Tuesday, January 28, 2014

Walmart's empty shelves: (just) an understaffing problem?

Back in 2009, I had the opportunity to do an internship at Walmart's offices in Central America. My experience with the company was top-notch and it allowed me to realize first-hand the full impact that an efficient supply chain management system can have over a company's performance. So naturally, after reading Time's article on Walmart, I couldn't help but feeling related.

Time's article analyzes a serious inventory management problem within Walmart, which has been evidenced by the more and more frequent reports of empty shelves and poor customer service spreading through stores all over the US. This has had an unquantifiable impact on Walmart's financial performance in the form of unfulfilled sales and lost customers -who are switching to Costco, Target and other discount stores. Finally, the article points to understaffing as the main cause of the issue, which in my opinion is only half of the story...

Based on my experience with Walmart, I believe that their stocking problems are merely manifestations of a much larger issue that clearly hasn't been tamed to this day. I am referring to the integration of all links within its supply chain, which is by no means a small issue nor an easy one to fix. Sometimes we forget that Walmart is much more than just the store we walk into in the role of end customer. An immense amount of resources -new technologies, automation, market research, operations research, customer care, supplier care, among many others- are dedicated to ensuring an efficient alignment between suppliers, central offices, retail stores, and finally us -the consumers. Most -if not all- of the projects I worked in during my time with Walmart were somewhat oriented towards this particular goal. Most of the staff at central offices is dedicated to coordinating the resupply process through which the stores' inventory orders are transmitted, market tendencies are analyzed, relationship with suppliers are closely monitored and new orders are placed.

Even though keeping the chain working is clearly the top priority on these people's lists, judging by Walmart's performance last year, this goal is yet to be achieved. According to multiple anonymous insider reports, Walmart's shelves are empty because there's not enough staff to keep them stocked. However, if we were to delve deeper into the problem, we would realize that it goes well beyond the stores and a closer look at the adjacent links in the supply chain is required. Walmart's stores are understaffed due to severe cost-cuts implemented by high management. These cost-cuts, in turn, are a response to Walmart's poor financial performance, which is a consequence of many confluent factors that involve many different links throughout the supply chain:

  • A poorly managed staff is an unmotivated staff. This has an impact on productivity, resource efficiency and ultimately on the level of customer service provided to the end consumer as well as Walmart's finances.
  • Walmart's deteriorated public image: public manifestations concerning inadequate working conditions, discrimination, environmental issues, and corruption, among others... They all devaluate the brand and drive business away.
  • E-commerce: Walmart has failed to invest significantly in the e-commerce sector, allowing for a myriad of competitors to gain on them and eat away their market share.

It is my opinion that -much like it happened with central offices back in 2009- as long as Walmart's supply chain remains disconnected, there is no sophisticated inventory management system that could ever get to the root of the problem and fix it all by itself. There is simply no substitute for a fine-tuned supply chain.

In the meantime, Doug McMillon is to succeed Mike Duke as new CEO of Walmart as of February this year, and is faced with the challenge of addressing these much-neglected issues.What do you think Doug's first steps towards fixing this mess should be?

Time Business & Money - The trouble lurking on Walmart's empty shelves
Consumerist - Walmart employees tell Consumerist about all these empty shelves
Walmart 1% - Doug McMillon named new Walmart CEO, will face slew of immediate problems

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