Nordstrom Case Study

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The Nordstrom Difference:
The Surprising Similarities and Differences in the Operations and Materials Management of
Three Related Fashion Retailers

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Excellent customer service and up to date, technology driven processes are two of the hallmarks of a successful 21st century operations and materials management plan. These two criteria, along with the quality and value of the actual product being produced are the keys to every successful business today. This is particularly true in retail, an industry which is far from recession proof, and must rely on pleasing customers through offering a good value, large selection, and pleasant shopping experience. The importance of these elements within the operations and materials management plan is clear in this brief case study on Nordstrom, Nordstrom Rack, and Faconnable, which until its 2007 sale was a Nordstrom boutique featuring Nordstrom's own Faconnable brand. Although related, each company has distinct operations and materials management plans and focuses on service, technology, and product to varying degrees. All fashion retailers rely on receiving attractive merchandise to operate. And although all three companies, Nordstrom, the Rack, and Faconnable offer high end clothing and accessories, the way the product arrives and is displayed could not be more different. Nordstrom custom orders merchandise from vendors around the world; in addition, the company increasingly relies on its in-house design team to create everything from slips to shoes to slacks to meet the needs of its customers while maximizing profit levels. Nordstrom has a sophisticated 'perpetual' inventory system, implemented in the early part of the decade which has allowed it to track product every step along the way, expedite special orders for customers, and keep a very close eye on hot sellers and 'slow movers' in order to maintain the perfect merchandise mix on its sales floors. Nordstrom realizes customers expect only the latest, hottest fashions and the perpetual inventory system is its successful attempt at meeting these high expectations. In contrast, the Nordstrom Rack, the discount outlet for Nordstrom merchandise has a much more relaxed inventory system. The Rack relies on regular deliveries of trucks from Nordstrom mainline stores. These trucks arrive with a wide variety of merchandise which may be a result of overstocks, slow sellers, or even custom designed but lower cost merchandise from Nordstrom suppliers, both in house and external. In sharp contrast to both of these retailers, Nordstrom Faconnable, the boutique incarnation of the retailer, available in only 31 international locations, utilizes the tracking and ordering technology of it's larger siblings, but most every piece is a small run order from only the highest quality designers throughout Europe all bearing the Faconnable label. In addition to the merchandise offered in stores, Nordstrom has a significant presence online, while the Rack has a bare bones presence, and Faconnable does not formally advertise online. The organization of employees, both salespeople, managers, and support staff in these three businesses vary as greatly as their merchandise mix. The primary focus at Nordstrom is its legendary customer service. Consistently ranked number one in national surveys for customer service, Nordstrom organizes all of its operations, but particularly its 'front of house,' or sales staff, around being always available, knowledgeable, helpful, and friendly. Therefore, Nordstrom employs a higher ratio of employees to customers than is common in most other retailers. Managers, Assistant Mangers, and Salespeople are all available to assist customers both during open hours, and even before and after in case of 'fashion emergencies'. While managers have the added responsibilities of writing schedules, instructing salespeople, and managing department
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