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Focus: Distribution/Materials Handling

Feature Article from Our Distribution and Materials Handling Subject Area - See All

From SCDigest's On-Target E-Magazine

- March 4, 2013 -

Supply Chain News: Walmart US Chief Says Sales are Suffering Because of Challenges in Keeping Stores Shelves Stocked

Problem "Getting Worse" Bill Simon Says, though Walmart Says Comments Taken Out of Context; Time to Relook at RFID?


 SCDigest Editorial Staff

Just two weeks after internal emails were obtained in which a senior Walmart executive said sales through the middle part of February were "a disaster," minutes of a Walmart managers meeting now say the retail giant is having troubles keeping merchandise on the shelf.

The emails on the poor start to February emails from Jerry Murray, Walmart's vice president of finance and logistics, who in a Feb. 12 email to other executives obtained by Bloomberg said this was "The worst start to a month I have seen in my about seven years with the company." (See Walmart Email Says February Sales Are Down Sharply - What Should a Consumer Goods Demand Planner Do?)

SCDigest Says:

From all this reporting, it is unclear whether the issue is lack of merchandise getting to the stores, issues with getting stock from the back room to the shelf.
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Walmart downplayed the email, even as some analysts said the elimination of the $2000 annual payroll tax exemption and delayed income tax refunds could in fact be hitting many Walmart shoppers hard. Walmart did later say Q1 same stores sales in the US will be flat.

Now, Bloomberg has also obtained copies of the minutes of a Walmart managers meeting in which Bill Simon, Walmart US CEO, says that a two-year problem with keeping store shelved stocked is "getting worse," and a major threat to its operations.

Though the minutes were just released, it appears the problems started in 2011, at the same time Walmart decided to return some 8500 products to its store shelves that had been eliminated a couple of years before that. That strategy to "declutter" its stores and reduce overall inventories appeared to backfire, with many shoppers heading to other stores to find the items they wanted.

With Walmart's same store sales growth stagnant, the company reverse the decision in early 2011, promoting the change with advertising and in-store signage touting "It's Back" for the returning SKUs. (See Walmart to Reverse SKU Count Reductions, Bring Back 8500 Items to Shelves.)

And whether directly related or not, Walmart's sales growth did start to rise again after thar reversal.

But the added SKU counts also led stocking challenges.

"We run out quickly and the new stuff doesn't come in," Simon said, according to the minutes of the Feb. 1 meeting, as reported by Bloomberg.

Bloomberg says that Walmart has been hiring consultants to walk the aisles and track in-stock positions on the shelves, and in some cases even reassigned store greeters to replenish merchandise.

Walmart again says the comments are being taken out of context.

"These are personal notes from one participant in the meeting and are not official company minutes," David Tovar, a Walmart spokesman said in a telephone interview with Bloomberg. "There are a number of significant misinterpretations and misleading statements that do not accurately reflect the comments by Bill Simon or any other participant in the meeting."

Tovar also said that "We're very pleased with our in-stock position," and that audits by the company and its consultants show in-stock levels match or exceed historical levels.

Still, Bloomberg was able to get quotes from a Walmart department manager in one store in California, who said "There are gaps where merchandise is missing, 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."

The manager added that "My camera bar hasn't had cameras since early January. 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?"

In should be noted, however, that the manager is a member of OUR Walmart, a labor-backed group seeking to improve working conditions at the discount chain.

A quick check of some social media sites finds some anecdotal support for the contention that shelf stocking is an issue at Walmart.

(Distribution/Materials Handling Story Continues Below )


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"Why is it when you go to the Walmart, the shelves are always empty?" started one post on the Cafe Mom site on Feb. 15. While some posters said they hadn't noticed any real changes, one responded that "Yes. I have noticed that too. Also there is less variety of certain items," while another said "Yes, very frustrating indeed. Several times lately, I have gone to other stores to buy what I needed because Walmart was out of stock."

Source of the Issue Not Clear

While Tovar disputes there are any issues, Bloomberg says that Simon recently put a senior executive in charge of fixing the problem, and said that in 2011, Walmart hired consulting firms Acosta Inc. in the U.S. and Retail Insight in the U.K. to help deal with out of stock challenges.

But from all this reporting, it is unclear whether the issue is lack of merchandise getting to the stores, issues with getting stock from the back room to the shelf, or some combination of both. In many cases, inaccurate store inventories are to blame too, leading a retailer's replenishment systems to not act because it thinks there is more inventory at a store then there really is.

"We need to start with the intent that our shelves will be full," Simon said during the meeting, according to the minutes.

All this naturally leads us to wonder if the value prop for Walmart's abandoned carton-level RFID program or expanding its item level program to more categories might be starting to clarify itself.

Have you seen any issues related to Walmart's in-stock positions? Any thoughts on what the problems might be? Let us know your thoughts at the Feedback button below (email) or in the Feedback section. Anonymity will be provided upon request.

Recent Feedback

Walmart has had a terrible problem with out of stocks at the 3 stores in my area that we used to shop at. We  no longer shop at any Walmart because you simply can not buy a bill of groceries there anymore with at least 12-15 (or more) out of stocks. If you have to go to an other store to finish shopping, why not just skip Walmart in the first place. Other chains do not have habitual out of stock situations. It has actually gotten so bad that from 3-4 pm daily they actually import clerks from all over the store to "face out" and "pull up" their empty shelves. I am going to say this problem of out of stocks has been going on now for at least 24 months. Every month their sales continue to erode and yet nothing changes. It is almost like their corporate office has "a line down" because nothing changes except it gets worse. For consumers it is actually an easy problem to fix, we simply go to another retailer who does not have any problem keeping the stocks stocked. GOOD BYE WALMART. End of story.

Old Timer
Head Grocer
My House
Apr, 19 2013

When you re-introduce as many as 8500 previous items to the shelves without increasing the liner feet of shelving, you cannot get what is referred to as "packout" on the shelves. The net result is that you don't have sufficient inventory on hand because the shelf space is not large enough to hold the contents of a newly ordered case of goods.

The other problem with Walmart's business plan is that they simply do not hire enough workers to get the new stock to the sales floor in a timely manner. By 3 pm in the afternoon, holes in the shelf are appearing rapidly. Shoppers will tolerate this out of stock situation only for a short time before abandoning Walmart in favor of a grocer that takes care of business.

Turning around Walmart's business plan is akin to turning around a nuclear powered aircraft carrier in the ocean. It takes forever. When sales drop off for long enough it will eventually occur to management what has to change. So far their sales have been dropping for many quarters and they are still clueless.

Hal Smith
Consumer & Chief Buyer
May, 01 2013