To restate the obvious for a bit of background: Walmart's business model is to sell common products at low margin but at extremely high volumes. The low prices are secured through the company's practice of supplier management, building relationships with high-volume suppliers and securing their lowest possible price by promising an incredibly large amount of orders. These high volumes are maintained through intricate and state of the art logistics planning to move products as quickly and efficiently as possible from the manufacturers to the distribution centers, then from there to to the individual stores, and from there to the shelves.
So where did the problem arise?
In an article published in Bloomberg this week, it was alleged that individual Walmart stores were not operating with the necessary levels staff (if you've ever wondered why they have 50 register stalls but only six open, here's your answer). These budget-minded, intentional staffing shortages made by the company affected the stocking crew, and there were not enough employees on the floor to ensure the shelves were properly stocked.
If a product isn't stocked, it can't be sold, decreasing profits. If a product isn't stocked, it's in the warehouse, increasing turnover times. Both of these problems are bad for a company with the business model like Walmart.
The company identified and remedied this problem through the use of a consultant firm who identified approximately 800 SKUs across all departments that were indicative of common customer purchases. The consultants came in to various stores, performed anonymous shelf audits, and identified which products were under-stocked. In a later phase, the consultants placed stickers at each SKUs shelf location, allowing Walmart employees to key in on those critical products.
The takeaway, if there is one other than "buy green stickers", is that for all the planning and forecasting that can be done on the manufacturing quantity, inventory cycling, and transportation angles, problems can arise at any point along the supply line. Often in the most basic areas.