There was interesting news in the retail world at the end of last week, as internal emails from a Walmart executive were leaked to Bloomberg, saying that thus far February sales have been a "disaster" for the chain.

Bloomberg says the emails state that Walmart had the worst sales start for a month in seven years, as payroll-tax increases hit shoppers already battling a slow economy.

"In case you haven't seen a sales report these days, February MTD [month-to-date] sales are a total disaster,” Jerry Murray, Walmart's vice president of finance and logistics, said in a Feb. 12 email to other executives. "The worst start to a month I have seen in my about seven years with the company.”

Walmart later said this was just Murray's own view and that it may not be entirely accurate. Nevertheless, the news seems to be responsible for sending Walmart's stock price down more than 2% on Friday. Murray is, after all, in charge of finance.

That obviously could be worrisome news for vendors to Walmart and maybe even to consumer goods companies generally - and for demand planners with responsibility for getting the forecast right.

So, when a demand planner hears that Walmart news, what actions if any should he or she take?

SCDigest decided that was an interesting enough question that we would ask some demand planning experts for their thoughts on the subject.

Karin Bursa, vice president of marketing for supply chain software provider Logility, which does a lot of work in the consumer goods sector in demand planning and more, had the bright idea to ask a few supply chain executives from Logility's customers on what they would do with the news.

Those responses "were surprisingly consistent" across companies, Bursa said.

She offers below consolidated perspectives from these VPs of supply chain from leading branded and private label businesses that serve Wal-Mart:

"We would do very little in this specific instance," those execs generally said, according to Bursa. "Forecasting is about managing error. When normal error at the SKU by plant level is 30% (which is considered very good by our industry standards for this level of granularity), what is a 2% possible decrease in volume? Anyone trying to manage at that level is well into diminishing return on forecasting investment. We will watch the trend and determine if we should adjust the statistical method to something more aggressive to current trend."

The consensus, Bursa said, was also that "Worst case, we might have a little extra finished product before the trend is recognized. Walmart is big enough that the product will be consumed and not become obsolete. When demand planners start using management overrides because they read an article, it's time to get them out of the job. If you are using a robust supply and demand planning system and understand your error rate performance, then you need to trust the system to help the business respond appropriately. The best approach is to build the intelligence into your model and avoid manual overrides."

Robert Nardone, former vice president of supply chain planning at Unilever North America and now consultant and educator, agreed there is nothing to get too frantic over, but noted that depending on the product category, a consumer goods company might want to dig down a little deeper.

"As any demand and replenishment planner knows there are a lot of moving parts to a sales forecast and it is tough to react to a single report. The devil is always in the details," Nardone told SCDigsest. "While Walmart had a weak January and a slow start to February, many retailers reported a decent January, with results up 4-6%. However, it's a good bet that rising prices - such as the cost of gas up over 10% since the beginning of the year, and the paycheck hit from the social security tax increase - are going to impact some discretionary spending , things like restaurant meals, big ticket items, vacations, and luxury goods."

Therefore, he said, demand planners for products that fall into the discretionary spending bucket should be managing the forecasting process and inventory levels much more closely.

"If Walmart is being more negatively affected because their typical consumer is more impacted by the current economic situation, I would also manage Walmart specific SKU's more tightly," Nardone added.

Steve Steutermann, a vice president for supply chain research with analyst firm Gartner, says this is just another example of the increasing demand volatility almost every company is facing.

"We have done some deep quantitative research in the past year, and the expectation from companies is that demand volatility will continue," Steutermann told SCDigest. "Most organizations are reliant on a demand forecast and lagging indicators to react. In this case, the lagging indicator is "Days Inventory on Hand (DIOH)" at the end of the month, as well as an over forecasted demand plan. But more granular demand visibility is critical."

(Supply Chain Trends and Issues Article - Continued Below)