charges Will decrease due to less product being returned/repositioned.
Monitoring these 3 areas will tell you if the project is on track or if any minor adjusting is required.
Superior connections Outside experts say that North West operates the most
complex supply chain theyve ever seen, not only due to distance and destinations,
but also the multiple modes of transportroad, ice road, rail, air, waterplus local
handling that can add up to a half dozen hand-off points for some stores. For us,
that says opportunity for improvement.