By Kevin Meyer
I've written a lot about Walmart, in particular their supposedly glorious supply chain. To be honest, they execute a traditional supply chain exceptionally well. They source from cheap labor countries, put it on big ships, and distribute it to thousands of stores incredibly efficiently. For a traditional supply chain. They still run into issues with too much inventory floating on slow-moving ships, arriving after that particular style has lost favor. And they beat the crap out of their suppliers to get every last penny of margin out of them, and then claim they deliver that to their customers.
If they actually get the product to their customers. Something Walmart is apparently forgetting is that the supply chain is not complete until the product is in the hands of their customers. That last hundred feet from the store's big back room to the shelves has become an issue.
During recent visits, the retired accountant from Newark, Delaware, 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, 63. “If
it’s not on the shelf, I can’t buy it,” she said. “You hate to see a
company self-destruct, but there are other places to go."
As I mentioned, it's only a hundred feet away. If that.
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, according to interviews with store
thinly spread workforce has other consequences: Longer check-out lines,
less help with electronics and jewelry and more disorganized stores,
according to Hancock, other shoppers and store workers.
At the Kenosha, Wisconsin,
Wal-Mart where Mary Pat Tifft has worked for nearly a quarter-century,
merchandise ready for the sales floor remains on pallets and in steel
bins lining the floor of the back room — an area so full that “no
passable aisles” remain, she said. Meanwhile, the front of the store is
increasingly barren, Tifft said. That landscape has worsened over the
past several years as workers who leave aren’t replaced, she said.
Of course Walmart has a different perspective…
“Our in stock levels are up significantly in the last few years, so the
premise of this story, which is based on the comments of a handful of
people, is inaccurate and not representative of what is happening in our
stores across the country,” Brooke Buchanan, a Wal-Mart spokeswoman,
said in an e-mailed statement.
A lot of good that does you if you can't get it onto the shelves. Perhaps that spokeswoman should talk to some Walmart execs.
Last month, Bloomberg News reported that Wal-Mart was “getting worse” at stocking shelves,
according to minutes of an officers’ meeting. An executive vice
president had been appointed to work on the restocking issue, according
to the document.
“When times were good and people were still shopping, the lack of
excellence was OK,” said Zeynep Ton, a retail researcher and associate
professor of operations management at the MIT Sloan School of Management in Cambridge, Massachusetts. “Their view has been that they have the lowest prices so customers keep coming anyway. You don’t see that so much anymore.”
are “so sick of this,” said Ton, whose research, published in Harvard
Business Review, examines how retailers benefit from offering good wages
and benefits to all employees. “They’re mad about the way they were
treated or how much time they wasted looking for items that aren’t
In Walmart's eyes it's apparently those pesky workers again. What a "cost"…
Retailers consider labor — usually their largest controllable
expense — an easy cost-cutting target, Ton said. That’s what happened
at Home Depot in the early 2000s, when Robert Nardelli,
then chief executive officer, cut staffing levels and increased the
percentage of part-time workers to trim expenses and boost profit.
Eventually, customer service and customer satisfaction deteriorated and
same-store sales growth dropped, Ton said. “When you tell retailers they have to invest in people, the typical response is: ‘It’s just too expensive,’” Ton said.
Wal-Mart is entangled in what Ton calls the “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. “It requires a wake-up call at a higher level,” she said of the decision to hire more workers.
As opposed to the cost – and not just in sales – of empty shelves.
Like the rest of us, even Walmart is only as good as the last 100 feet of its supply chain. Sometimes all it takes is the "cost" of another human or two.
Martin B says
They need to read your “Data, Facts, and Truth” post. A case of looking at the printouts, not going to the gemba. Or the retail equivalent, “The truth is in the stores.”
David Hallsted says
“Low prices. Every day. On everything.” or “Save Money. Live Better” or “Always Low Prices” are all slogans for Wal-Mart. It is interesting to see a brand dictate the company’s processes, not what the customer wants. Wal-Mart needs to change their slogan to, “Low prices on stuff you can get” or Target will take their market share.
Costco is another store that still relies on low prices brand but suffers from a lack of process improvements which is why I shop at Target often. Target uses cart mules to retrieve dozens of shopping carts. There is always a shopping cart in the Target store for me to use. Just last week I saw a Costo’s human cart mule using a rope to get 10 carts. I always bring a shopping cart from the parking lot because I never know if there is cart at the Costco store for me to use. Target has their checkout stands three level deep. I am never more than the third person inline being checked out in under 5 minutes. I only shop at Costco once a month, early in the morning, so I only wait in line a half hour. At Target I know where to find what I want because it is easily labeled. In Costco it is a guessing game where the product is located each time I shop there. I will do most of my shopping at the local grocery store. Why? I will walk less distance on my entire shopping trip at the local grocery store versus me walking from my parked car to the Costco store front.
I only reason I can see why folks shop for food at Costco is because they do not value their time.
Phil Mendelowitz says
Good article and I find this is happening in quite a few different companies today. Safeway has also reduced staffing to the point where the basics like cleaning, restocking and customer service is suffering greatly. I find the smaller chains like Trader Joe and Mi Pueblo are maintaining staffing and keeping things in order and that’s where my dollars are going.
Scott Maruna says
I may be looking at this incorrectly, but I can’t help but think that the last 100 ft, or more broadly, the interface between the between the customer and your product /service is the most important interactions your business can have. Whether it is a restaurant or a global distribution organization, it comes down to value from the perspective of the customer. Why would any business try to focus on this point in their processes to save money? One could argue that this is the one spot that you invest in the staff, not cut their hours and hope for the best.
Ed F says
I googled Zeynep Ton from the Bloomberg article and ran across her website and accompanying articles and blog. One piece linked to from her site was on QuikTrip’s investment in their employees. It provided another entry into my mental data bank of places I’ll frequent if given the choice — and not just out of a warm, inchoate sense of “social justice.” This place seems to be building committed, give-a-care employees. Kudos to CEO Chet Cadieux.
Mark Graban says
There’s a big difference in the expectations a customer should have at a warehouse club (like Costco) and a regular retailer (Target). David, you’re right – different customers value their own time differently. Some are willing to stand in line a long time to save money.
Had to laugh at the quote in the article about Wal-Mart’s plan to fix the problem…
“An executive vice president had been appointed to work on the restocking issue…”
You mean no one was aware of it before!? Let’s put together a team and pre-plan a meeting to develop a plan to review the issue.
Here’s hoping s/he at least knows where the Gemba is….
Joe Peters says
I think that financials are affecting them heavely at the moment that’s why they’re orienting on bottom line so drastically. But it just proofs that they hadn’t been prepared for tough times, I think it will take some time to focus capabilities in a right way and start solving important problems.
Fried Ape says
They could do with looking at a different metric. Rather than studying the cost of sales they could look at profit per foot of shelf space. That would drive a change in behaviour.
Len Canoot says
You see these cost-cutting activities everywhere, not just in retailing. It’s sad how many organization think the only way to control costs is to reduce headcount. I have the experience that uncontrolled headcount reduction can work contrary to reducing costs: in the long run, it increases costs because knowledge and valuable work is lost.