Best Buy's Supply Chain Management Practices - A Customer-Centric Approach to Business
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Case Details:
Case Code : OPER083
Case Length : 15 Pages
Period : 2005-2009
Organization : Best Buy Company Inc.
Pub Date : 2009
Teaching Note :Not Available
Countries : US
Industry : Consumer Electronics Retailing
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
Background Note
Best Buy was the brainchild of Richard M. Schulze (Schulze) who, along with a partner, founded it in 1966 in Minnesota, US. The store was first named
'Sound of Music' and served the home and car stereo retail market of Minnesota. In 1971, Schulze bought out his partner's stake and began to expand the business...
Restructuring the Business
Andersen Consulting implemented a plan called 'process to profits', revamping Best Buy's ads, merchandising, pricing, and purchasing practices.
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The plan included eliminating low selling product lines and models, focusing more on selling service plans
- a high margin area, and including more products within a given price range...
EXPANSION STRATEGY
As a part of restructuring, in 1996, Best Buy slowed down its geographical expansion plans. In 1998, the company started selling music online through its website, www.bestbuy.com. The company also introduced a new store format, Concept IV. Concept IV occupied between 43,000 and 45,000 square feet and had more hi-tech products than previous formats...
REVAMPING THE SUPPLY CHAIN
Best Buy followed a push model for its supply chain where similar product assortments were supplied to all its stores. The company imported most of its products from Asia...
CUSTOMER-CENTRIC APPROACH
In 2003, Best Buy planned to revamp its supply chain with the focus being on Customer-centric principles. The company consulted Larry Selden (Selden), Professor at Columbia University, to arrive at a basis on which to divide its customers into Angel and Demon customers...
The Road Ahead
Best Buy started a pilot for testing the results of the Customer-centricity approach in 32 stores for fiscal 2004 and found that the growth in comparable store revenues of these 32 stores was 7% above the rest of the chain's average comparable stores' revenue growth and that their close rate had increased by 6%...
Exhibits
Exhibit I: Stock Price Chart of Best Buy (1985-2009)
Exhibit II: Best Buy's Income Statement (FY 2004 - FY 2009)
Exhibit III: Best Buy's Balance Sheet (FY 2004 - FY 2009)
Exhibit IV: Best Buy's Efficiency Ratios (FY 2004 - FY 2009)
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