Walmart Inventory Management: An Analysis of Out-of-Stock Issues

This report examines Walmart's inventory management practices, focusing on the problem of "out-of-stock" merchandise, which led to significant sales losses. The report identifies issues such as disorganized back rooms, poor communication, and supply chain volatility as contributing factors. To address these challenges, the report recommends implementing a push notification service to inform customers about product availability, improving demand forecasting using data from all sales channels, and utilizing a reliable order point formula to optimize stock levels. By implementing these solutions, Walmart can enhance customer satisfaction, increase sales, and mitigate the negative impacts of inventory shortages. Desklib provides access to a variety of solved assignments and resources for students.

Running Head: WALMART INVENTORY MANAGEMENT
Walmart Inventory Management
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Running Head: WALMART INVENTORY MANAGEMENT
Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Overview of the company............................................................................................................2
The Inventory Management.........................................................................................................3
Discussion of the problem............................................................................................................3
Recommended Solution...................................................................................................................4
Conclusion.......................................................................................................................................5
Reference.........................................................................................................................................6

Running Head: WALMART INVENTORY MANAGEMENT
Introduction
The inventory management is a component in the supply chain management. It
supervises the supply chain of goods from the manufacturers to the warehouses, from the
facilities to the sales. A primary function of the inventory management is to secure a detailed
record of the new or returned product when it enters or leaves a point of sales or a warehouse
(Chaiyawantakee et al., 2015). The inventory management is a complicated process especially
for the larger organizations. However, the basics are the same irrespective of the size of the
organization. In the inventory management, the required goods are delivered to the destination in
the form of raw materials and kept in the stock areas or the shelves (Dearsystems.com, 2019).
The present repot will deal with the inventory management of Walmart. It will begin by giving
an overview of the company. It will then find the problem in the inventory management, discuss
about the problem and conclude by providing suitable solution.
Discussion
Overview of the company
The first store of Walmart opened in the year 1962 in Rogers, Arkansas. It is the largest
company as far as the revenues are concerned. According to the reports of 2017, the company
owns the revenues of $485.9 billion. Almost 63 % of the revenues come from the U.S operations.
The company is a private employer employing almost 2.3 million people. It serves more than
260 million customers per week and 11, 718 retail units are there in 28 countries. It is an
America multinational retail corporation (Trujillo, 2019).It operates a chain of the hypermarkets,
the grocery stores and the discount department stores. The company was founded in the year

Running Head: WALMART INVENTORY MANAGEMENT
1962, by Sam Walton. The company mainly deals in the electronics, the home and furniture,
footwear, the pet supplies, the auto, grocery, health and beauty and many others. It is the most
profitable retailer in the entire U.S. The U.S division is the largest one. In the U.S, more than 90
% of people reside within the periphery of the Walmart Stores.
The Inventory Management
The Inventory management of Walmart is one of the most crucial part of the entire
supply chain of products. Since, the company is huge in size, an effective and efficient
management is crucial for the operational success. Recently, the executives of the company have
acknowledged the presence of an inventory management issue. Due to the out of stock
merchandise, the company lost almost $ 3 billion sales in the year 2013. Although the company
had other challenges too such as poor weather, economically backward customer base and higher
tax rates, the challenge aroused by the inventory department contributed to lower the earnings
more (Panmore.com, 2019). The survey on the employees revealed the fact that, the store back
rooms were beyond the control. The main issue was the combination of the poor procedures and
few payroll hours. It made the management of products according to the needs, a failure.
Identification of the problem
It has been identified that Walmart is facing problem of “out-of-stock” inventory that is
effecting the business up to greater extent (Forbes.com. 2019). The Walmart Inc. has been telling
the customers that some products are “out-of-stock,”. According to Nassauer (2019), it has
occurred after the retailer has changed the e-commerce system for avoiding the orders which are
too expensive to ship. The problem of out-of-stock in the inventory is disturbing the customers
because they are not finding the goods which are in high demand.

Running Head: WALMART INVENTORY MANAGEMENT
Discussion of the problem
The studies on the supply chain have suggested that the issue with the inventory
management is mainly related to “out-of –stock”. It is seen as the long lasting aftereffect of the
occurrence of Great Recession. The issue of “out-of-stock “can decrease the inventory
productivity and can cause sales loss along with the loss of customer good will (DeBusk et al.,
2018). In the cases of Walmart, there was not enough of employees for keeping the back room
organized. It has also been found that some of the products were ordered at the store level and
other products were ordered at the home office by the employees. Sometimes, proper instructions
are not sent to the stores regarding the new items. Hence, the employees are befuddled. The
second issue is that Walmart had to listen to the employees carefully.
The consideration of the employees’ reports could have saved the company from facing
such difficulties and change its course when necessary. However, it also needs more employees
in the store for keeping track of the inventory. The company is presumably suffering from one
of the major trends which are uncovered in the logistics study (Hufschmid & Collett, 2017). The
volatility in the supply chain is the major reason behind the problems. The re-setting of the
merchandise is tricky to handle and if anything goes wrong, the entire management goes wrong.
Hence, it is becoming difficult for the Walmart Company to determine the requirements of the
customers as they are behaving in the most fickle manner. The company is simultaneously
balancing the in-store logistics along with the e-commerce that is creating more uncertainty.
Recommended Solution
The recommendations are as follows:

Running Head: WALMART INVENTORY MANAGEMENT
 The company has been subject to unfavourable responses from their customers. Hence,
the company should formulate a strategy that will be helpful in decreasing such
unfavourable responses. The company should incorporate a PUSH MESSAGE or
notification service that will be helpful to inform the customers when a certain
commodity is in stock. It can also help in marketing of the company’s products. Sending
a push message notifications is a type of direct marketing tool that is used by various
companies (Bacile, T. J., Ye, C., & Swilley, 2014). Thus, both issues of customer
satisfaction and marketing can be paid attention to with incorporation of push
notifications.
 The company should also forecast the demand to evade the inaccuracy in the forecasting.
The best practices are determining what to measure and how it can be measured. It can
integrate the data from all the sales channels (Gagliordi, 2019). It can further create a
repeatable monthly process. The data and other necessary information in hand can help
the company to satisfy the customers by delivering the goods up to the expectations of
the customers.
 The company is also suggested to use a reliable order point formula. It tells
approximately when to order more stock and when the stock has reached to the lowest.
The solutions will impact on the company’s cost structure by increasing it up to greater
extent. The heightened customer satisfaction will subsequently increase the production
and sales of the company. The more there will be proper stock in the inventory, the more
they will be able to deliver the customers in the most desired manner. The accurate
selection of the suppliers to balance the supply and demand of the goods can easily save
Walmart from the issue of “out-of-stock”.

Running Head: WALMART INVENTORY MANAGEMENT
Conclusion
Therefore, from the above discussion, it can be seen that inventory management is an
essential part of the entire supply chain management. In Walmart there are some issues in their
inventory management which can be addressed by the application of the above recommended
methods. The report has well demonstrated the inventory management of Walmart. It began by
giving an overview of the company. It then found out the problem in the inventory management,
discussed about the problem and provided suitable solution.
Reference
Bacile, T. J., Ye, C., & Swilley, E. (2014). From firm-controlled to consumer-contributed:
Consumer co-production of personal media marketing communication. Journal of
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Chaiyawantakee, S., Srimongkol, P., Bunsiri, P., Lanak, K., & Wilkison, P. B. (2015). U.S.
Patent Application No. 14/338,498.
Dearsystems.com (2019). Out of Stock? Here are 5 Ways to Prevent Stockouts for Good | DEAR
Cloud Inventory Management. [online] DEAR Cloud Inventory Management. Available
at: https://dearsystems.com/out-of-stock/ [Accessed 12 Mar. 2019].
DeBusk, B. C., Sewell, A. M., Hodge, G. S., & Fox, S. J. (2018). U.S. Patent No. 9,990,466.
Washington, DC: U.S. Patent and Trademark Office.

Running Head: WALMART INVENTORY MANAGEMENT
Forbes.com. (2019). Is Walmart Really Fixing Its Out Of Stock Problems?. [online] Available at:
https://www.forbes.com/sites/retailwire/2015/08/23/is-walmart-really-fixing-its-out-of-
stock-problems/#19af6e223364 [Accessed 28 Mar. 2019].
Gagliordi, N. (2019). Walmart turns to robots to help solve out-of-stock issues | ZDNet.
Retrieved from https://www.zdnet.com/article/walmart-turns-to-robots-to-help-solve-out-
of-stock-issues/
Hufschmid, D., & Collett, G. C. (2017). U.S. Patent Application No. 15/394,149.
Nassauer, S. (2019). Why Walmart Shoppers are Finding More Items ‘Out of Stock’. [online]
WSJ. Available at: https://www.wsj.com/articles/why-walmart-shoppers-are-finding-
more-items-out-of-stock-1535716801 [Accessed 28 Mar. 2019].
Panmore.com (2019). Walmart’s Inventory Management - Panmore Institute. [online] Panmore
Institute. Available at: http://panmore.com/walmart-inventory-management [Accessed 12
Mar. 2019].
Tirinato, J. A., Zelin, M. P., Gibson, P. A., Zaltsman, L., & Davis, G. (2018). U.S. Patent
Application No. 10/024,734.
Trujillo, P. (2019). Walmart Is Addressing Inventory Problems With a New System. Retrieved
from http://www.waspbarcode.com/buzz/walmart-2/