Sunday, October 19, 2014

Inventory Management at Walmart

In class, we discussed how inventory management - good or bad - can significantly impact a company's supply chain. Through the Scientific Glass, Inc. case study, we saw that having too much inventory can decrease the liquidity of assets and affect how quickly a company can adapt to changes in consumer demand. Most importantly, however, having the improper level of inventory can impact profitability, which is really all companies care about at the end of the day.

In scouring the Internet for something that applies to this topic, I found an article discussing Walmart's inventory struggles that occurred last fall. It claims that Walmart's inventory levels increased partially because they did not predict sales accurately (going back to our lecture on forecasting). Further in the commentary, though, the author begins talking about seasonal items - decorations for Halloween and Christmas, in particular - and their impact on Walmart's inventory. According to Walmart CEO Bill Simon, the increase in inventory is due to "timing shifts in the receipt of merchandise for [...] the upcoming holiday season." But the big question remains: why change it?

Employees interviewed for this article say that usually, the bulk of Christmas items arrive in shipments a couple weeks before Black Friday, in line with the "just-in-time" delivery system we learned about in class. However, last year, Walmart began sending mass amounts of holiday products way before then, which impacted how Walmart prioritized its space on the floor. The company had to heavily discount certain items (the article mentions sweatpants) to make room for prematurely delivered holiday merchandise. The organization of products in stores is haphazard, since Halloween jack-o-lanterns and Christmas trees sit next to each other in the seasonal items section. And since the back rooms of most Walmart stores are already stocked heavily with day-to-day merchandise to meet consumer demand, the Christmas products that arrive early are forced onto the floor out of necessity.

Does Walmart honestly think that consumers are ready to buy Christmas items before Halloween? Why drastically increase inventory levels at stores all around the country just for holiday products? Honestly, it does't make much sense to me! What do you think?

Here's the article:

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