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Wal-Mart Tackles Out-of-Stocks

Wal-Mart is rolling out new applications and processes in its first seven RFID-enabled stores, to ensure that items are on the shelves when customers want to buy them.
By Mark Roberti
Tags: Retail
Apr 01, 2005—By most accounts, Wal-Mart has one of the most efficient supply chains on earth. But even Wal-Mart’s supply chain has inefficiencies. The only way for a store manager to know that some shelves are empty is to have employees (or “associates,” as Wal-Mart calls them) walk the aisles. If an associate spots an empty shelf, he or she scans the bar code on the shelf. A screen on the associate’s handheld bar code scanner indicates how many items are in the store’s back room or in transit to the store.

Often associates spend 15 or 20 minutes looking for items in the back room. If they don’t find them, they sometimes use their handheld computers to change the on-hand inventory to zero and order more cases of the product—even though several cases may be tucked away somewhere.

When the associate orders more products, cases are picked at the nearest distribution center, put on Wal-Mart–owned trucks and sent to the store (deliveries are made daily). When the cases arrive at the store, an associate does not scan them into inventory using a bar code scanner, because that would take too long and slow operations to a crawl. Instead, Wal-Mart assumes that each pallet, case or item ordered has arrived at the store.

“We update perpetual inventory with the quantity shipped to the store, once we receive that trailer,” says Simon Langford, manager of Wal-Mart’s RFID strategy. “But we still don’t know what’s in the back room and what’s gone out to the sales floor and back again. We have no visibility of that.”

These are minor inefficiencies, but they all contribute to product not being on the shelf when the customer wants to buy it, which means Wal-Mart is missing opportunities for sales. The problem becomes compounded during holiday seasons, when many products have a short shelf life. The failure to get goods onto the floor means they have to be marked down after the holiday.

And that’s where RFID comes in. Wal-Mart’s goal is to use the technology to generate automatic “pick lists”—lists of goods that need to be picked in the back room and brought out to the sales floor—and to keep more accurate track of not just the amount of inventory on hand but also its location within the store.

Langford stresses that Wal-Mart is taking a gradual approach. The company doesn’t want to add complexity and make the store associates’ jobs more difficult. The goal is to give associates better information in stages to allow them to adjust to changes in processes and work more efficiently. “We want people to go about the tasks they’re doing normally,” says Langford, “but we want to enhance those tasks and help them work more efficiently—spend less time in the back room and more time on the sales floor.”

Suppliers typically ship tagged cases on pallets to Wal-Mart’s distribution centers in Texas. Wal-Mart breaks down the pallets and ships individual cases to stores. Wal-Mart Supercenters also have a grocery section with a separate receiving area. Goods are typically shipped in full pallets to the grocery section.
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