Wal-Mart challenged with replenishment issues

Wal-Mart Stores Inc. is the master of low prices and broad assortment merchandising, but efficiently re-stocking more than 100,000 products for each of its 4,000 or so supercenters is an ongoing challenge that has garnered the retailer loads of negative media publicity in the last few days.

Wal-Mart has defended its position in the media insisting the “empty shelf” media blitz is not a fair representation of what is occurring in its stores across the country. The retailer surveys more than half a million customers each month for feedback on check-out, store cleanliness and service issues, who report mostly positive shopping experiences.

That is not to say some shelves in specific areas from time to time might look sparse, a problem that suppliers like Crossmark, Acosta and others work to improve.

Duncan MacNaugton, chief merchandising officer at Walmart U.S., said last year that he believed on-shelf-availability was a multi-billion opportunity.

John Owen, executive vice president of Crossmark, a third-party service provider to Wal-Mart, said Wal-Mart has been engaged with its suppliers in trying to improve on-shelf-availability for quite some time, because the goal industry wide is 99%.

Wal-Mart reports its on-shelf-availability at historically high levels between 90% to 95%, but says it is striving for more efficiency as store traffic increased by 23 million customers in the previous fiscal year.

Replenishment is an art of sorts, according to Owen. He and his team at Crossmark are among a handful of suppliers who recently tested Wal-Mart’s SPARC mobile application that is designed to give suppliers better visibility into a retailer’s backroom – which is the nerve center that controls how accurately and efficiently shelves are restocked.

He said it’s no secret that Wal-Mart, its suppliers and major competitors are constantly working toward higher on-shelf-availability. Owen applauds Wal-Mart for the rigorous testing of the new SPARC mobile app over the past few months saying his team tested on-shelf-availability for some its product clients who were pleased with the overall results.

“I think it will make a big difference, as more suppliers get the training and began using the program this summer,” he said.

Owen said the original SPARC concept – which he called SPARC 1.0 – was a badge system that gave suppliers like himself access to the handheld Telxon which is used within a store to track inventory on hand in the back room.

Prior to the badge system, Owen said he had to track down an associate with the Telxon and get them to look up the data, which is a cumbersome action given there are dozens of suppliers in a store on a given a day.

He said the badge allowed him to sign-on the Telxon himself, but he still needed the actual Telxon do his job, which was creating an equipment shortage.

The new mobile app – SPARC 2.0 – solves the equipment issue and still gives the suppliers the visibility they need under the monitoring of Wal-Mart, who controls access with tracing ability.

TIGHTER EMPLOYMENT
Another factor in the replenishment issue is people. Wal-Mart has tightened its labor force in spite of continued store growth and expansion.

Analysts say retailers across the board have tightened up in recent years during the economic downturn and are reluctant to add back positions in the tenuous economic climate.

Jami Dennis, a retail consultant who teaches classes on retail replenishment, says the feedback she receives from smaller Wal-Mart suppliers is a difficulty in contacting their replenishment managers who are dealing with heavier workloads.

She said the smaller suppliers do not have a Wal-Mart-exclusive team and have more trouble managing Wal-Mart’s expectations.

“The expectation to manage is high. I get many suppliers that think that if they just fill the orders that Wal-Mart sends, then their work is done. They don’t always know that they really have to manage the business by store, by product, by week,” Dennis said.

WORK IN PROGRESS
Dennis and Owen say communication is key in raising the replenishment bar. The system is complicated, given store traffic, number of products and escalating consumer expectations. But, no one disputes that the rewards are high for all the stakeholders if replenishment levels rise just 1% on a book of $274 billion in annual U.S. sales.

Dennis gives Wal-Mart credit for developing new tools like the SPARC application, although she has not personally seen or tested it.

As a replenishment expert she says constant monitoring and management are required by suppliers and Wal-Mart and unfortunately both sides suffer from time poverty.
These experts say improving replenishment levels requires teamwork and collaboration using all the tools available and they remain anxious to see the results when the SPARC app is rolled out this summer.

Owen said the training and certification requirements were well-worth the commitment given the preliminary results he has seen testing the app on behalf of his product supplier customers.

Dennis says she trains suppliers around the country on how to identify weaknesses in retailer forecasting and ordering programs, but she also urges all suppliers to be proactive in their Wal-Mart business.

“Many times they find me to take the training after they have had a replenishment issue. Improving replenishment standards is manageable, but suppliers need to be engaged every step of the way,” Dennis said.