“There’s no substitution for boots on the ground in the store. No substitution. You can have all the technology you want but if you don’t get it out of the back room to the floor when the customer needs it, then that’s a lost cause.” – Drake Jackson, Category Manager (retired), Walmart
Understaffing at Walmart is driving the company’s out-of stock problems, causing headaches for customers and suppliers alike, and potentially undermining Walmart’s low-price strategy, according to three experienced Walmart hands, who discussed these issues on the June 22nd edition of Saturday Morning Meeting.
According to BloombergBusinessWeek, Walmart added 455 U.S. stores over the past five years, while the combined Walmart/Sam’sClub workforce declined by around 120,000 to 1.3 million.
As staffing levels in Walmart stores decline, the company’s suppliers are apparently being forced to take more responsibility for getting their products to Walmart’s customers. David Carmon, former VP of Operations for Walmart sees the effects on suppliers first hand – his current company helps manufacturers with in-store merchandising and sales. Carmon says that his business at Walmart is flourishing because the company’s suppliers “are reaching out for services to get product on the shelf.”
Walmart’s approach, suggests Carmon, threatens to drive up its cost of goods, potentially undermining the company’s promise of “Every Day Low Prices”:
…when does … suppliers having to put labor toward putting product on the shelf … become part of your cost of goods? Is there a tipping point there where Walmart loses its ability to have a different cost structure on goods than their competitor so … that has an impact on retails and you normalize the field? That would be the danger I would see on the Walmart side.
Drake Jackson, retired Walmart Category Manager, echoed Carmon’s concerns: “When you start getting your suppliers focused on things that they’re not core at I think that’s a bad thing and it does drive their cost of business up.”
Tom Muccio, retired president of Global Teams for Procter & Gamble, agreed with Carmon and Jackson about the root of the problem, saying, “When you cut labor in a store, you’re gonna have increased out-of stocks.”
Walmart’s out-of-stocks problem has likely been aggravated by the reintroduction of thousands of SKUs after a failed effort to save costs by reducing product selection.
Carmon says Walmart had built a staffing model around the SKU reductions, which would have cut the labor required to manage product in stores. With a narrower selection of products it would have been easier to move goods direct from truck to shelf. The reintroduction of thousands of products means more product has to go from the truck to the back of the store and then to the shelf when there is room. But reintroducing the SKUs without also adding back labor has evidently put a strain on the company’s ability to keep shelves stocked.
For Jackson, an expert on merchandising at Walmart, the solution is simple: “There’s no substitution for boots on the ground in the store. No substitution. You can have all the technology you want but if you don’t get it [product] out of the back room to the floor when the customer needs it, then that’s a lost cause.”