Inventory refers to items an organization keeps in stock. Small business firs have low stock levels and hence may not necessarily need complexity in managing the stock levels. However, larger companies have higher stock levels that require technical management to avoid stock issues and inconvenience business processes. The larger companies, therefore, utilize inventory management system to ensure efficiency in stock management. There exist a number of inventory systems such as multi-period inventory systems, partial inventory systems, and fixed order quantity or period systems among others (Sarkissian, n.d). A look at the inventory management system of Wal-Mart helps one understand how inventory systems work and issues that may arise due to inventory systems.
Wal-Mart’s is a large company that requires efficient inventory management systems. Therefore, Wal-Mart utilizes advanced technological inventory system. The system incorporates several aspects of technology to serve the inventory needs of the company. Wal-Mart’s inventory system is a vendor managed inventory model. The model involves suppliers having access to Wal-Mart’s data on inventory levels at a given time. Suppliers also get information on the rate at which various goods are moving helping the determine when to send ore good to Wal-Mart. The company is hence responsible for the movement of stock from the wares houses to store. Wal-Mart enjoys various advantages of the vendor managed system such as reducing delays in the supply chain as well as reduced costs by not having to hire extra personnel to oversee supplier goods. The responsibility of identifying reorder levels is passed to suppliers. Wal-Mart also incorporates just in time system to minimize storage levels. Just in time at Wal-Mart happens in for of cross-docking where the suppliers take the goods to the warehouses, and Wal-Mart receives them in their trucks and they are taken to the store for display. The cross-docking reduces stock at the warehouses (Greenspan, 2017).
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Wal-Mart has had its fair share of issues arising from inventory mismanagement that has caused the company dearly. Wal-Mart has previously encountered difficulties in the maintaining stocked shelves. The challenges of keeping shelves stocked caused Wal-Mart to hire professional logistics experts in 2011, Acosta Inc. to track down items on the shelves. However, by 2013 stocking issues were only worse for Wal-Mart with merchandise running out fast and new stuff not arriving on time. The situation was adverse causing the company a loss of three billion dollars in 2013. Wal-Mart had to cut down on customers which led to the accumulation of inventory since employees were not enough to restock the shelves adequately. The issues put stocking in at the top of Wal-Mart’s priorities. Unfortunately, the mess went on to 2014 as Wal-Mart reported low earnings again due to surplus in stock and chaotic storage space (Trujillo, 2016). Therefore, issues with management of inventory especially in a large retail store like Wal-Mart can amount to significant loses. Lack of stock translates to a loss of customers since the stock to be purchased are not readily available on the shelves. Overstocking is especially critical for fragile goods and perishable. Thus, an effective inventory system is crucial for efficiency in running of organizations businesses.
In conclusion, the vendor managed inventory system and the just in time system has helped Wal-Mart counter some of its stock issues. Just in time delivery ensure that the shelves are not left empty and at the same time avoid the holding of excess stock in warehouses. The vendor managed system ensures timely restocking since the supplier keeps track of the stock levels and how fast they move enabling planning for restocking. Additionally, the vendor managed system takes off the responsibility of extra personnel from Wal-Mart allowing the manageable employees to perform other functions and ensure the running of the store. Conclusively, inventory management is fundamental to the running of business primarily for larger retail stores like Wal-Mart. Every organization is supposed to implement the inventory system that best serves its underlying stocking challenges to remain profitable and functional in the market.
References
Trujillo, P. (2016). 6 times horrific inventory control almost killed these companies. Business 2 Community . Retrieved on 28 June 2018 from https://www.business2community.com/product-management/6-times-horrific-inventory-control-almost-killed-companies-01659644
Greenspan, R. (2017). Walmart: Inventory management. Panmore Institute . Retrieved on 28 June 2018 from http://panmore.com/walmart-inventory-management.
Sarkissian, A. (n.d). An introduction to inventory systems. AZ-central . Retrieved on 28 June 2018 from https://yourbusiness.azcentral.com/introduction-inventory-systems-14724.html
