Limitation of numbers to show reality.

Last week a Bloomburg News story came out about Wal-Mart shelves not being stocked. The story can be found here:

The article contends that the are many reports of shelves of Wal-Mart being empty, primarily because there was not enough labor in the store to stock the shelves.  Responded Wal-Mart spokesperson Brooke Buchanan in the article:  “Our in stock levels are up significantly in the last few years, so the premise of this story, which is based on the comments of a handful of people, is inaccurate and not representative of what is happening in our stores across the country.”

Let me do some speculation here.  Despite contrary opinions from the reporter reporting the stores are reporting out of stocks and the Wal-Mart spokesperson saying stocking levels I think they both right, but statistics Wal-Mart uses lead to conclusions which is beyond the scope of the data.

I remember Wal-Mart in the 1970’s and 1980’s almost literately laughing at its major competitor, K-Mart, as it improved its logistics processes and kept in shelves fill while K-Mart did not. The supply chain processes got the product into the store. With a management who understood how to staff a store the products made the leap from the back room to the shelves. However there was no real to measure getting product from the backroom of the store to the shelf.  Today, RFID could do that, but it is expensive and used only on limited items by Wal-Mart.  My guess the current statistics only show that the product has reached the store, not that it is on the shelf for the customer to buy. So with all the wonderful supply chain talent they have, they can argue that their stock levels are up significantly but that does not mean they are at a place the customer can buy them.  You measure business by numbers, but they all have limitations and you must manage around those limitations.

I do have some knowledge how Big Box stores work. In many cases the amount of labor budgeted is based on the store sales forecast. If they are not reached, the store manager is compelled to reduce the labor budget. It can reach a point were labor is cost so much there is not enough personnel to man the cash registers, keep the store orderly, put out displays, and keep the shelves filled.  If H. Edward Deming was still around, he would call sub-optimizing the system. It makes the profits look good in the short term while hurting long term sales and profits.  Home Depot experienced this last decade.  It allowed its competitor, Lowe’s, to experience high growth as customers switched due to poor service and missing products on the shelves of Home Depot . Once a new management came in, labor policies changed, and Home Depot resumed its growth.

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