Shrinkage at Walmart

In 2015, the world’s largest retailer, Walmart, announced a quarterly increase in sales that was accompanied by an increase in expenses that reduced its hoped-for profit. In discussing the higher expenses, the company mentioned “shrinkage” three times in its written press release and 13 times in its conference call with financial analysts.

The company attributed a significant part of its increased shrinkage to shoplifting and outright theft, including one instance in which a team of thieves pushed a shopping cart full of electronics out a back door and loaded them into a waiting car. To combat these problems, which are unfortunately common in retailing, the company announced it was restarting a training program for employees that helps them learn how to spot shoplifters and fellow employees who are pilfering, along with adding staff to areas of the store that contain high-value or easy-to-steal items. They also plan to start checking customers’ receipts at store exits.

In addition to these measures, however, the company also reported that a sizable portion of the shrinkage results from difficulties encountered in managing inventory flow throughout the company’s distribution network and its stores. When warehouses and store backrooms become overstocked with inventory, it can be difficult to determine which items should be discounted and moved to the store’s shelves. In recent years, Walmart has increased its sales of grocery and food items, which can be damaged more easily than its other inventory and for which failure to monitor expiration dates can be costly. To deal with these backroom inventory management issues, the company has added employees to staff those areas.

Walmart’s U.S. supply chain includes more than 100 distribution centres from which the company makes deliveries to its more than 5000 stores and Sam’s Club locations using its fleet of more than 6000 trucks. Managing the flow of inventory from the company’s suppliers through its distribution centres and into its retail outlets is a mammoth task and, as discussed in this chapter, the company has made attempts to use technology in new and creative ways to address these challenges in the past.

REQUIRED

1. Become familiar with RFID technology and its potential uses in Walmart’s supply chain using the information presented in this chapter and information you obtain through the Web Links, your favourite search engine, and your library. In about 150 words, outline the advantages Walmart might gain by using RFID in its retail stores. As you draft your answer, be sure to consider the nature of the stores’ backroom environments, which include metal shelving. Also, consider Walmart’s possible use of RFID and other technologies as an alternative or addition to the increased staffing levels the company has announced for its backroom inventory storage areas.
2. In about 100 words, discuss the technologies that Walmart’s trucking fleet might use to better manage their operations. Include a discussion of tracking technologies, GPS devices, and/or apps for use by truck drivers on their smartphones or tablet devices.
3. In about 100 words, discuss the advantages Walmart might gain if it were to use RFID tracking technologies in all of its retail stores to manage every single item as opposed to using either case-level RFID or tracking only part of each store’s inventory at the item level.