Walmart the Poster Child for Inventory Management

Has it gone pear shape? 

By Wizard Partner Jane Fraser

"Woes mount for Wal-Mart. With growth, stock price and profits down, the retail giant once thought to be invincible finds itself on shaky ground." David Olive - TheStar.com - August 12, 2007 

When we (the Wizard of Ads Partners®) studied business models with Roy Williams, Walmart was the poster child for Inventory Management.

Under this business model, the operationally excellent retailer always has the stock on hand because they accurately determine when to reorder goods using “activity-based accounting” instead of “cost-based accounting”. Activity-based accounting monitors the customer’s actions and looks for trends. Cost-based accounting looks only at the numbers, which frequently results in the retailer issuing rain checks.

According to a recent article posted on thestar.com Walmart may have slipped off their pedestal onto shaky ground.

Excerpt from Woes mount for Wal-Mart: The company's growth rate has slowed to a crawl, overtaken by rivals once thought to be no match for the "beast of Bentonville." Average annual profit growth lags that of Target Corp., Costco Wholesale Corp. and other competitors. Wal-Mart's repeated efforts to push upscale merchandise have ended in tears. Expansion at home is still thwarted by hundreds of U.S. communities; and several forays abroad are struggling or have been scrapped.

This article identifies a number of Walmart’s errors:

• Burying their head in the sand – transparency should be more than a shiny buzzword!

• Losing sight of who they are, what they do best and what took them to the pinnacle…

• Sacrificing the customer base that built their business for the customer sitting over there in that greener pasture.

• Assuming that their competitor’s encroachment is “just luck” and a temporary imposition.

• Forgetting that the strongest brands are built from the inside out.

• Stomping on their inside champions.

• Assuming that successful business customs are transferable between cultures.

Are you making the same mistakes in your business?

 

PS. Make sure you read David Olive's complete article, Woes mount for Wal-Mart.