THIS WEEK, a Bloomberg news headline covering Walmart’s quarterly earnings declared, “Walmart struggles to restock store shelves as U.S. sales slump.”
The story reported that Bill Simon, executive vice president and chief executive officer for the U.S. for Walmart Stores Inc., had appointed an EVP specifically to address the restocking problem. The topic was addressed in a spirited discussion by the experts at RetailWire.com. (Links to both publications are appended below.)
Apparently out-of-stocks have been a sticky issue for the world’s largest retailer. Almost exactly one year ago, the company reported it could boost U.S. sales by about $5 billion a year if it kept store shelves more fully stocked. The latest report suggests it’s just not happening.
Walmart’s $5B out-of-stock problem is prime evidence of retail’s paradox of scale. In brief: the bigger the chain, the greater the distance between headquarters and the shopper. No wonder the supermarket industry routinely reports an in-stock ratio that barely clears 91%.
Centralized replenishment systems are probably a main culprit here. Not that the technology is unsophisticated. It’s just that they build a time-lag into the reordering process that confounds store inventory accuracy. Fold habitual in-store task breakdowns into that and you wind up with a lot of stubborn holes at the shelf.
Computer generated ordering that works off of the in-store information loop is inherently more responsive to actual store conditions. Nothing about this conflicts with the need to maintain central data for supply chain purposes. At Itasca Retail we work closely with a grocery chain retailer who consistently succeeds at the 99.4% in-stock level by following this approach.
It’s not unsolvable with the right store-focused process and tools designed to enable it. There’s no reason Walmart or any retailer should accept lowered expectations.
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