Walmart shifts inventory to warehouses
In reporting second-quarter results, Walmart officials said the chain is holding more inventory "for certain items" at its distribution centers rather than in store backrooms in a bid to improve flexibility across its supply chain.
The retailer continues to focus on clearing its backrooms of inventory in a bid to improve operational efficiencies in its stores.
The changes have resulted in total inventory growing at the rate of 2.2 percent, signficantly slower than the 4.8 percent gain in revenues in the quarter. Comp store inventory declined 2.4 percent versus last year.
"These actions, along with better management of seasonal inventory and reducing modular changes and future shipments to the stores, allowed us to reduce comp store inventory while improving both in stock levels and sales," said Greg Foran, president and CEO of Walmart U.S., on a conference call with analysts. "Inventory management will continue to be an ongoing focus for us."
Relatedly, Mr. Foran said a Customer Availability Program being rolled out will replace obsolete processes with "modern technology and new routines that keep associates on the sales floor rather than in the stockroom. Processes for truck deliveries at peak times and for stocking shelves have been significantly simplified, freeing more associates to be on the floor during peak customer traffic."
The improving stock levels come after Walmart faced numerous media reports beginning in 2013 of "out-of-stock" situations across stores. The shortages were blamed on employee cuts that hampered restocking.
The Wall Street Journal said the move to shift inventories to distribution centers particularly supports e-commerce sales. Shipping from warehouses to an online shopper is quicker than having an associate pull an item as part of a ship-from-store model.
At the store level, one tradeoff may be that store associates will be less likely to fill a particular understock from the backroom. On the other hand, having an associate locate stock "can be expensive and inefficient" and deeper inventories at warehouses more efficiently refills stock levels across multiple stores.
"It’s smart, it’s naturally an outgrowth of e-commerce," Kevin O’Marah, head of research for supply chain talent development firm SCM World, told the Journal. "They can have less inventory systemwide, and still offer more variety."
Underscoring in-store inventory challenges, the Consumerist has been running a series of articles this year detailing the discovery of many consumer electronics devices and accessories nearly ten years old and obsolete on Walmart’s clearance racks.
- Wal-Mart Stores’ (WMT) CEO Doug McMillon on Q2 2016 Results – Earnings Call Transcript – Seeking Alpha
- Reins Back Inventory in a Revamped Supply Chain – Wall Street Journal
- Raiders Of The Lost Walmart Discover That PS2 Memory Cards Are Finally On Clearance – Consumerist
- Walmart To Keep More Merchandise In Warehouses, Less In Stores – Consumerist
- Walmart Strains to Keep Aisles Stocked Fresh – New York Times
- Customers Flee Wal-Mart Empty Shelves for Target, Costco – Bloomberg
- Is ship-from-store a proven omnichannel benefit? – RetailWire
Do you see broader benefits from stores carrying greater inventory stocks in distribution centers versus store backrooms? How does the strategy better support omnichannel goals?