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OM in the News: Wal-Mart’s Disappearing Inventory

March 30, 2013

walmart shelvesMargaret Hancock has long considered the local Wal-Mart superstore her 1-stop shopping destination, writes BusinessWeek (April 1-7, 2013). No longer. During recent visits, the Delaware accountant says she failed to find more than a dozen basic items, including certain types of face cream, cold medicine, bandages, mouthwash, hangers, lamps and fabrics. The cosmetics section “looked like someone raided it,” said Hancock. “If it’s not on the shelf, I can’t buy it.”

Tim White, a California attorney, added that while long checkout lines irritated him, “the number-one reason we gave up on Wal-Mart was its prolonged, horrible, maddening inability to keep items in stock. The store would go weeks without products he wanted to buy, such as men’s dress shirts, which he found only in very large or small sizes and unpopular colors.”

It’s not as though the merchandise isn’t there. It’s piling up in aisles and in the back of stores because Wal-Mart doesn’t have enough bodies to restock the shelves. In the past 5 years, the retailer added 455 U.S. stores, a 13% increase, but its employee count dropped by about 20,000, or 1.4% to 1.4 million workers. A thinly spread workforce has other consequences: longer check-out lines, less help for shoppers and more disorganized stores. Last month, Wal-Mart placed last in the American Customer Satisfaction Index, the sixth year in a row the company had taken the last spot–and Bloomberg News reported that the company was “getting worse” at stocking shelves. Retailers consider labor — usually their largest controllable expense — an easy cost-cutting target. But eventually, customer service and customer satisfaction deteriorate.

Years ago, Wal-Mart supervisors drilled a message into employees’ heads: “In the door and to the floor.” That mantra now seems impossible to execute as the firm has become entangled in what one expert calls a “vicious cycle” of under-staffing. Too few workers leads to operational problems. Those problems lead to poor store sales, which lead to lower labor budgets.

Discussion questions:

1. Why can’t Wal-Mart keep its shelves fully stocked?

2. What suggestions do you have for dealing with this OM problem?

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