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CASE STUDY JUST-IN-TIME SHIPPING8 When Nintendo Co. shipped its new "Mario Kart: Double Dash" videogame to stores in November [2003], most retail- ers agreed to pay a little extra to have the games sent directly to the stores within nine days. For about 60% of the stores, the games went from a packaging plant near Seattle straight to the retail-store shelves, no stops at warehouses or distrib- ution centers, which can increase the time a product gets to the shelf to as long as six weeks. As it turned out, speed was crucial. The game, which fea- tures characters racing go-carts while throwing things at each other, was out of stock by the first week of December, after sales of almost 500,000 games. Nintendo was able to restock shelves in time for the critical pre-Christmas rush-thanks to Atlanta-based United Parcel Service Inc.-and Nintendo sold more than 900,000 games in the U.S. by the end of the year. The trend toward just-in-time retail shipments has been growing over the past decade. Nintendo began shipping videogames that way 10 years ago. But in 2003, with the econ- omy sputtering, retailers strove to keep inventories low. So Schneider network can change its destination without hav- ing to be reloaded on different equipment, he said. Working closely with retail stores to reduce inventory requires implementing expensive technology to track where products are selling the best. Transport companies must have the technology to track shipments and get them to the retailer at a specified time, and manufacturers must install their own tracking systems to match that of the retailers. Suppliers such as Scholastic and Nintendo tend to bear most of the costs of getting goods to the retailer, and in some cases that means paying to store inventory on behalf of the retailers. As for Nintendo, a 10-year veteran of direct-to-store deliveries, the game maker has managed to pass along some of the shipping costs to retail customers. Marketing head Mr. Harrison said retailers that participate in the direct-to- store shipping program must pay extra, amounting to about 2% of total sales, allowing Nintendo and retailers to share the costs. "We try to show them the benefits" of cutting down on their own inventory and cycling fresh products on the shelves more quickly, he said. when an item like "Mario Kart" sold well, some retailers were in a bind, and relied on faster shipping of merchandise to stores to accommodate customers. "Really the biggest time of year for us is November and December," said George Harrison, senior vice president of marketing for Nintendo of America Inc., the U.S. unit of the Japanese company. "If it goes out of stock for a while, customers tend to lose interest in it." UPS and FedEx have beefed up their services for retail shipments, not only delivering packages to stores on a tight schedule, but also handling customs or packing the goods exactly as the retailer wants. UPS goes so far as to inspect goods for retailers and to put clothes on hangers. Other transport companies are using their extensive delivery net- works in new ways to handle direct-to-store shipments. Closely held truckload carrier Schneider National Inc... Green Bay, Wis., sees itself as a "rolling warehouse," deliver- ing goods to retail stores as they are needed, said Tom Nightingale, vice president of marketing for the carrier. Schneider uses the same equipment to load goods on trucks or on trains, which has turned out to be one of the com- pany's strengths as a retail-goods carrier. A shipment in the Questions 1. From the retailer's perspective, what are the dangers of understocking a video game during the holiday season? What are the dangers of overstocking? How do direct ship- ments, like those described for Nintendo's products, help retailers deal with these dangers? Are the retailers simply trading inventory costs for transportation costs? Explain. 2. In addition to supporting tighter delivery schedules, how else are logistics service providers supporting their cus- tomers? In your opinion, is this "good" for the long-term competitive position of the logistics providers? Why? 3. What role will information systems play as retailers seek to reduce inventories by receiving smaller, yet more fre- quent and accurate shipments? What are the implications for the manufacturers and logistics providers who serve the retailers? 4. Currently, Nintendo is able to pass on some of the costs of the faster shipments to the retailers. In the long term, what do you think will happen