Wal-Mart's inventory decisions having negative effects on its vendors


It seems as if the world has heard this story before. Well, we're here to hear it again. Wal-Mart's efforts to drive inventory out of its lair and into the lairs of its vendors (for many reasons, including inventory-carrying costs) have angered some of its largest vendors, making the relationship between themselves and Wal-Mart a little blue -- companies like Procter & Gamble and Hershey. What's the deal, you might say?

Well, for one, Wal-Mart wants to continue having its vendors fight for shelf space by driving down inventory growth to half (or less) of sales growth. That puts pressure on vendors to grow sales at a rate where they can accurately predict turns they'll need to make to Wal-Mart. This is no easy task, even with Wal-Mart's famously-fantastic information systems that give an unprecedented amount of data to its vendors at all times. In fact, Wal-Mart is almost just a "storage warehouse" for many vendors, since they own their own inventory until it's sold at point-of-purchase. A neat concept, Wal-Mart. Just don't irk your customers.

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