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

Posted Apr 28th 2006 3:25PM by Brian White
Filed under: Bad News, Rumors, Industry, Rants and Raves, Wal-Mart (WMT)

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.

Tags: Gilette, Wal-Mart, Wal-Mart vendors, Wal-martVendors

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Reader Comments (Page 1 of 1)

4-28-2006 @ 5:53PM

EJ Passeos said...

Don't you want to say wahhh! to the suppliers here. Don't we all see inefficiencies everyday? I was in WM this week and they didn't have any of the Wal-Mart brand of soap I use (I use mostly Wal-Mart's Equate).
Now, I don't blame that on Lee Scott, but rather a combo of the store manager and the distributor/supplier.
Wal-Mart is right to look at their supplier costs, but their biggest priority should be the condition of their US stores. The Journal article a few weeks back about the new president of US stores described utter incompetency that I could right in great detail at my local beloved Wal-Mart.
Great post.
EJ Passeos

4-28-2006 @ 11:37PM

Skip said...

Fifteen years ago I could find everything at WalMart that I could not find at KMart, as Kmart was always out of stock on key items. I walk into WalMart today and the key items I want are now out of stock just as they were at KMart 15 years ago. Fifteen years ago I would spend much more than I planned at WalMart because the store would always have stuff I wanted that wasn't on my list. Now I go to WalMart and spend less than I planned due to terrible out of stock situations.

4-29-2006 @ 1:57AM

Roo said...

I have the solution. Cut china-mart employees' pay by $2 an hour and increase the employee-paid health insurance contribution by 50%. And actually have the employees pick up merchandise in their own cars on their work breaks from the suppliers. That way the Bentonville people can have more $. I talked to Lee Scott before his 4-week vacation and he said I have a GREAT idea for the company and gave me "the cheer"

HA