Nordstrom Company Operations AuditTina Hidai, Maisy Lam, Kyle Specht

Productions and Operations ManagementDr. Pradip K. Shukla

12/11/14

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Table of Contents1. Background of Nordstrom…………………………………………………………………....32. Nordstrom Basic Facts………………………………………………………………….........43. Quality Management…………………………………………………………………….........54. Service and Product Design…………………………………………………………………..85. Process and Capacity Design………………………………………………………………..126. Location……………………………………………………………………………………....147. Layout………………………………………………………………………………………...168. Human Resource and Job Design…………………………………………………………...179. Supply-Chain Management………………………………………………………………....1810. Inventory, materials requirements planning, and JIT…………………………………...2011. Intermediate, short term, and project scheduling………………………………………..2112. Maintenance………………………………………………………………………………...2313. Recommendations…………………………………………………………………………..2314. References…………………………………………………………………………………...26

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1. Background of Nordstrom (Firm as a Whole)Fashion Retail Industry: Background, Buyers, and Main Competitors

The fashion retail industry consists of brick and mortar stores, as well as eCommerce. Not only do fashion retail stores offer physical products, but also the additional services provided to customers have increased this overall industry’s value. Traditionally, customers of the fashion retail industry who are attracted to high levels of customer service show brand loyalty. Nordstrom prominently demonstrates this. Within the fashion retail industry, Nordstrom competes mainly with Saks Fifth Avenue, Neiman Marcus, and Bloomingdale’s. Although consumers increasingly look for the best products at the lowest prices, Nordstrom has been able to maintain increasing market share without sacrificing quality or experience for lower prices. The company has been realizing great success, earning yearly revenue of $12.5 billion and net earnings of $734 million in 2013.

(Biesada)

History of NordstromNordstrom is an upscale American retailer founded by John W. Nordstrom in 1901.

Nordstrom was founded in Seattle, Washington, where it is now headquartered. Currently, the company consists of 271 stores: 117 full-line, 151 racks, 1 Last Chance, and 2 Jeffrey stores. In addition, Nordstrom has three online stores: Nordstrom.com, Hautelook, and NordstromRack.com. Today, Nordstrom is a leader in the retail industry. However, this corporation began from a humble foundation.

John W. Nordstrom left Sweden for New York with five dollars in his pocket. Once arriving in New York, word of the gold rush in Alaska had spread. John left for Alaska and struck gold, earning $13,000. John returned to Seattle to invest his money. There he reconnected with former friend, Carl Wallin, who owned a shoe repair shop. In 1901, John and Carl opened Wallin & Nordstrom, a small downtown shoe store. A second store was soon opened and the company’s success skyrocketed. John and Carl both retired, leaving the company to John’s three sons. By 1960, Nordstrom became the largest shoe store in the country. The company expanded into the women’s clothing industry by acquiring Seattle-based Best Apparel in 1963. Three years

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later, a Portland fashion retailer was purchased, offering customers a selection of shoes and apparel under the new name, Nordstroms Best. In the same year men and children’s wear product lines were added. In 1971, the company went public and was formally renamed, Nordstrom Inc.

Overview of Nordstrom

Nordstrom products include women’s/men’s/children’s apparel, women’s/men’s/children’s shoes, accessories and jewelry, handbags, gifts, beauty/fragrance items, and home goods. In addition to physical goods, Nordstrom services include food services, spa services, personal stylists, online shopping, free returns, complimentary shipping and delivery, custom tailoring, a credit rewards program, and more. The company sells a mix of independent designers, as well as a number of house brands. Nordstrom’s house brands include Halogen, Chelsea28, Zella, Leith, Tildon, Caslon, 1901, Wallin and Bros., Nordstrom cashmere, and many more.

SWOT Analysis (MarketLine Advantage)

2. Nordstrom Basic FactsNordstrom’s Mission Statement and Corporate Goal:

The goal of Nordstrom is simple and represented throughout the company. It reads: "At Nordstrom, our goal is to provide outstanding service every day, one customer at a time." Not surprisingly, the management mission closely resembles the company goal. The management mission reads: "We work hard to make decisions in the best interest of our customers and those serving them." The Nordstrom mission and corporate goal has not changed from John W.

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Nordstrom’s initial vision of focusing on providing customers with exceptional service, selection, quality, and value.

Corporate Values: 1. “We’re a family”: Employees are treated as family, with positive encouragement and

support.2. “Use good judgment”: Employee teams are built upon trust and integrity.3. “Be empowered”: Employees are encouraged to be proactive and take initiative. 4. “Setting goals matters”: Employees determine their own successes by setting personal

goals.5. “It’s your business”: Employees have personal, financial, and professional stakes in

Nordstrom.6. “Healthy competition is good”: Employees motivate each other to work hard.7. “Be honest”: Nordstrom values open communication.8. “Be recognized”: Nordstrom gives recognition to outstanding employees.9. “Be a good neighbor”: Corporate social responsibility is highly valued.10. “Be kind”: Employee-to-client relationships should be established through courtesy.11. “Have fun”: Nordstrom is the business for all people passionate about fashion.12. “Our door is always open”: Nordstrom encourages open and honest employee

communication.

3. Quality management:Key Decision Description

Quality management deals with maintaining high-standard products and services that meet or exceed customer expectations. Good quality management systems require strong checks and balances systems, where quality is constantly being monitored, fixed, and improved. Thus, it is important for firms to determine who is responsible for quality and define standards of quality they expect to produce.

Choices Available to Nordstrom and Selection MadeIn terms of quality management, Nordstrom has the options of either placing

responsibility solely on one individual/team of employees or making quality everyone’s responsibility through Total Quality Management. At Nordstrom, vendors/suppliers are held accountable for physical product quality (under specified supplier manual standards) and employees contribute value by providing the customer with the best shopping experience possible. Especially with the increasing popularity of dotcom businesses, web teams and retailers have a growing influence on quality of services and products provided. Since product delivery plays a central role in online shopping, logistics managers must make certain that products are packaged and shipped in a satisfactory manner. Employees involved in such services are highly responsible for guaranteeing the customer a good “in-home shopping experience”.

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As one facet of the company’s quality management, Nordstrom offers services such as direct to customers (DTCs) and charge sends for items that are not currently available at the given store but are available at a different location. DTCs are defined as orders placed and charged at one given store that are actually supplied by a different store location. Once fulfilled, the order is shipped to the customer’s address of choice or a local Nordstrom store. Charge sends are orders that are placed and charged from a store that carries the item and are shipped directly to the customer. These methods maximize in-store sales and further show the company’s commitment to making the customer’s shopping experience as easy, seamless, and accommodating as possible.

As for in-store shopping experiences, department managers, store managers, their teams of employees, and stylists are held to high standards. In the case that items do not meet quality standards, employees are obligated to send items as return to vendors (RTVs) or to the Nordstrom Quality Center (NQC). Items that are not in sellable condition are taken out of the inventory database and sent to NQCs. In the case that a vendor has produced less than perfect quality products, the vendor will issue an RTV to have those goods sent back to the vendor and taken out of the active inventory. NQCs and RTVs involve additional tasks that Nordstrom employees are expected to perform in order to maintain the quality of products and services for customers.

Process Used to DecideNordstrom’s Total Quality Management system, capitalizing on organization-wide efforts

to constantly improve quality, was decided upon by looking at its mission statement and corporate goals. Because Nordstrom capitalizes on its B2C business structure, all forms of impressions on its customers determine the success of the company. Thus, Nordstrom strategized a quality management system that would prioritize the customer. Customer satisfaction surveys are available in retail stores, allowing for Nordstrom to receive direct feedback from customers in regards to how they are doing as a company. Customers are also encouraged to email or call Nordstrom customer service departments or the store manager to inform them of positive or negative in-store experiences.

When dealing with unsatisfied customers, Nordstrom goes out of its way to address and correct issues that the customer is/was faced with. Online customer review sites, such as Yelp, are also under constant surveillance to gauge Nordstrom’s quality performance. When Nordstrom receives positive or negative comments, that feedback is shared with employees. If a positive letter or call comes in about a particular associate or shopping experience, praise is usually given during morning rallies in addition to rewards such as free lunch or coffee. If a negative letter or call is received, the people involved with that negative experience are consulted to prevent future occurrences.

Nordstrom’s RationaleStandards of quality are based on customer expectations. Thus, interpersonal employee-

to-customer interactions play a key role in the overall shopping experience for the customer and

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consequently, customer satisfaction. Although good physical product/merchandise quality is important, services are just as important--if not more. Employees are instructed to always prioritize the customer’s needs and make sure customers feel good when shopping at Nordstrom.

Nordstrom employees are responsible for maintaining a personal book of customer contacts. Calls are to be made regularly thanking customers for shopping at Nordstrom, checking on the status of customer orders, follow-ups with experience and product satisfaction, upcoming shopping events, and future shopping appointments.

Role of TechnologyMuch of what Nordstrom or any retail customer values today are convenience and a

seamless shopping experience. Each store is equipped with a web-team that fulfills online orders in order to get products shipped to customers faster. In order to respond to such customer demands, Nordstrom has now adopted newer cash registers to provide faster services and website foot traffic capabilities (how many people visit the app or website) that allow the company to recommend products to returning customers based on past purchases. Mobile point-of-sale transaction checkouts through employee iPhones are also a newer adaptation that Nordstrom has introduced. By increasing the number of transaction channels available to customers for checkout, customer waiting times in line can also be significantly decreased, improving the quality of customer shopping experiences even more. ERP systems for manufacturing/service delivery and for tracking marketing and sales data are additional capabilities that allow Nordstrom operations to run with higher overall quality.

Mobile POS Transaction Device (Clay)Strengths

Nordstrom’s close attention to changes in consumer demands with its increased focus on the eBusiness side of retail keeps the company relevant. One of the greatest pitfalls in retail shopping experiences for customers is waiting in line. In order to reduce such waiting times, Nordstrom took advantage of the queuing theory to create greater value for their customers. Nordstrom spokesperson, Colin Johnson, stated that with the integration of technological in-store services, it is “easier for customers to stay connected in the stores by using their mobile devices to shop, compare, and learn more about merchandise.” Johnson continued to explain that the goal of the integration of technology into Nordstrom’s operations processes is to enable employees to “take care of customer[s] anywhere in the store.” Such attention to customer demands illustrates how Nordstrom cares and wants to find ways to best provide products and services to its

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customer base. Because Nordstrom’s main focus is on customer satisfaction, the company can take advantage of customer loyalty and positive word of mouth. Since everyone is involved in providing the end consumer with the best quality service and product, Nordstrom is also able to instill a greater sense of teamwork among employees and promote a positive work culture.

WeaknessesUnfortunately, because Nordstrom is so customer-driven, sometimes it is hard to

determine exact standards of quality that employees can firmly follow. Therefore, customer experiences and quality tend to vary between different store locations. Additionally, operational objectives may end up conflicting with what customers want as sometimes customers expect costly services from Nordstrom at low prices or no cost at all. Traditionally, Nordstrom does not offer coupons like its competitors, but does offer sales throughout the year in attempts to drive sales. Finally, Nordstrom employees tend to only be experts within their own department. This, unfortunately, lessens the likelihood of employees cross-selling products to customers because they don’t seem as well versed about other product departments.

4. Service and Product Design:Key Decision Description

Service and product design is an operational area of decision-making dealing with deciding what products and services to offer to consumers and how to design such products/services. In order to efficiently make decisions in terms of service and product design, product specifications must be clear and operations management must be integrated into the process.

Choices Available to Nordstrom and Selection MadeThe three methods of new product development include: taking a market pull, technology

push, or interfunctional view approach. With the market pull approach, new products are designed primarily based on changes in the market, with no consideration of changes in technology. On the other hand, the technology push approach looks to changes in technology and does not take into consideration market demands. Finally with the interfunctional product development view, both market and technological advances are taken into consideration when designing new products.

Being a fashion forward company, designs of physical products/merchandise are all done by in-house design teams’ or suppliers’ who take an interfunctional new product design approach. Designs are created based on market demands. Product development processes require paying close attention to changes or advances in technology so that products can be manufactured in the most efficient way. Each department has various house brands that have different product designers.

Nordstrom’s Innovation Lab teams utilize the Lean Startup Model to look for potential problems within a proposed product or service idea. Through a Build-Measure-Learn loop, potential product problems are identified and addressed. Once minimum viable products are

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designed and built, a Desirable-Viable-Feasible model is used to question the potential success of the product and adjustments that could be made to it. Representative customer bases chosen by Design Thinking test prototypes of products. After identifying a relevant customer base sample, customer problems are presented for the lab team to address and solve. Lean Software Development is used to constantly remove waste, shorten cycle times, and empower the lab team.

Desirable-Viable-Feasible Diagram (Nordstrom Innovation Lab)

Innovation Lab Team Cycle (Nordstrom Innovation Lab)

In terms of service design, in-store Nordstrom employees also are managed based on an interfunctional view. Nordstrom’s People Lab teams design services. This team’s mission is to create an “inspiring workplace where [they can] enable talented people to provide amazing customer experiences” (“Join the Team”).

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People Lab Team Values (Nordstrom People Lab)

People Lab Team Activities (Nordstrom People Lab)

Additionally, employees are constantly trained to adapt to new technology and equipment. For example, as mentioned previously, employees were trained to use new mobile POS devices to expedite the in-store transaction checkout process.

As for providing a strong sales force, Nordstrom holds 2-day employee training workshops: Day 1 of the employee training focuses on Nordstrom values, showing employees how to offer Nordstrom services and how to treat customers; Day 2 of the employee training workshop trains employees to use technical machines and computers. Various representatives from departments are responsible for training new hires, including Human Resources, Service Experience, Loss Prevention, Department Managers, and others. Because Nordstrom employees are not given an employee manual or handbook, Nordstrom focuses on hiring people that they know they can depend on and can train.

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Process Used to DecideBased on the benefits found through industry benchmarking and forecasting of customer

demand, Nordstrom decided it is best to use an interfunctional view approach in order to stay relevant and best serve its customer base. For example, Nordstrom’s decision to use mobile POS devices was made based upon looking at Apple, Target, and Home Depot’s purchases checkout design and integrating new, innovative technology into their services processes. The company, again, looks at its overall corporate objectives and makes its decisions based on maintaining consistency with its goal of satisfying customer needs.

Nordstrom’s RationaleSince every customer has his/her unique needs, not all situations can be predicted through

a manual. This is why employees are given the authority to make final judgment calls. Such a process is reasoned by the fact that Nordstrom management only hires employees who are reliable and responsible. Employees are given only one rule to follow: use your best judgment. Trust drives this policy.

Role of TechnologyNordstrom has adapted to many changes in technology. The business accepts cash,

checks, credit, debit, and gift cards. In addition, its highly successful eBusiness retail fronts are a recent service change in business design. As mentioned previously, Nordstrom has also added the in-store service of mobile POS device check out capabilities. Additionally, Nordstrom stores now have Wi-Fi service.

Online Retail Site (Nordstrom.com)Strengths

Based on Nordstrom’s situational contingency approach to employee training, employees can benefit from greater flexibility and autonomy when working with customers. With this training method, employees feel more empowered and motivated to provide customers with great service experiences. Additionally, Nordstrom’s technological adaptations through its interfunctional view approach have kept the firm relevant and allow Nordstrom to continuously enhance customer-shopping experiences.

WeaknessesBecause Nordstrom is such a large firm, any adaptations to technology and changes in

product or service design takes a lot of corporate investments (time and money). Especially when it comes to training employees on new equipment, difficulties may surface if employees are not enthusiastic about adjusting to new processes. More experienced employees may have aversive

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reactions to the new technological systems. Additionally, too large of a focus on providing services through technology may make the company appear less personable.

5. Process and Capacity Design:Key Decision Description

Process and capacity design deals with understanding the different processes necessary and the order to which they need to occur in order to successfully produce desired products and services. Equipment, technology, and other resources needed also must be identified through this operational decision area.

Choices Available to Nordstrom and Selection MadeThe choices available to Nordstrom are as follows: each operational process can be

divided up based on department or team responsibility, teams can be given great autonomy or be micromanaged, and processes can be technically based and executed or be performed by a human labor force. Nordstrom’s process and capacity design requires employees to be proficient in both interpersonal skills and technical skills. Equipment and machinery are used, but a labor force is most crucial to Nordstrom’s success and efficiency. Specific department teams are held responsible for specified process tasks.

Nordstrom’s products and services are available in high volume, however services are customized to each given customer. The process of delivering a product to a customer is as follows: Nordstrom buyers order inventory for each retail stores, orders are delivered to the store, customers visit Nordstrom retail locations, customers are assisted by in-store employees, and finally make a purchase/complete a transaction.

Process of Delivering Goods to End Consumer

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Process Used to DecideNordstrom looks to customer expectations and what its competition is doing

(benchmarking). The company also uses the critical path method to identify the most efficient way to execute operations processes.

Nordstrom’s RationaleGiving each department specified tasks eliminates overworking employees and also

improves their quality of outputs (although, idle employee time should not be too high). Teams are given some autonomy to how they perform their tasks, as long as processes are consistent with company image. While some processes are more technically heavy, others require more human skill. This depends based on the given task. Overall, processes are fairly balanced in terms of relying upon both human and equipment functions.

Role of TechnologyNordstrom uses scheduling and record keeping systems via Enterprise Resource

Planning. One function of the ERP system is to analyze costs of necessary business processes.

StrengthsWith a large volume and product variety available, customers are highly likely to find

something that they will purchase. Also Nordstrom’s labor force can better serve customers because of the flexibility given to them. Processes are straightforward, making it easy for employees to be trained to serve customers. With specified tasks, Nordstrom teams also experience steep learning curves where they can grow to become more specialized in their particular duties.

WeaknessesBecause employees are given flexibility in terms of service processes, sometimes it is

harder to prepare the exact equipment and technology needed in order for the employee to best serve the customer. 6. Location: Key Decision Description

Location is a large operational decision area. It deals with identifying important criteria used to decide where to locate company facilities by analyzing where the company’s current facilities are located.

Choices Available to Nordstrom and Selection MadeNordstrom can look to different demographics when making location decisions. Location

choices include: urban areas, rural areas, semi-urban areas, suburban areas, neighborhood areas, areas that are frequented with a lot of traffic or no traffic, shopping malls, or establishing a stand alone store.

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Some current Nordstrom locations include: their full line store locations which expanded internationally (5 in Canada and 1 in Puerto Rico) and their national retail stores, some of which are located in Chino, Palm Springs, Bakersfield, and Kentucky. Nordstrom also has flagship stores in Seattle, San Francisco, and other large cities.

Nordstrom’s current focus is placed largely on its rack stores.

Nordstrom Rack Store

Process Used to DecideNordstrom decides where to locate new stores based on looking at areas where its major

competitors are (benchmarking), consumer foot traffic, and data from Geographic Information Systems reports. Although Nordstrom retail stores are traditionally located in shopping malls, the company’s brand image has become well spread to the point that the firm has begun considering stand-alone store locations as well. Nordstrom also looks to urban and neighborhood areas. Through GIS reports, Nordstrom searches for areas with higher income and spending demographics.

Nordstrom’s RationaleNordstrom locations are decided based on the amount of frequented traffic within the

area: with higher traffic, more people are likely to notice and stop by the Nordstrom store. Higher income levels areas are also preferred because Nordstrom serves the premium customer segment. Nordstrom rack locations tend to be placed near full line Nordstrom stores. Neighborhood locations are also optimal areas for Nordstrom stores because they are safer and are characterized by a better atmosphere, which is consistent with the Nordstrom image.

Role of TechnologyNordstrom uses a form of Geographic Information Systems analysis to better understand

the demographics of given areas and find promising Nordstrom locations.

StrengthsBy paying attention to area demographics, Nordstrom can best identify geographic

segments with the highest profitability potential. Currently Nordstrom has expanded all across the country and internationally with full line branches. This has allowed the company to realize high profits. In addition to its full line stores, Nordstrom’s new focus on its rack stores is targeting the less saturated lower price range customer market share.

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WeaknessesBecause Nordstrom tends to locate itself near other competitors, there is always the

danger of customers shopping at its rival locations. Also, with continued international expansion, Nordstrom is bound to experience some cultural challenges and must work hard to uphold its corporate image across markets.

7. Layout Design:Key Decision Description

This area of operations management deals with arranging the layout of a company facility and deciding how large facilities must be in order to meet such plans.

Choices Available to Nordstrom and Selection MadeNordstrom facilities can be designed via a grid layout, loop (racetrack) layout, or free

flow layout. With a grid store layout, fixtures are lined up parallel to walls. In this case customers typically go down each store aisle to find products they want. As for the loop layout, clearly defined aisles circle through the store like a racetrack. Finally the free flow layout does not have any set flow or aisles in the store. Nordstrom uses the racetrack layout within its stores. Its facilities are organized based on volume per square foot.

Process Used to DecideNordstrom’s visual manager uses the ABC method by identifying high value, “A” type

products and placing them in areas where customers frequent more often. “A” items also are given more real estate per product. On the other hand, “C” type lower value items are placed in closer proximity with each other and are found in places that customers are less likely to walk by.

Firm’s RationaleAreas that are frequented more tend to be areas where customers will purchase more.

Thus, Nordstrom takes advantage of the loop layout, as it is the store design that allows for maximum customer exposure to different products. New merchandise and “A” items are placed along the racetrack so that customers can easily see them. Each Nordstrom department is set up to visually appeal to and draw in shoppers passing by. In an effort to increase visual appeal, Nordstrom avoids overstocking the front ends of their stores and fixtures are low so they do not obstruct the customer’s view of other products. The store’s in-house visual team sets up all visuals.

Role of TechnologyNordstrom sales management analyzes where products are placed inside of its store and

see the resulting transactions based off of that. In-store video cameras can also track customer navigation patterns. ERP systems are useful in understanding shopping habits as well.

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StrengthsNordstrom effectively takes advantage of the ABC method. In doing so, the firm is better

able to identify how it wants to design the layout of products inside of its stores so that the company can maximize profits on sale items that will bring in the greatest profits. Additionally, the store is organized in a way that customers are exposed to many departments while walking around, which increases the likelihood of a purchase.

WeaknessesMore price sensitive shoppers may have a harder time finding items because such lower

value “C” items are not as exposed as the “A” items. Additionally, with the racetrack layout and Nordstrom’s traditionally taller and skinnier store designs, retail stores sometimes look more cluttered and are difficult for customers to navigate.

8. Human Resources and Job Design:Key Decision Description

This operational decision area involves determining human resource standards and maintaining a good work environment for all employees.

Choices Available to Nordstrom and Selection MadeDecision areas in regards to human resources deal with determining the level of

employee autonomy granted, enforcement methods of maintaining a positive work environment, work environment priorities, and ways in which employees are instructed to interact with customers.

With Nordstrom, employees discuss important work environment related topics (i.e. sexual harassment) on a monthly basis to ensure a comfortable work experience for everyone. Elimination of harassment is a huge focus of Nordstrom’s. Employees are held under a no retaliation policy, where workers cannot be punished for bringing up issues that concern them. With a checks and balances system in place, employees are held responsible for work related issues that they have discussed with their managers. In terms of autonomy granted, employees are trusted with large autonomy over how they interact with/serve customers.

Process Used to DecideBecause of Nordstrom’s no retaliation policy, a strong work environment feedback loop

is in place. Nordstrom can receive uncensored feedback that helps the company work towards improving overall employee work experiences. Motivational theories relating to employee morale are also considered. Because happier employees result in greater performance, Nordstrom does its best to maintain a healthy work environment where workers feel comfortable.

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Nordstrom’s RationaleEmployees should not be afraid to bring up issues that are bothering them. They should

also be given greater responsibility and stake in their jobs as a form of motivation. By trusting employees to use their best judgment, they feel more valued and morale will increase. Additionally, all customer interactions are different (situational contingency) and employees should act however they best see fit.

Role of TechnologyNordstrom holds a detailed checks and balances record on file so they can easily

reference what issues were discussed between employees and managers in the case that a repeat issue comes forth.

StrengthsEmployees are guaranteed to feel comfortable in their work environment and are guided

to perform at their highest potential.

WeaknessesA significant amount of time and money must be invested in order to ensure a good work

environment for employees. Additionally, employee pay is based on commission only or minimum wage (depending on whichever is higher). This pay system may seem unfair to workers and create a discouraging work environment. Sales force employees may also realize decreased motivation at work if customers begin to favor online shopping over shopping at brick and mortar locations.

9. Supply Chain Management:Key Decision Description

Supply chain management deals with the details of interactions/communication with store suppliers and partners.

Choices Available to Nordstrom and Selection MadeNordstrom can either directly deal with suppliers or have a middleman buyer. The

company also has some choices when it comes to holding inventory: it can hold all inventories in central warehouses or use cross-channel inventory visibility. The current supply chain management system Nordstrom uses has the firm’s buyers purchasing merchandise from their pool of suppliers. Nordstrom’s main suppliers are located in Seattle. Buyers purchase products for Nordstrom stores on a national scale. Nordstrom is a unique retail firm because it implements a multi-channel commerce supply chain that provides cross-channel inventory visibility--inventory is not only held in physical warehouse facilities but in-store inventory is also considered stock available for Nordstrom’s eBusiness.

The company has multiple distribution centers located in Florida, Iowa, California, Maryland, Oregon, and Utah. These centers can send products to Nordstrom stores or directly to

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customers. The Nordstrom fulfillment and contact center is located in Cedar Rapids, Iowa, where the facility processes customer orders, inbound merchandise, and returns. Nordstrom suppliers are held under high standards that are listed in its supplier manual.

(Slovak)

Process Used to DecideBuyers must have good forecasts for next season’s demand as they purchase from

suppliers a year in advance. Quantitative forecasting methods such as data analysis of historical sales data is used to predict future demand. Additionally, in-store managers’ internal insights are taken into consideration. Nordstrom’s supply chain strategy is also created based on its Total Quality Management approach.

Firm’s RationaleBy purchasing on a national scale, there is a level of consistency amongst Nordstrom

stores and costs are reduced. Because Nordstrom also pays attention to in-store employee suggestions for purchases, necessary adaptations to in-store inventory needs are possible.

Role of TechnologyNordstrom’s ERP system is used to track inventory and product planning/costs. Software

for historical sales analysis is also used to track popular items that may have faster turnover periods.

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StrengthsSales forecasts are taken into consideration when ordering inventory supplies. In the case

that forecasts are underestimated, store managers have the authority to reorder inventory. With such a large branch of Nordstrom stores, intrafirm inventory can also be taken advantage of by acting as buffer stock for other firm branches and Nordstrom’s eBusiness. Nordstrom’s adoption of cross-channel inventory visibility has allowed the company to achieve increased inventory turnover rates (upon implementing this supply chain management system, Nordstrom achieved a high of a 5.6 inventory turnover).

WeaknessesBecause Nordstrom buyer purchases are standardized on a national scale, inventory may

not always be accurately estimated for each retail store. Another issue with this system is that buyers are more centralized and are not as familiar with local market demands. In addition, reacting to regional manager reorder requests complicates the inventory management process. With cross-channel inventory visibility, transportation processes are also complex. Additionally, keeping Nordstrom’s eBusiness inventory stock updated in real-time is a challenge that the firm faces. As for reverse logistics, multi-channel supply chains and cross-channel inventory visibility make product return processes exponentially challenging as well.

10. Inventory, materials requirements planning, and JIT:Key Decision Description

When it comes to supply chain management and communication with suppliers, inventory management and materials requirements planning is a must. Questions in regards to this area of decision-making deal with determining quantities needed of various inventory items and details of reordering.

Choices Available to Nordstrom and Selection MadeFirms can either employ a just in time inventory system or hold a large amount of

inventory in stock. Nordstrom does not use a just in time inventory system. Typically the middlemen buyers track popularity of different inventory items and do the reordering automatically. With Nordstrom’s cross-channel inventory visibility capabilities, the firm has significantly reduced stock outs.

Forecasting is done through department managers, who predict inventory volumes by looking at Nordstrom’s 3-month trend. For buying purposes, trend is used from the prior year.

Process Used to DecideNordstrom uses tracking of product transactions to see trends indicating popularity of a

particular item. On special occasions, in-store managers can request an immediate stock up of a certain product if it has a big enough product call out. However, this is fairly uncommon. Requirement planning is the department manager’s responsibility.

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Nordstrom’s RationaleNordstrom wants to give its customers their products as soon as possible. By having

enough inventories at hand, they don’t hold the risk of back ordering or increasing customer-waiting time in the case that forecasting sales is lower than actual sales. Thus, Nordstrom uses the expansionist strategy in terms of inventory management.

Role of TechnologyNordstrom’s ERP systems are used to track transactions between middlemen buyers. The

firm’s online communication systems are also important if managers need to make special inventory requests. Software systems and technology behind the Nordstrom eBusiness is also vital for keeping up with inventory stock updates.

StrengthsBecause Nordstrom has an expansionist inventory strategy, the firm is less likely to lose

customers to competition due to stock out issues. EBusiness is also booming for Nordstrom because of its inventory strategy; convenience is emphasized with the availability of the service of transporting products to customer homes or local retail stores.

WeaknessesA con of such an expansionist inventory strategy, however, is that Nordstrom incurs the

costs of holding inventory, opportunity costs, and obsolescence cost in the case that demand is much lower than expected. Additionally, it is much more complicated to keep track of inventory with Nordstrom’s multi-channel business that utilizes cross-channel inventory visibility. Sometimes miscommunications result due to changes in inventory stock that were not immediately noted or recognized by all employees.

11. Intermediate, short term, and project schedulingKey Decision Description

This operational decision area covers issues of payroll during slow versus peak periods and also considers the option of subcontracting for the firm.

Choices Available to Nordstrom and Selection MadeNordstrom has the choice to subcontract or not and to take people off of payroll during

slowdown periods or to keep them on payroll. The company currently has some subcontractors, although they are not a huge part of the firm’s operations. In addition, Nordstrom keeps its employees on payroll even during slower business periods.

Process Used to DecideNordstrom looks to its customers’ preferences in terms of if they want subcontractors to

perform a service for them or if the firm itself is capable of performing the services. When

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making decisions about employee payroll, Nordstrom also uses/analyzes employee motivation techniques and theories

Nordstrom’s RationaleBeing a large corporation, Nordstrom has a growing selection of versatile services. Thus,

dependency on subcontractors is not very necessary for them. In order to maintain high employee morale and performance, job security is vital for workers. Even during seasonal peak periods, Nordstrom does not over staff its stores because they want to continue to pay their full time employees normal salaries.

Role of TechnologyNordstrom uses integrated ERP systems with its existing subcontractors so that smooth

communication is a capability. Payroll systems are also set up to best track employee wages and company costs.

StrengthsWith Nordstrom’s current payroll approach, the firm keeps its employees feeling secure

with their jobs and, therefore, realizes the long-term benefits of increased employee morale, loyalty, and performance. Nordstrom is also able to maximize revenues and control over its added services with a lesser focus on subcontracting.

WeaknessesAlthough employee job security is a benefit, in doing so Nordstrom must invest more

money into its existing employees and may forego the opportunities of ‘fresh’ employee talents. Additionally, Nordstrom is not fully capitalizing on the benefits of subcontracting: saving set up costs and time. The company may also face challenges of spreading itself too thin over such a large pool of services.

12. Maintenance:Key Decision Description

Maintenance is vital in order to ensure consistently good firm product quality and image. Thus, firms must identify who is responsible for maintenance.

Choices Available to Nordstrom and Selection MadeFirms can have maintenance teams/departments that operate at set hours or are constantly

on duty. Nordstrom has a maintenance team that operates close to 24 hours a day on a daily basis. Employees are also involved in some basic store upkeep efforts.

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Process Used to DecideNordstrom decided to have an extremely available maintenance team in order to remain

consistent with its corporate objectives and goal of providing maximum customer value.

Nordstrom’s RationaleTo uphold a good image as a firm, maintenance is crucial.

Role of TechnologyTechnological communication systems between departments and maintenance are set up

to keep communication smooth and fast. Scheduling systems for maintenance employees are also in place. Nordstrom keeps a detailed record of past issues that were brought up to maintenance so that everyone remains informed and can quickly react to them.

StrengthsWith a widely available maintenance team, in-store issues can be resolved quickly.

WeaknessesHigher costs of maintaining such a team must be incurred.

13. RecommendationsOverall Opinions/Evaluation of Management

Nordstrom’s customer-focused approach in operations plays a large part in its success as a business because it is so directly interactive with its customers. Customers benefit from Nordstrom’s business approach of prioritizing clients first. However, the company can improve on various operations areas.

Quality Management Recommendation

Better educate employees on products and how to better serve customers. In addition, quality of service should be measured based upon some objective standards.

JustificationEmployees are expected to get to know their products on their own, as the majority of

employee training focuses on providing the best services. Customers will also want employees to be knowledgeable and reliable. Through a standardized training program specifically on products, all employees will be on the same page. Customer services standards should be set because in-store customer experiences tend to vary from branch to branch without much consistency.

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Services and Products DesignRecommendation

Rather than focusing on transitioning only to faster technology aided services like the POS transaction devices, Nordstrom should still realize the importance of personal interactions with its customers.

JustificationNordstrom was founded upon the idea of providing consumers with quality shopping

experiences, rather than solely supplying convenience shopping. In order to maintain this “Nordstrom experience” the company should value its personal, interactive relationships with customers.

Processes and Capacity DesignRecommendation

Educate other employees about other store departments as well.

JustificationEmployees tend to be isolated within their own store department. Although management

encourages cross selling, this is difficult if employees don’t know much about other departments and their products offered.

LocationRecommendation

Nordstrom should also begin focusing on stand-alone store locations when considering expansion options.

JustificationAs Nordstrom’s brand is very well known and established, the company has a large

enough base of loyal customers that would visit stand alone locations.

Layout DesignRecommendations

Create wider and shorter building designs with departments that are easier to locate.

JustificationsBy making the layout wider and shorter, the rooms will appear more spacious and less

cluttered. Also the departments should be better organized so customers have an easier time finding what they are looking for.

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Human Resources and Job DesignRecommendations

Offer incentives for customers to shop at brick and mortar locations rather than online by possibly doubling points or offering promotional discounts/customer rewards. In addition, Nordstrom should reform its employee commission-only pay system.

JustificationsSince Nordstrom’s eCommerce business is so successful; customers have decreased their

visits to Nordstrom stores. This drastically reduces the amount of potential sales and pay for Nordstrom employees. Employees may also be experiencing discouragement because of the commission-only pay. Thus, Nordstrom should consider creating more attractive work incentives.

Supply Chain ManagementRecommendations

Nordstrom should transition to using regional Nordstrom buyers, instead of national buyers.

JustificationsThis allows buyers to be in touch with their localized markets, which creates a more

niche/customized shopping experience because customer demands are better understood.

Inventory, Materials Requirements Planning, JITRecommendations

Implement real-time inventory updates to increase stock accuracy.

JustificationsSince inventory is only updated after store closing times, real time changes in stock

during the day are unaccounted for and can create a lot of confusion and frustration for employees and customers.

Immediate, Short Term, Project SchedulingRecommendations

Partner with and promote locally known emerging talents, when occasions arise, to create a feeling of support for others within the community.

JustificationsThis will allow local businesses to promote themselves amongst many of Nordstrom

customers in addition to showing Nordstrom shoppers that a large company can reach out to the community.

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MaintenanceRecommendations

Create a more streamlined communication system between housekeeping/maintenance teams and in-store service employees.

JustificationsMany times there are accidents in the store (food or drink spills, litter, etc.) and they go

unnoticed for a while. If each department were equipped with a call-button that immediately notifies the maintenance team and sends them to the corresponding location, issues can be resolved in minimal time. This is especially important because Nordstrom takes great pride in having very clean stores and facilities.

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2014.

Brang, Nicholle. Personal interview. 3 November 2014.

Clay, Kelly. "Nordstrom Sees Sales Boost From Mobile POS Devices." Forbes. Forbes Magazine, 6 Apr. 2012. Web. 30 Oct. 2014.

"Company History." Nordstrom. Nordstrom, Inc. Web. 10 Nov. 2014. <http://shop.nordstrom.com/c/company-history>.

DeAngelis, Stephen F. "Supply Chain Helps Nordstrom’s Bottom Line." Enterra Solutions. Enterra Insights Blog, 8 Sept. 2010. Web. 14 Nov. 2014.

"Join the Team." Technology People Lab. Nordstrom People Lab. Web. 12 Nov. 2014. <http://nordstrompeoplelab.com/join-the-team/>.

Kizer, Rich, and Georganne Bender. "Everything You Need to Know About the Science of Store Design." Vacuum & Sewing Dealers Trade Association. Floor Care Professional, 1 Aug. 2008. Web. 14 Nov. 2014. <https://www.vdta.com/Magazines/AUG07/fc-art-of-the-layout.html>.

"Nordstrom, Inc." MarketLine Advantage. MarketLine, 11 Nov. 2014. Web. 20 Nov. 2014.

"Nordstrom Innovation Lab." NordstromInnovationLab.com. Nordstrom, Inc., 7 Feb. 2012. Web. 11 Nov. 2014. <http://secure.nordstrominnovationlab.com/pages/our_process_told_as_our_team_s_timeline>.

Partridge, Amy R. "You Are Everywhere: Mapping the New Retail Supply Chain." Inbound Logistics. Thomas Publishing Company, 1 Aug. 2012. Web. 8 Nov. 2014.1

Slovak, Chloe. "Nordstrom E-Commerce Analysis." Web. 11 Nov. 2014. <http://nordstromfinalproject.blogspot.com/2013/05/supply-chain.html>.

"Store Layout: Nordstrom." 1 Jan. 2012. Web. 12 Nov. 2014. <https://storify.com/rjohnson8/store-layout-nordstrom-1>.

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