Analysis

Inventory Management Process

With customer satisfaction being the top priority at Rite Aid, inventory control is crucial to maintaining happy customers.  There needs to be an adequate stock level to keep out-of-stocks to a minimum without overstocking too much inventory which will lead to outdated merchandise.  To keep this healthy balance Rite Aid has opted to employ an Optional Replenishment System. This utilizes a perpetual inventory system using point-of-sale technology, and compliments it with a strict inventory process within the store.  The technology includes proprietary Windows based software that is linked to the cash registers and handheld Telxon/Symbol scanners.  

Delivery 

• The delivery of store merchandise occurs weekly, this includes pharmacy stock as well as regular store items.  A typical delivery occurs when the store is closed. In the case of the store in Whiting, the truck leaves a Rite Aid distribution warehouse in Maryland and usually arrives between 3am and 4am. 
• The delivery process demands that it take no longer than 24 hours to unload the truck and stock and organize all of the product received.  Items received on the truck are reflected in the store's perpetual inventory system at the time the truck leaves the warehouse.

 Overstock Items

• When the store associates complete stocking the shelves with the inventory they received, any front-end overstock items are then brought to the back room where they are categorized and organized onto "blue carts" and scanned in to the Backroom Inventory System.  This system works as a compliment to the perpetual inventory system by specifically keeping track of what items are in the stockroom at all times.  
  

• Any time a piece of inventory is brought in to the stockroom it is scanned in to the system and conversely, whenever it is removed from the stockroom, it needs to be scanned out as well. At any time, you can scan an item's bar code and find out how many pieces of merchandise are on the sales floor and how many are in the backroom.

Continuous Maintenance

• Constant evaluation and maintenance of inventory levels and locations are key to making the inventory process work.  Each morning the computer system automatically generates a report listing all items that were sold the previous day that have inventory counts in the backroom as well as the backroom location.  Pulling these items out the stockroom on a daily basis ensures there is efficient restocking from overstocked items, reducing out-of-stocks on the sales floor and keeping outdated items to a minimum.
• In addition, there are weekly audit reports, called a cycle count report, listing about 100 items that need to be counted and updated in the inventory system.  This makes sure the process is working correctly and fixes small inventory problems before they become big problems.

 Ordering 

• Since Rite Aid uses an Optional Replenishment System, a majority of the store orders are generated automatically.  Every item in the store has a pre-set minimum and maximum (min, max) on-hand inventory level and when the quantity falls below the minimum amount, an order to bring the inventory quantity back up to the pre-set range is automatically generated.  The min,max levels are determined at a corporate level by the Category Manager for each category of items.
  
• In addition to regular inventory levels, ordering additional stock to prepare for an upcoming sale is typically made by the Store Manager or Assistant Manager using the company's Ad Order System.  The lead time for the Ad Order System is 3 weeks prior to the upcoming sale.  This ordering menu shows the manager all of the items that will be on sale listed by individual SKU, a suggested order quantity for each item, and a link to historical sales data for that item during each sale period over the last 12 months.  Items ordered on the Ad Order System will be shipped in 2 weeks, one week prior to the start date of the sale.
• The last part of inventory ordering is manual orders. Using the handheld scanners, store management can order inventory for the next scheduled delivery with 2 days lead time. Usually these orders are made to satisfy rain check items, to accommodate inadequate min,max levels for ABC items that increase in demand seasonally (i.e. cold relief items during the winter and allergy relief items in the spring), or to increase stock on an item that is anticipated to be in demand (i.e. batteries for an impending snow storm).  
  

Full-fill the Order

• Once this weekly cycle is completed the order is transmitted electronically to the warehouse distribution center where the order is "picked", packaged and prepped for delivery.  Rite Aid utilizes a forward placement distribution model, spreading inventory between 14 distribution centers throughout the United States serving approximately 4,600 stores.  That means that on average each center serves about 330 stores each week.  The Perryman distribution center is 1.2 million square feet and employs over 1,100 workers.  For an operation of this scale, an efficient inventory management process at all levels needs to be controlled and continuously improved upon.