Musictoday, Llc: Managing Inventory for Night Train

Abstract

Musictoday, a music merchandising company based in Charlottesville, Virginia, began as a much smaller outfit working for the Dave Matthews Band. It grew to manage a significant, complex value proposition for a wide variety of performers, including the Rolling Stones, Bob Dylan, Katy Perry, Depeche Mode, and the estates of Michael Jackson and Jimi Hendrix. Due to the many changes in the music industry, including streaming services and online purchases of branded merchandise, Musictoday managed complete websites, branding, and merchandising services for its clients. One of its smaller acts, Night Train, ran out of posters during the previous holiday season, and Musictoday's VP of Operations was reconsidering the inventory planning process for Night Train's next season, including the optimal order quantity. The updated case is an excellent way to introduce economic order quantity (EOQ) calculations in a core first-year MBA course. The case is also supported by supplemental videos that may be accessed in the instructor's Teaching Note. Excerpt UVA-OM-1204 Rev. Feb. 28, 2019 Musictoday, LLC: Managing Inventory for Night Train On a frosty morning in January 2019, Jack Murphy sat at his desk and thought about how he could get his client, Night Train, back on track. Murphy was VP of operations for Musictoday, a provider of e-commerce, ticketing, and merchandising services to the music industry. For a wide variety of artists, Musictoday sold tickets to live events, built custom online stores, and fulfilled orders for merchandise (often referred to as “merch” by fans), including CDs, vinyl, T-shirts, hats, posters, and stickers (Exhibit1). Musictoday also packed and shipped those orders from inventory that the company stocked in its warehouse in Charlottesville, Virginia. Sales of CDs and downloaded music over the past five years had taken a nosedive for most artists as consumers tended toward using subscription services such as Spotify and Pandora to listen to music. For revenue, artists relied increasingly on touring and merch, which was offered both at concert venues and online, via personalized websites. Music sales represented, for many artists, less than 5% of revenue. By 2019, 30% of an artist's revenue, on average, was derived from merch. Because of these changes, the merch industry had grown at 10% a year or more over the past three years—jumping from $ 2.82billion in 2015 to $ 3.1billion in 2016, and expanding from there. As often happened, growth in sales attracted competition. Merch companies created unique VIP kits, held promotional and pop-up store events, bundled merch with concert tickets, adopted a wider variety of clothing styles to appeal to a discerning market, and designed unique merch kits with specific relevancy to an artist's particular fan base, such as masks, poly resin toy guns, photographs, and more. It was imperative that Musictoday keep up with the market to remain profitable and take advantage of the growth potential—but due to the expanding complexity required to deliver such a wide variety of products, Murphy knew that doing so would require a more sophisticated approach to inventory management. . . .