JCPenney's Destroyed Products Have To Count For Something

How do inventory systems handle items that employees are required to intentionally destroy? That's the problem for JCPenney, which, it turns out, is contractually obligated to throw out unsold merchandise from its American Living brand. The requirement has been part of the retailer's deal with Polo Ralph Lauren, which designed the products, and was presumably created so the pricey products wouldn't end up with discounters, thereby devaluing the brand. (The retailer now says the deal will be changed so unsold merchandise can be donated or liquidated, which is standard practice.)

But that leaves open the question of how a retailer's inventory systems are supposed to deal with such oddball requirements. Every retailer deals with inventory losses: Grocers have spoiled chickens; bookstores have damaged paperbacks; and everyone has theft. Although it all gets rolled up on the balance sheet as lost inventory, accountants like to know exactly what happened. Spoiled? Stolen? Damaged? Intentionally destroyed? No matter what it is, IT better have a transaction code. Just remember, whenever a retailer cuts a supplier deal with unusual conditions, sooner or later someone in IT will have to sort it out.