Date: November 28, 2021

Name : BALIÑA, JAMAILA B.

Program : MBA – Major in Financial Management
Subject : BM208A – Production and Operations Management and Development
Professor : MR. JHUN L. VERIL, CMITAP, MBA

CASE ANALYSIS PAPER – TOYS R US

I. SUMMARY OF THE CASE

Toys R US (TRU) was founded in 1957, and was one of the largest toy retailers in
the world. The company operated three separate business units: US Toys,
International Toys and US Babies, and once dominated the toy industry. With a history
of providing popular children’s toys, Toys “R” Us has also been able stand out amongst
competition by providing the most up to date toys, a large variety of toys, and locations
that attract customers from all over the world. However, in the early 2000’s Toys R US
didn’t successfully adapt to the changing trends in the retail industry, and the
emergence of mass merchants such as Walmart and Target.
To compete with their competitors in the market, the company launched its new
online store. In November of 1999, they were already having issues dealing with traffic
volume on their website. As a result, they had to limit access to the site to keep the
servers from crashing. Despite this limit, the orders still continued to pour in. The
company promised customers that all orders placed before December 10th would be
delivered before Christmas. But the strain of a new online store, pressure on its supply
chain, lack of manpower to deal with the surplus of orders, and not enough time proved
to be too much. Toys R Us did not have the time or workforce and was incapable of
packing and delivering those orders fast enough. It was unable to meet all the online
orders made at the time. As a result, Toys “R” Us sent out apology letters two days
before Christmas stating that the orders would not arrive in time for the holiday.
Customers were outraged and the company’s reputation suffered. Toys “R” Us was
quick to make amends offering all affected customers a $100 gift certificate but the
damage had been done.

II. STATEMENT OF THE PROBLEM

Toys R Us CEO David Brandon cited the firm’s “inability to provide expedited
shipping options, and the lack of a subscription-based delivery service” as causes of
its problems. The issues with Toys “R” Us’ online system were occuring well before
the apology email was sent out. The company was overwhelmed by high demand for
children’s toys and was unable to meet all the online orders made at the time. This
situation resulted to frustrated customer which eventually damaged the company’s
reputation. It also places the company in a vulnerable position with respect to its
competitors.

III. OBJECTIVE
The objective of the case is to identify the problem encountered by Toys R Us and
how they were able to addressed and/or handle such problem. The case was able to
show that the main problem of the Toys R Us was the failure of the company to deliver
the customers’ orders on time. Based on the problems that was cited from the case,
we can provide possible recommendations and conclusions for future references of
other companies who might experience the same problems faced by Toys R Us.

IV. ALTERNATIVE COURSES OF ACTION

The company undertook several actions to address the main challenge bedeviling
the business. They were apologetic to customers and offered $100 gift certificates as
compensation. However, this was not sufficient for many customers, who believed
Toys “R” Us’ customer service hit an all time low with minimal communication before
December 23rd. After the backlash from the customers, Toys R Us outsourced their
order delivery fulfillment to Amazon. The actions included reducing staff members and
closing various stores to prevent further loss of revenue. Such a response could not
solve the underlying problem, namely, failing to deliver the company’s promise of
offering the best assortment at competitive prices to the customers.
V. SUMMARY OF:
A. FINDINGS
Toys R Us management was suffering from management myopia. They were still
believing Toys R Us was the center of the toy industry and nothing bad could happen
to the company. The company was so confident that they can cater all the customers’
orders on time even though they knew they lack the capacity to do so.
B. RECOMMENDATIONS
Customers expect fast order fulfillment and delivery from online channels, thus
meeting their expectation must be the main goal of the company. Right from the start,
Toys R Us should have outsourced a third-party company to ship the customers’
orders on time. Although they did, but only after their failure to deliver thousands of
orders on time. The company should also make sure that their supply chain is intact
and has no issues. Since the business is only at the peak for during the holidays and
goes off-peak for the rest of the year, they should have made sure that their resources
especially the manpower, equipment, website, etc. can accommodate the anticipated
volume of orders from customers. The company should forecast the demand of their
customers so that they will know how much products shall they produce.
C. CONCLUSIONS
For many businesses, the problem isn’t necessarily in how much stock they carry,
but in getting it to the store or the customer in a timely manner. It is really important
for companies to properly to manage their production and never delay the flow of
production so that the products will be delivered immediately to the customers.
Frustrated customers who fail to find the desired product will look for products from
competitor firms. In addition, technology has a great impact on business operations.