Walmart can't manage their inventory?

Students of supply chain and logistics know that when the topic of supply chain excellence and inventory management prowess comes up, the companies that comes to mind first are Walmart and Toyota.

Toyota has already admitted to slowing sales and poor management of their supply chain, through shutdowns due to supplier failures, lack of attention to customer needs in product design, and other flaws.

Now it seems like Walmart is the next paragon of excellence that is falling.  According to a new story in Bloomberg, the company’s inventory management practices have a lot of room for improvement.  Not only are its sales going down, but they are having to hire consultants and roam the aisles to figure out why they are stocking out so much.  The restocking challenge emerged as Walmart was returning more merchandise to shelves after a previous effort to de-clutter its stores

“We run out quickly and the new stuff doesn’t come in,” U.S. Chief Executive Officer Bill Simon said, according to the minutes of the Feb. 1 meeting. Simon said “self-inflicted wounds” were Wal-Mart’s “biggest risk” and that an executive vice president had been appointed to fix the restocking problem, according to the minutes.

A representative tried to “hush” the story later.  David Tovar noted after the meeting that when Simon said things were “getting worse” he was referring to “modular changes,” the process of replenishing merchandise to keep up with customer demand and changing seasons.

However, ask employees, (says the story), and you get the same picture.

Evelin Cruz, a department manager at the Walmart Supercenter in Pico Rivera, California, said Simon’s comments from the officers’ meeting were “dead on.” “There are gaps where merchandise is missing,” Cruz said in a telephone interview. “We are not talking about a couple of empty shelves. This is throughout the store in every store. Some places look like they’re going out of business.”  Cruz, 41, who has worked at Walmart for nine years and oversees the photo and wireless sections at her store, said it can take weeks or months for merchandise to be replaced after it sells out.

“My camera bar hasn’t had cameras since early January,” she said. “They let the merchandise phase out but nothing new comes in to replace them. We’re supposed to have 72 cameras but we maybe have 12. What are customers supposed to buy?”

To some extent, Walmart may be experiencing one of the major trends uncovered in our logistics study:  volatility in the supply chain.  Re-setting merchandise displays is tricky business, and if you can’t get it just right, you’re going to run out.  It’s also getting more difficult to determine what customers are going to want, as they are getting more fickle.  Walmart is also balancing in-store logistics with their e-commerce business, and this is also causing more uncertainty in how to manage the business.  At any rate, if you need to a buy a camera, maybe Walmart isn’t going to be your first option.  Try Amazon.