Do a complete inventory of items in the stores, in transit between the stores and the warehouse, and in the warehouse, is maintained by a computer located at corporate headquarters.

Read the case study at the bottom of this page. Respond to the questions listed after the case summary. Your paper should be 500 words long (2-3 pages) and have at least one IWG formatted reference.The paper is to be in essay format and there must be clear transitions between questions.Finish Line runs retail shoe stores in more than 200 locations. The company is based in Indianapolis, Indiana where its corporate warehouse is located. Don Courtney, Vice President, in charge of Management Information Systems, Materials Movement and Distribution, assessed the impact of a new Finish Line mega-store located in the Circle Center Mall in Indianapolis.“One of the things we noticed early on was that we started having lots of products come in specifically for the Circle Center store. We were doing business with vendors we had not done business with before. A lot of products were just unique to that store and didn’t go to any other stores.”We have a distribution center that handles distribution of products that are sent to all of ou stores. The special products for the Circle Center store would be ordered in small quantities and products for the rest of our stores are ordered in large quantities. The products for the Circle Center store are kept in a separate space in the warehouse. We developed a process that allowed the products for the Circle Center to be distributed to that part of the distribution center immediately on receipt. This eliminated having to give it an assigned location and having to spend time finding products for just that one store. Many aspects of the operation of the new store were different. The new store, with 15,000 square feet of retail space, compared to the normal 5,000 square foot stores, presented new operations challenges for the Circle Center store manager, Don, and his team. Don wondered what other surprises were waiting as he prepared for the new store’s first week of operation and the upcoming Christmas buying season.Logistics at the Finish LineThe efficient flow of material through the Finish Line distribution system is important to the success of the company. Buyers who anticipate the needs of the many stores order the product. Vendors, such as Nike and Reebok, send the product to the warehouse in Indianapolis. On receipt, the product is stored in a location determined by a computer program designed to maximize the use of space in the warehouse.A complete inventory of items in the stores, in transit between the stores and the warehouse, and in the warehouse, is maintained by a computer located at corporate headquarters. Each night, the computer calculates lists of items that are needed by each store. This list is specially sorted so that the items can be quickly picked in the warehouse. Once picked, a conveyor moves the items to an area where they are sorted by store.The Finish Line has contracted with a few trucking companies which deliver product using large semi-trailers. The normal stores each receive a delivery every three-week days. This three-day schedule allows stores to be replenished two times per week in two out of three weeks. In a three-week period, they get five shipments. The new Circle Center store receives shipments every day of the week. Products can also be transshipped between stores when necessary. Product BuyersProducts sold at the Finish Line stores are divided into about 40 departments. Examples of these departments include basketball shoes, running shoes, cross trainers, tennis shoes, and football shoes. Apparel, such as jackets, are also organized by department. Buyers specialize in departments, allowing them to become familiar with the products and the particular characteristics of customer demand and supplier manufacturing practice.Shoes generally make up about 70 percent of the business. This varies, though, according to the time of the year. In August, 85 percent of the business might be Fall back-to-school shoes. This drops to 50 percent in December, when it is easier to buy a sweatshirt or baseball cap as a gift.The buyers see the Finish Line business as highly fashion oriented. Seventy-five percent of the product that comes into the distribution center is new. Often the product is very similar to one ordered last year. Customers expect the latest style and color. The buyers can look at how a similar product sold last year when all of it was available. Looking at how it sold in total may be misleading, since they are normally going to sell what they bought.The product is normally not replenished. Rather, the item is purchased, pushed out to the retail stores and sold. There are exceptions to this, particularly with everyday items, such as socks. Determining the amount to be purchased can be difficult.Even though it only takes two to three months for the company to actually produce the product, the normal lead-time quoted by a company like Nike or Reebok is six months. For instance, you need to order shoes from Nike in March in order to have them in the store to sell by September. From the many choices presented, the buyer is faced with the difficult problem of anticipating what will be hot six to twelve months into the future. Imagine how difficult it is to anticipate the success of a pair of shoes 6 months from new when school is starting!The order quantity for each shoe style is created from looking at sales figures for the past year and forecasting the demand for shoes for the coming 6 months. The actual distribution of sizes sold at each store is part of the calculation. Finish Line collects orders from buyers at all the stores using strict deadlines. Once the total number to order has been calculated, Finish Line contacts the manufacturer to place the order. Finish Line must decide which style of shoes to order and how many of each shoe size to order. Missing the forecast for an item can be disastrous, since there is normally no second chance to reorder. Ordering too many results in having to discount the item at one of the outlet stores where discontinued styles are sold.Once the order arrives from the supplier, approximately 60 percent is immediately distributed to the stores. The allocation to the stores is calculated from the forecasts used to determine the original order, adjusted for store closings and new stores. The rest of the order is stored in the warehouse, and used to replenish store inventory.Retail Store Inventory ReplenishmentThe central computer keeps a perpetual inventory of every stock keeping unit (SKU) at every store and in the warehouse. An SKU is a unique item in inventory. In the case of shoes, for example, an SKU is a specific style, color, and size pair of shoes. A typical store has approximately 5,000 SKUs and the Circle Center store has more than 10,000 SKUs.Each night, the computer calls each store and downloads information concerning each sale to a customer, returns from a customer, receipts from the warehouse, and transfers to another store. The computer knows the exact location of each unit of each SKU sold by the Finish Line. If a store needs, for example, a size 10 men’s, black, Michael Jordan, basketball shoe, the system can be queried for the current location of a pair. The system keeps detailed sales history information to aid the buyers in their purchasing decisions.Associated with each SKU at each location, a minimum and maximum quantity target is defined. These values are used to control the replenishment of inventory at each location. The system generates a replenishment order for a location whenever the on hand balance plus the amount in transit to that location is less than the minimum level. The size of the order is the quantity needed to bring the level up to the maximum amount.For a typical style at a store there might only be 24 to 30 pairs, and that can be spread over 12 or 13 sizes. For the largest and smallest sizes the minimum and maximum quantity typically would be set to one. The minimum and maximums might be two for the sizes other than the 9’s to 11’s, which might be set at a minimum of three and maximum of four.Don Courtney commented on the first Friday of sales at the Circle Center store:“…the first Friday we sold 286 pairs of men’s shoes and those represented 276 different SKUs. So it was all one of this, one of that, and one of this. And without having that broad range of offerings, obviously we wouldn’t be able to do that. So it’s very important when you have that kind of business, it’s very important that when you sell one, you can replace it.”At some point, replenishment is no longer possible from the distribution center. At this time the buyers have to decide which stores will receive the remaining inventory. The buyers run what is called a grid sheet that shows store by store the recent sales and the sizes available for a style. From this they can see where the sizes are broken up and make transfers to stores where the style is selling well. Other factors the buyer must consider when making the transfers are the total number of shoes that a store can hold, the minimum number of shoes a store needs to have on hand to do business, the number of different styles on hand at the store, and the number of display locations at the store.The Finish Line has a few stores that they refer to as close out or outlet stores. In these stores, shoes are displayed in large racks by size. So ultimately, when styles are broken to a point where all the sizes cannot be maintained in inventory, the style is closed out in these special stores.The Layout of the Circle Center StoreThe layout of the new store is typical of the other stores, just much larger. Along each wall are display ranks where a single shoe of each style is shown. These display racks are organized by men’s shoes, women’s shoes, hiking shoes, and golf shoes. There is a large display area for sports apparel in the rear of the store.Other than for a few sale items, the inventory for each style is kept in a stock room that is adjacent to the store. Similar to the display racks, the stock room is organized by shoe style and by size within the style.When a customer indicates an interest in a shoe, the salesperson goes to the stockroom to retrieve a pair. The shoes are brought back to the customer and fitted. If the customer wants the shoes, they are then purchased at the centralized cash register kiosk.Don had some concerns with the organization of the Circle Center store:“When we opened that store, we had plenty of everything in that first weekend, every time a salesperson left the shoe wall to go to the back room, you knew he or she was going to come back with the size that was requested. There’s going to come a day, even in the first weeks, when like everybody else, you’d never have everything. We’re always in the process of some styles fazing out. Why that’s such a concern to me with Circle Center is that it’s a long walk, a walk all the way across the store. We keep our back room in an order. You put all the basketball shoes together so that if you go back for a particular basketball shoe, because that’s what the customer wanted, and we don’t have it in their size, you can find another basketball style in the same look, same price range, to come back and say, ‘Well, I don’t have that, but I have this. Would you like this other shoe?’In fact, we have wired the columns in that store so that we could install a couple of touch screen terminals that could be used to quickly check store stock. We’ve even talked about doing headsets and having somebody in the back room checking, retrieving, and running the shoes to the shoe wall.”Discussion QuestionsHow important is it to have a mix of products? What are the inventory issues that are raised by seasonal products? What problems does this create for The Finish Line?Spread of risk. Given the way the buying takes place for the shoe products, who is taking the most risk? Is it the manufacturer or the buyer?At the Circle Center store, one shoe of each style is displayed for customers to see. All inventory is in the back room. When an customer wants to try on a pair of shoes, the sales clerk goes to the back room, get the shoes, and takes them to the customer. Some customers try on several pairs of shoes before deciding which to buy. Can you think of a better way to stock the shoes so the sales person does not have to keep going to the back room?When demand for a style is high, and the Finish Line distribution center has only a few pairs remaining in the center, how do you decide which stores get the remaining stock of shoes?