For those of us still interested in microeconomics, there's an interesting story in today's issue of The Wall Street Journal.
The story is about the challenge facing Home Depot CEO Frank Blake shortly after he took the reins in 2007. While visiting a store in Arizona, he found they had a surplus of lawnmowers. And while visiting another store on the west coast, he noticed they were short on popular power tools. The problem was all stores carried the same inventory, almost regardless of what sold in the specific location.
The solution for Home Depot, as it has been for other large retailers mentioned in the story, has been to localize the selection of merchandise while still taking advantage of the volume-based pricing available to large chains. Essentially, HD used data to determine which items in a large centralized inventory, will do best at each store. Match supply to demand.
With fewer unsold items, overall costs drop and prices can be lowered while still maintaining profitability. It's a good story and a good example.
I look forward to your comments.