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Best Buy
“Satisfying the unmet needs of Best Buy customers”
Submitted for
Accounting 324
Dr. Jeff Payne
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3.1 Executive Summary
The purpose of this project was to identify a flaw in a business process of a company, that if
fixed, could obviously and specifically help the customer. This project is designed to improve a
business process to better fulfill the customer needs. Best Buy’s supply chain strategy was found
while researching different companies in search of a business process in need of improvement.
This project’s research will revolve around improving a business process of Best Buy’s to
achieve this goal.
As a team, we wanted to create a project that stood out in many ways. Our goal in regards to our
business process problem was to create a solution that was realistic and implementable. We also
wanted to emphasize the importance of having the customer as our primary concern. We aspired
to communicate our message in the most effective way as possible, and complete the required
conditions of our assignment at the same time. The tasks involved in fulfilling the obligations of
this assignment were performed through thorough research, analyzing the supply chain strategy,
and having an overall understanding of the controls in place for this business process. In order
for this project to have optimal results for Best Buy, we designed a systems flowchart, a control
matrix, an ERD, and an ACCESS database with hypothetical sales transactions, all of which to
better understand the business process, which will aid us in making recommendations to the
strategy.
The goal of this report is to display the findings of our research and recommendations to Best
Buy. The best analysis of what our team discovered about the supply chain strategy is shown in
our control matrix. It reveals the process’s present controls as well as the missing controls. We
have observed that the controls in place are essential, and overall very useful for the backorder
process. Best Buy has improved in transitioning to a “customer facing unit” approach for
inventory control, which allows each store location to track regional buying habits, thus making
inventory decisions based on historical buying preferences. This helps satisfy customer needs,
but there are further improvements in delivering their out-of-stock items that Best Buy needs to
address. Our suggested missing controls are also shown in the control matrix, and encompass
necessary implementations Best Buy should consider to improve their supply chain strategy. It
helps the overall process in efficiency and effectiveness, which in turn better satisfies Best Buy’s
mission: to discover unmet customer needs, then research and evaluate the best way to
accommodate the needs of those customers.
Although Best Buy’s continuous efforts to improve the company’s inventory management
system, several imperfections still exist. These improvements could include adding a corrective
control to inventory, so inventory that doesn’t arrive at its intended destination will automatically
be reordered. Furthermore, segregation of duties needs to be implemented in the warehouse, in
order to assure that the opportunity to commit fraud or simple human errors is minimized. If
these tasks were executed properly, Best Buy’s inventory process system would have more
effective use of resource, and less inventory waste.
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3.2 Revised Documentation
2.1 Organization’s Description
In 1966, Richard Schultz founded a small store called Sound of Music in St. Paul, Minnesota. It
steadily grew and expanded to operating nine stores in 1978, just twelve years after its inception.
In 1983, Sound of Music board directors approved of a new corporate name, Best Buy Co., Inc.
and opened its first superstore. Best Buy continued to grow at a rapid pace, and merely six years
from the opening of Best Buy’s first store, they had a revolutionary concept. The store format
became a “grab-and-go” store with non-commissioned employees and a warehouse environment.
This is also the year the familiar yellow tag label was introduced. From 1993-2002 Best Buy
became the nation’s second largest consumer electronics retailer, they established the Best Buy’s
Children Foundation, and teamed up with the Geek Squad.
Since Best Buy’s humble beginning, it has proven itself to be a business unafraid of innovation
or new ideas. It has a commitment to growth and customers, with a focus on enhancing the
customers’ enjoyment of technology. Recently, the stores are being transformed to shift the
focus from product-centric to customer-centric, all according to BestBuy.com.
Best Buy has found strength in numbers, with over 150,000 employees. They have over 700
locations and have a store in every state except Alaska. Best Buy has also gone global with first
opening a store in Canada, then moving to China and Europe. They are in the process of looking
to expand into Mexico and Turkey. According to Bob Willet, CIO of Best Buy and CEO of Best
Buy International, “International expansion has two important facets. It gives us access to more
growth opportunities, and it gives us access to a globe of talent, ideas and new perspectives.
Both, we believe, are important for us to accelerate our growth in an increasingly global
economy” (Bestbuy.com). Best Buy’s comparison of revenue for the past three years is looking
positive, with a revenue of $30,848 million in 2006 and $35,934 in 2007 (2007 Annual Report).
Their revenue per square footage is $936 million per square foot.
The products Best Buy is best known for are TVs, DVDs, cameras, computers, CDs, speakers,
phones, satellite radio, games, and home appliances (ranging from refrigerators to vacuums).
They are known for Best Buy’s technology, but offer many services that some consumers are not
aware of. For example, Best Buy offers a furniture assembly service that allows the customer to
have professional in-home or office assembly of office furniture, entertainment centers, TV
stands and office chairs. Also, Best Buy offers professional in-home delivery and installation
services for all major appliances as well as DIRECTV. In addition to home and appliance
installation, Best Buy offers car installations. Expert Autotechs are available to install new
audio, video, or satellite radio or GPS navigation system in customer’s vehicles.
The most recognized service Best Buy offers is The Geek Squad. Geek Squad® Agents and
Installers’ jobs are created to “take the hassle out of your technology woes” (geeksquad.com).
They are trained and skilled to install computers, networks, home theaters, and all car
installations.
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Best Buy has four leading values concerning Best Buy’s corporate responsibility: Unleash the
power of Best Buy’s people, have fun while being the best, show respect, humility, and integrity,
and learn from challenge and change. Best Buy’s mission for community relations is displayed in
Best Buy’s donation of one point five percent of pretax earnings through the Best Buy Children’s
Foundation and Corporation (bestbuy.com).
The business objective of Best Buy is simple: “we look for unmet customer needs, and then we
look for the best way to meet those needs and serve those customers in order to grow,”
(bestbuy.com). That is the secret to Best Buy’s success, and its customer-friendly business
approach will be essential during this time of economic uncertainty. An economic crisis is a
make or break time for companies. Unlike many companies who are releasing employees
because of the economy’s state, Best Buy is growing. They are doing this because of its decision
to focus on service by adding people to help customers. However, they, along with most
businesses, face challenges continuing to grow during the state of the economy. Most people
during this time are trying to cut costs, therefore extra spending on electronic items and other
goods that Best Buy offers is limited. Best Buy is also facing the challenge of conserving energy.
With all of its electronics, there is constantly energy being used in large amounts. An example of
this would be its numerous TV’s that are always on, even if people are not around to watch them.
To manage this challenge, Best Buy is now taking steps to reduce its greenhouse gas emissions,
with a goal of having eight percent less emissions by 2012. The strategies to meet this goal
include: energy-efficient lighting in stores, implementing no-idling policy for its fleet, testing
solar panels on certain stores, and using technology to track energy usage, according to Dan
Haugen, writer of an article from MinnPost.com.
Works Cited
"Change the World." Community Relations 26 Sep 2008 <http://www.bestbuyinc.com/community_relations/>.
"Financial Highlights." 2007 Annual Report 2007 26 Sep 2008 <http://media.corporateir.net/media_files/irol/83/83192/root/highlights.htm>.
"Geek Squad Downtown." Geek Squad City 26 Sep 2008 <http://www.geeksquad.com/agents/detail.aspx?id=535>.
"International Growth - Why Expand Globally." About Best Buy 26 Sep 2008
<http://www.bestbuyinc.com/about/international_growth.htm>.
"Portfolio Growth - The Secret to Our Success." About Best Buy 28 Sep 2008
<http://www.bestbuyinc.com/about/portfolio_growth.htm>.
Haugen, Dan. "Study challenges safety of Medtronic stent; also: Best Buy trying to save energy, and Sun Country
boosted by magazine poll." 17 Oct 2008 23 Nov 2008
<http://www.minnpost.com/businessagenda/2008/10/17/3927/study_challenges_safety_of_medtronic_stent_als
o_best_buy_trying_to_save_energy_and_sun_country_boosted_by_magazine_poll>.
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2.2 Business of Information Process Overview
As one of the largest electronics retailers in the world, each Best Buy store location potentially
processes thousands of transactions each week. As demand spikes during the holiday season, as well
as when new products are introduced to the market, it is beneficial to Best Buy’s business plan that
they be able to process customer orders with the same efficiency as they would throughout the rest
of the year. Customers demand that products be available at their convenience, and that their orders
be filled in a timely manner. When there is a breakdown in Best Buy’s inventory and supply chain
management system, customer satisfaction undoubtedly plunges. This potentially has long term
affects on Best Buy’s profitability as a company, since the established mindset of virtually all
consumers in the American economy involves the entitlement to a positive customer experience.
Best Buy has incorporated this same credo into its mission statement, but the fulfillment of this
promise can prove difficult.
Consumers expect retailers to stock adequate inventory to meet demand. However, this is not
always the case. Retailers must predict the buying habits of customers, for current and future
purchases, as they select the products to offer for sale. This is not easy. Consumers are bombarded
on a daily basis with advertisements of new technologies, and updated versions of everyday
products. Therefore, product preferences and demand can change on a daily basis. Unfortunately
this does not translate in “real time” to retailer’s inventory positions. There is an unavoidable time
frame between the store order and actual reception of new inventory. Plus, there must be a place to
move or dispose of the old inventory currently on location. This process can be costly for Best Buy
since they not only incur the costs of bringing the new inventory to the point of sale, but also must
assume the disposal costs of obsolete and unpopular inventory. Therefore, when buying demand
changes, retailers find themselves in the predicament of satisfying consumer needs while not
sacrificing its profit margin.
Methods to solve the supply chain and inventory management struggle have taken many different
forms. In the past, Best Buy’s particular strategy was to stock each store location with large
quantities of the same products. This “high-volume distribution mechanism” was thought to be the
most effective way to ensure that products would be on hand for consumers. On the contrary, little
consideration was given to the consumer demographics of various regions. In an attempt to remedy
this problem, Best Buy has transitioned to a “customer facing unit” approach for inventory control.
This modernized approach allows each individual store location to track regional buying habits, and
thus make inventory decisions based on historical buying preferences of their particular
demographic. Although this reformed system has, thus far, proven successful for Best Buy, there is
still no way to avoid the occasional stock-out. These are the circumstances when Best Buy must
have a competent and timely supply chain to satisfy customers whose real time buying needs have
not been met.
Best Buy’s livelihood, as a retailer, relies on them being punctual in terms of fulfilling customer
orders. Therefore, communication between the different divisions of business functions is a crucial
component of this business process. The first phase of this process is the actual customer order.
This element, of the business process, takes place when the customer discovers the product they
intend to buy is not currently in stock. Consequently, they inform customer service of their product
order. Naturally, the consumer expects customer service to provide them with a reasonable time
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frame of when delivery is expected. In order for this to be possible, the store location, warehouse,
and transportation division must be in sync if they are to provide the customer with quality
information.
As a result of faulty communication between separate business operations, Best Buy employees are
often uncertain about quantity and time of arrival of inventory. Although Best Buy fills an order for
a specific number of products, the store is still uncertain of how many the warehouse will supply to a
particular Best Buy location. It is clear that the transportation units knows how many will be
delivered to each location, even though the store is still not provided with the information.
Consequently, there is a communication gap between the store and the warehouse. This hinders the
company’s business objective of fulfilling customer needs. Essentially, a “domino effect” begins
with unmet customer needs and ends with diminished profits.
After researching the organization thoroughly, we have identified this communication gap as a
potential weakness that can deter Best Buy from achieving the company’s business objectives. It is
obvious that something must be done in order to fix this gap, before another company achieves
competitive advantage by designing a more communicative supply chain. If competitors discover
more effective ways to satisfy customers, Best Buy could potentially lose market dominance.
2. 3 Narrative
Para
1
2
Line Text
1
2
3
4
5
6
7
8
9
10
11
12
13
16
17
18
The Best Buy customer decides to purchase an item currently not in
makes two
copies of a rain
stock. The Best Buy salesperson then checks
the warehouse
check
receipt,
which
includes
current
sales
price,
item
number,
raincheck
receipt
inventory on the computer to verify the item is currently
in stock in
receipt
number,Ifcustomer
email isaddress,
and date. One
copy is
the
warehouse.
the inventory
in the warehouse
the salesperson
given
theorder
customer
who
will bringand
it back
verify
his and
purchase
inputstothe
into the
computer,
printstoout
a copy
when theitorder
TheThis
second
copyincludes
is stored
on filesales
by the
provide
to thearrives.
customer.
receipt
current
price,
salesperson.
The
salesperson
then
makes
a
purchase
order
for
item number, receipt number, customer email address, and date.that
product
through
an automatically
online Best Buy
inventory
On this site
the
The computer
then
transfers
thesite.
information
to the
salesperson
can see manager.
how many products are on the shipping truck
warehouse loading
but cannot specifically determine how many this location will
receive. Because of this, the salesperson cannot tell the customer
The warehouse loading manager finds and then loads the item on
exactly how long it will take so the sales person gives a rough time
the truck. The warehouse loading manager then updates customer
span when it could arrive.
purchase order data, inputting the time the truck departs the
warehouse and expected time of arrival. The computer sends that
data back to the Best Buy store where the store manager receives
the information and forwards the information to the customer by
e-mail.
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20
21
22
23
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When the truck arrives the inventory is scanned into the system,
and then the store manager notifies the customer of the arrival by
e-mail. Upon arrival, the customer presents the purchase order to
the salesperson. The salesperson verifies request by checking the
computer database. The salesperson then retrieves
the item of request and delivers it to customer. The item is then
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25
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scanned and the customer pays for the ordered item. Following
the sale, the computer automatically updates the inventory record.
2.4 Table of Entities and Activities
Entities
Para
Activities
Customer
1
1. Purchases an item not in stock.
Salesperson
1
2. Checks warehouse inventory on computer.
3. Inputs order on computer.
4. Provides a copy of the order for the customer
Computer
1
5. Automatically transfers information to the
warehouse manager.
Warehouse Loading
Manager
2
6. Finds and then loads item onto truck.
7. Updates the customer purchase order data.
Computer
2
8. Sends data back to Best Buy store
Store Manager
2
9. Receives the data and forwards it to the
customer.
Store Manager
3
10. Scans in the inventory when truck arrives.
11. Notifies customer of item arrival.
Customer
3
12. Customer presents purchase order receipt to the
salesperson.
Salesperson
3
13. Verifies request by checking computer
database.
14. Retrieves, scans, and delivers item to customer.
Customer
3
15. Pays for item.
Computer
3
16. Automatically updates inventory record.
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2.5 Level 0 DFD
Purchase
Request
Customer
1.0
Receive
Purchase
Request
Inventory
Request
Sales Order
Record (Form)
Sales Order
Journal
3.0
Process
Inventory
Request
Transport
Inventory
2.0
Record
Sales
Order
4.0
Receive
Inventory
Notify
Customer
Notify
Customer
Service
5.0
Receive
Notice
Inventory
Journal
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2.6 Systems Flowchart
Salesperson
Computer
check
warehouse
inventory
Warehouse Manager
Verify
Updates
Stop order
Purchase order
receipt
Yes
Verify
Input
Purchase order
receipt
Pick
Inventory
Key input
Accept
input
Purchase order
receipt
A
Customer
A
Data
storage
No
Store Manager
Record Input
Load
inventory
Key inventory
updates
Receive
inventory
Phone call
about
order
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3.3 Control Matrix
Control Goals of the Best Buy Business Process
Control Goals of the Operations
Process (a)
Recommended Control Plans (b)
Ensure
effectiveness
of operations
A
B
Ensure
efficient
employment
of resources
Ensure
security of
resources
Control Goals of the Information
Process (a)
For the completed
sales order
ensure:
IV
IC
IA
For
inventory
master data
ensure:
UC
UA
Present Controls
P-1 Enter customer sales order immediately
following customer order
P-2 Confirm input acceptance
P-3 Enter shipment data in shipping
P-4 Automated data entry
P-5 Independent shipping authorization
Missing Controls
M-1 Automated warehouse inventory check
M-2 Bar code scan of all inventory entering
truck
M-3 Bar code scan of inventory exiting the
truck at each store location
P-1
P-1
P-1
P-3
P-4
P-3
P-4
P-5
P-5
M-1
M1
P-2
M-2
M-2
M-3
M-3
P-1
P-2
P-3
P-1
P-3
P-4
M-1
M-2
M-2
Effectiveness goals:
A = Provide timely acknowledgement of
customer sales order receipt
B = Provide timely shipment of goods to
customers
Our first present control, “enter customer sales order immediately following customer order”, is
designed to assure that the order is placed in a timely manner. This allows a company to ensure
that the order is placed as soon as possible in order to maximize customer satisfaction, speedy
delivery, accurate and complete orders in an efficient and effective manner for the organization.
Our first present control is a preventative control because it prevents orders from being
misplaced or not processed. Another present control that is implemented in Best Buy is “confirm
input acceptance”. This control informs the salesperson that the input has been accepted.
Therefore, it requires that valid and complete information be keyed into the computer before the
order is placed. The second control is a preventative control in nature since the system confirms
that the input has been accepted, and if the information was invalid it would prevent the
transaction from being processed. The third present control is “enter shipment data in shipping.”
This control requires that updates about the inventory are input accurately and completely into
M-3
M-3
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the system. This allows the data to be sent to the store, in which the sales manager may notify
the customer of updates on the arrival time of the item. This control is a detective control due to
the fact that as the shipping information is updated into the system, the inventory being sent is
compared to the inventory initially requested. Therefore, discrepancies would be detected
immediately. The fourth present control is “automated data entry.” This control attempts to
effectively eliminate human keying errors, and using fewer human resources. As a result, the
data entered into the system has a higher probability of being accurate. The fourth control is a
preventative control because due to its goal of minimizing human keying errors in the system.
Through the use of preformatted screens, drop down boxes, and online prompting data is entered
into the system more efficiently and captured faster than in a manual entry system. The last
present control is “independent shipping authorization.” This control allows the shipping
manager to input the inventory being shipped. Due to the shipping manager having sole control
over this task, it provides efficient use of resources, as well as presenting problems that could be
fixed with some of our missing controls. Our final present control would best qualify as a
preventative control, despite its many flaws. It is designed to prevent numerous individuals
access to inventory that could easily be stolen; however, without checks and balances in the
system, the loading manager could easily take advantage of this preventative control.
After evaluating the present controls being implemented by Best Buy, our group came up with
three missing controls we felt would improve the company. The first of these controls is
“automated warehouse inventory check.” This is a very important control that is lacking in the
company. It would allow the individual stores to pull up the information regarding a particular
item and track the location. This means that a salesperson can check whether an item is in stock
at the warehouse before it processes the sales order, as well as checking whether a particular item
is already en-route to the store. The second missing control vital to the company’s continue
success is “bar code scan of all inventory entering truck.” This takes some of the pressure being
placed on the loading manager, because he no longer has sole responsibility of tracking the
inventory. Once the item is scanned Best Buy knows that the item is on track, and therefore can
track exactly where an item gets lost. With the second control, one must have “bar code scan of
inventory exiting the truck at each store location” in order for Best Buy to fully understand when
and where the company is having problems with inventory count. Furthermore, once the
inventory is scanned into the system leaving the truck, computers can automatically notify the
customer via e-mail that the product has arrived. All of the missing controls would be detective
controls, designed to keep track of the inventory and detect any weakness within the company.
3.4 Controls Analysis
Control goals are created with the objective in mind to achieve what the business or information
process desires. They are also created to avoid undesirable events. Best Buy’s inventory and supply
chain management system is what is specifically being analyzed for this project. Therefore, the
control matrix created relates specifically to the present and missing controls for this system. There
are five present controls being analyzed: ensure customer sales order receipt immediately following
the customer order, confirm input acceptance, enter shipment data in shipping, automated data entry,
and independent shipping authorization. The adequacy of these goals should be measured on a
specific basis. Entering customer sales orders immediately after the customer order is a crucial
control. If this control is strictly followed, there are fewer problems in regards to input validity and
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completeness. The second control, confirm input acceptance, is also a necessity for having adequate
control of operations and information processes. If the input is not confirmed, there could be a
sacrifice in the input’s completeness and validity. The third control, enter shipment data in shipping,
is a control that needs much improvement to be a completely adequate control. Two of the missing
controls address the needed specifications to create a stronger control. However, it is still an
important control and if the shipment data is entered correctly, this control ensures efficiency of
resources and effectiveness of operations, as well as input completeness and accuracy. Automated
data entry, the fourth control, ensures input accuracy. The last present control being analyzed is
independent shipping authorization. This is also a control that needs further improvement which is
explained by some of the missing controls. The loading manager has most of the control during the
process of taking the delivered items from the truck and checking off to ensure that the items
received were the correct items and correct quantities. Since the loading manager has all the
responsibility of the shipping authorization when it arrives at the store, there is room for error. This
control is not as adequate as it could be. Overall, the present control goals are all very necessary, but
a few need stricter guidelines.
This is why we created these three missing controls: automated warehouse inventory check, bar code
scan of all inventory entering truck, and bar code scan of all inventory exiting the truck at each store
location. The automated warehouse inventory check will prevent errors in reporting to customers of
what the warehouse has in store and what it doesn’t. It will provide for better input validity and
accuracy. The second missing control is having a bar code scan for all inventory entering truck. This
provides input accuracy. There should be no question about which inventory is in which truck,
which will be helpful for employees to be more informed, so they can better inform the customers.
The last missing control is bar code scan of all inventory leaving the truck. This allows for better
update accuracy and completeness, as well as smoothing out the transition of inventory from the
warehouse to the store location. This also takes away some of the responsibility of the loading
manager.
In order for Best Buy’s system to be efficient and effective, Best Buy must have a variety of
preventive, detective, and corrective control emplaced into the system. The most important of
these control measures are preventive controls which stop the problems before they occur.
Through the use of effective preventive controls a company can reduce its need for detective and
corrective controls. Therefore, the focus of our group was most heavily on preventive controls.
The preventive controls in Best Buy’s system include enter customer sales order immediately
following customer order, confirm input acceptance, automated data entry, and input shipping
authorization. As discussed section 3.3, these preventive controls are designed to prevent flaws
in the inventory system. Within our present controls we also have identified “enter shipment
data in shipping” as a detective control. This control is a detective control because after
comparing the items that needed to be shipped with the items that were actually shipped, it
detects any errors or items which were overlooked.
Best Buy also has several controls that, if implemented, would increase the efficiency and
effectiveness of Best Buy’s inventory process. These controls are automated warehouse
inventory check, bar code scan of all inventory entering truck, and bar code scan of inventory
exiting the truck at each store. As previously discussed, these controls are all detective controls
designed to prevent the mismanagement of inventory throughout the process. These controls
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allow the company to detect the approximate location that inventory is misplaced. Furthermore,
it provides the store location and the customer with tracking information on the inventory.
Therefore, these controls allow the company to use a cost effective computerized method to
monitor the inventory as it moves through the system. The inclusion of these controls would aid
the company in achieving the control environment that the company strives to attain.
The tone-at-the-top stresses that customer satisfaction is the ultimate key to Best Buy’s success.
As noticed from the present and missing controls that the organization requires, Best Buy strives
to provide the customer with reliable information on when and where a particular product will
arrive. With these controls information on the inventory is continually available to the stores and
the customer on the location of the product in transport. It also provides the company with valid
information on weak spots within the commute of goods. It is clear to see from this that the
tone-at-the-top provides a control environment that stresses customer satisfaction, and efficient
employment of resources. Moreover, the pervasive controls go to hand-in-hand with achieving
the companies control environment inherent within Best Buy’s business processes.
Collectively, the system controls add value to Best Buy in a variety of ways. By monitoring the
flow of inventory through the system, Best Buy attempts to ensure that the needs of the customer
will be met in a timely and efficient manner. These controls also ensure that Best Buy’ business
processes are carried out in the most cost effective manner possible. Through the use of an array
of different controls at various steps in the process, Best Buy is able to attain an optimal balance
between the needs of the company and the needs of the customer.
3.6 Recommendations for Improvements
After examining Best Buy’s sales order process thoroughly and analyzing the present and
missing controls in the organization, the group developed a series of recommendations to
improve this business process. Our first recommendation involves improving our fifth present
control, independent shipping authorization. With the obvious flaws in this control that we
discussed in section 3.3, we came up with a very cost effective way to provide checks-andbalances in this process. Moreover, after further evaluation, we developed a second
improvement to add a corrective control to any missing inventory discovered by the
implementation of our second and third missing controls.
First, we would have dual shipping control authorization. These positions would be handled by
the warehouse manager who verifies the amount and kind of items to be shipped, and the
inventory loading manager who takes the list of verified items and is responsible for the items
placement on the truck. With both of these positions, individual bonuses would be received
when the accuracy of the job is performed at or above target levels. These target levels will be
based on the price value of the inventory, and not on a per item basis. For example, if a TV for
$5,000 does not make it onto the truck to be shipped, and a $25 DVD player doesn’t either, the
TV would cause the manager’s performance level to be more heavily effected than the DVD
player. This is not assigning value to the customer; it is instead concentrating on minimizing
losses for the company. Furthermore, this does not contrast with Best Buy’s idea that they should
satisfy all customer needs, because the target level would be set to a standard close to perfection.
Therefore, virtually all items needed to be shipped must actually make it onto the truck in order
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for the bonuses to be received. Moreover, the system of checks-and-balances works in a way
that one of the manager’s bonuses is not affected by the other. For example, if the warehouse
manager doesn’t put all the items needed on the list, but the inventory loading manager still
complies to the list he/she receives, the inventory manager would not be penalized for the
warehouse manager’s errors. As a result, both managers have incentives to perform the job to
the best accuracy possible, hopefully deterring the desire to steal any inventory. This would also
ensure segregation of duties.
Our second improvement involves the addition of a corrective control to our business process.
After careful evaluation of our system, our group identified three significant controls that were
missing from our system. The corrective control we would like to implement into the system is
associated with the second and third missing controls: bar code scan of all inventory entering
truck, bar code scan of inventory exiting the truck at each store location. As a brief review, these
controls would be designed to detect the weakness within the organization by pinpointing the
approximate location that an item did not arrive. For example, if 50 cable cords are consistently
not accounted for at the end of each month, the automatic inventory update provided by the bar
code scans, would pinpoint the location where the cords were first absent. This can help Best
Buy determine the truck or store in which fraud or mismanagement is occurring. As a result Best
Buy can quickly assess the problem and remedy the problem.
However, although these detective controls are pertinent to the company, an additional corrective
control needs to be implemented in order to continue to maximize customer satisfaction.
Regardless of why the inventory did not reach its intended destination, that particular item is still
desired by the customer. Therefore, when all the items exiting the truck are scanned into the
system, the computer will recognize missing items, send notice to the store manager, and
automatically resend the order to the warehouse. Furthermore, this information would be sent to
the customer to notify him/her on the delay of the item.
The inclusion of these controls in Best Buy’s inventory chain would enhance the organizations
ability to be cost effective by reducing the risk of inventory loss. The addition of these corrective
measures would also correlate with Best Buy’s underlying corporate culture of satisfying
customer needs, and providing a positive buying experience.