Is Walmart Green Dot Program Helping To Keep Shelves Stocked, Or Just A Cheat To Pass The Audits?

Walmart (NYSE:WMT)'s widely publicized problems with keeping shelves stocked with merchandise already in the stockroom have taken a strange twist. Walmart reportedly was using a third party to make sure products were getting where they supposed to be getting. And after being pleased with the results, Walmart ordered that the program stop—and only reinstated it after shelves returned to being empty and media reports noted the problem, Bloomberg is reporting.

"Due to Walmart receiving a lot of negative press regarding their empty shelves, we are reinstituting the On Shelf Availability project," said Ashley Dixon, a coordinator with Acosta, the vendor handling Walmart shelf checks, in an e-mail to her employees on April 22.

When the audits resumed, Acosta staff tracked SKUs secretly and specifically would not let associates—and especially not store management—know which products were being tracked. Walmart quickly concluded, according to Bloomberg, that that was a mistake.

"We thought by not letting the stores know, that we would get a clearer picture, but that wasn't the case," Walmart spokesperson David Tovar told Bloomberg. "What we learned is it's actually better to have transparency with stores so they know the key items that particular time of year."

That led to the green dot move, where Acosta people placed neon green dots next to products where the store needed to pay special attention.

At a big-picture level, the idea of Walmart dropping the proverbial ball on inventory management is quite disconcerting. "It's like Tiffany's falling down on quality," said Wallace Hopp, associate dean of faculty and research at the Stephen M. Ross School of Business at the University of Michigan. "It's the core of their essence. If you can't manage inventory in retail, then you can't manage retail."

The Acosta audits focus on about 700 important items, which makes it easier to achieve a higher percentage of in-stock merchandise than if the whole store were counted. Walmart supercenters carry about 142,000 items, according to the company's website, so a typical Acosta audit represents about one half of 1 percent of a store, Bloomberg reported.

Walmart then prepared a spreadsheet of more than 800 items, merchandise that included Peanut M&Ms, Hanes boxer briefs, Covergirl mascara and Crest toothpaste—that needed "stickering." The circle stickers would indicate to Walmart workers which items Acosta would be searching for during its audits.

There are questions about whether that is an ideal approach. If the goal is for the stores to pass their audits, yes, it's a great technique. But if the goal is to get an accurate read of what is going on and then having a plan to fix the problems, it could be counter-productive.

"If they green-dotted for the purposes of the audit, that's short-sighted," Hopp said. "They should be much more concerned about having stuff in stock in the whole store."

Carol Schumacher, a Walmart vice president for investor relations, said in an analysts' call last week that on-shelf availability in the first quarter was in the 93 percent to 95 percent range. That may be, but one store associate quoted in the Bloomberg report questioned whether the green dots are helping. Said that associate: Most of the items that have green stickers "were in stock, or overstocked, while shelves were empty around them."

For more:

- See the Bloomberg story

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