Wal-Mart (NYSE: WMT) Struggles With Inventory Replenishment

 

Wal-Mart (NYSE: WMT) faces a problem few retailers do – their products sell out so quickly, restocking the shelves in a timely manner is hampering sales.

 

Wal-Mart was once regarded as the king of logistics, a pioneer in the industry using RFID technology to track and manage inventory, and avoiding stock out conditions that sap sales and anger customers. As more customers flock to Wal-Mart though, the current pipeline isn’t keeping up with the demand.

 

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.

 

Evelin Cruz, a department manager at the Wal-Mart 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.” Tovar said Cruz’s “comment appears to be national in scope. I doubt she had been to other Wal-Mart stores. I take issue with the quote.”  Cruz, 41, who has worked at Wal-Mart 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?”

 

For much of its history, Wal-Mart has been considered a master of logistics, persuading suppliers to set up shop near its operations. Yet in 2011, Wal-Mart hired consulting firms Acosta Inc. in the U.S. and Retail Insight in the U.K. for advice on how to keep its shelves stocked. Paul Boyle, the CEO of Retail Insight, didn’t return phone calls seeking comment. Meredith Rovine, a spokeswoman for Acosta, said representatives were unavailable for comment. At that time, Wal-Mart’s struggle to keep shelves stocked stemmed from the return of about 8,500 items to stores, following a failed effort to streamline its merchandise. At an investor conference in June of that year, Simon said he was focused on improving the company’s restocking operations. “The only thing that really matters to us is whether the product is on the shelf or not,” he said at the time. 

Wal-Mart must address this growing issue as soon as possible, to avoid losing customers to competitors without these issues.



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