Walmart to Solve its Supply Chain Issues and Further Cut Down on Costs

Greg Foran, the U.S. chief executive of Walmart, announced this week that his company is making a lot of efforts to re-invent its stores which recently faced a series of problems in the supply chain, many times lost the price war, and struggled with management issues.

Last year, the main problem was related to grocery items, which customers found less fresh than in other stores or found them non-existent since often the shelves were bare empty due to clogs in the supply chain. Moreover, grocery prices were often less appealing than those offered by the competitors.

Last fall, CEO Foran urged store managers to push sales of fresh and chilled food. He even gave them guidelines how to do it. But there was more to be done. The fresh and chilled food division is critical to Walmart since it brought the company $288 billion in revenue in 2014, which accounts for 60 percent of its overall earnings.

In 2014, Walmart saw two consecutive quarters of growth after a two-year series of declines. But CEO Foran plans to make sure that the growth holds and recently reported that his company had more work to do in order to achieve its goals.

First, Walmart will have to cope with fierce competition coming from other retailers such as Target and Dollar General DG which had been very aggressive on both pricing and product selection and expanded their business as Walmart was sliding down.

This week, Walmart’s CEO paid a short visit to Wall Street investors to brief them on the retailer’s future plans. Foran acknowledged that Walmart stores aren’t currently run by engaged employees, aren’t well-merchandized, and they sometimes fail to be clean or tidy. But Foran pledged that all these problems would be solved by the end of the year.

Foran also pointed out that Walmart must solve its inventory flow from the backroom to shelves. Because this flow gets often clogged, some items aren’t sold although they could, or others go easily out-of-stock although they shouldn’t.

Foram also wants to address the over-order issue for the benefit of the customer.

“If we then run less inventory in the store, the customer benefits because when they buy that product, they get it home and it lasts for five or six days,”

he argued.

Another plan to boost sales is related to cutting prices on fresh food that is near to its expiration date. Last fall, Walmart asked its store managers to discount fresh food including meat that was nearing expiration and not to offend clients by requesting a full price for a product that they have little time to use.

If all goes accordingly to the plan, the company would save over $500 million on a yearly basis, said Foran.

Also, Walmart plans to get more aggressive when negotiating shelf prices, which can be a major problem for all retailers that base their business on bargains. Foran acknowledged that Walmart had to quickly come to its senses since many competitors had beaten it in the price war.

Foran explained that low prices were the direct result of low costs. So, his company announced that it will further squeeze its suppliers to lower costs.

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