The following discussion describes a new inventory system used by J. C. Penney39: In an industry where the goal is rapid turnaround of merchandise, J.C. Penney stores now hold almost no extra inventory of house-brand shirts. Less than a decade ago, Penney would have stored thousands of them in warehouses across the U.S., tying up capital and slowly going out of style. The entire program is designed and operated by TAL Apparel Ltd., a closely held Hong Kong shirt maker. TAL collects point-of-sale data for Penney’s shirts directly from its stores in North America for analysis through a computer model it designed. The Hong Kong company then decides how many shirts to make, and in what styles, colors, and sizes. The manufacturer sends the shirts directly to each Penney store, bypassing the retailer’s warehouses and corporate decision makers. a. Discuss how this case illustrates the concept of the opportunity cost of capital. b. How does this innovation also help in demand management?
The following discussion describes a new inventory
system used by J. C. Penney39:
In an industry where the goal is rapid turnaround
of merchandise, J.C. Penney stores now hold
almost no extra inventory of house-brand shirts.
Less than a decade ago, Penney would have stored
thousands of them in warehouses across the U.S.,
tying up capital and slowly going out of style.
The entire program is designed and operated by
TAL Apparel Ltd., a closely held Hong Kong shirt
maker. TAL collects point-of-sale data for Penney’s
shirts directly from its stores in North America for
analysis through a computer model it designed.
The Hong Kong company then decides how many
shirts to make, and in what styles, colors, and
sizes. The manufacturer sends the shirts directly
to each Penney store, bypassing the retailer’s
warehouses and corporate decision makers.
a. Discuss how this case illustrates the concept of
the
b. How does this innovation also help in demand
management?
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