If you are an ecommerce business owner, you must have heard of Walmart, a retail giant with thousands of stores worldwide.
Walmart is not only known for offering a wide range of high-quality products but is also renowned for its efficient inventory management system.
With its years of experience and sophisticated inventory management network, Walmart has mastered the art of handling inventory to meet customer demands while optimizing costs.
In this comprehensive guide, we will delve into how Walmart's inventory system works, the types of Walmart inventory, and some strategies for effective Walmart inventory management.
Walmart's inventory system is a sophisticated and highly efficient operation that combines advanced technology, strategic partnerships, and data-driven decision-making. Here's an overview of how Walmart's inventory system works:
Walmart follows a just-in-time inventory system, where the focus is on minimizing inventory levels to reduce holding costs. This system ensures that products are restocked just in time to meet customer demand without accumulating excess inventory.
Walmart leverages cutting-edge technologies, such as Radio Frequency Identification (RFID). RFID tags are attached to products, allowing for real-time tracking throughout the supply chain. This technology provides accurate and up-to-date information on inventory levels, reducing errors and optimizing stock management.
Walmart employs a cross-docking strategy, which involves receiving goods from suppliers and shipping them directly to stores with minimal handling and storage in between. This reduces the need for large warehouses and accelerates the replenishment of store shelves.
Walmart uses data analytics to analyze consumer trends, identify seasonal variations, and forecast demand for different products. This data-driven approach helps in making informed decisions about inventory levels, ensuring that the right products are stocked at the right time.
Through a Vendor-Managed Inventory system, Walmart collaborates closely with its suppliers. Suppliers play an active role in monitoring and replenishing inventory at Walmart stores, sharing real-time data on sales, stock levels, and product performance.
Walmart has strategically positioned distribution centers and fulfillment hubs worldwide. This efficient supply chain network ensures that products can be transported swiftly and cost-effectively to stores, contributing to quick restocking and high product availability.
Here are key aspects that highlight the importance of Walmart's inventory management system:
The just-in-time inventory system employed by Walmart minimizes excess inventory, reducing holding costs. This efficiency allows the company to operate with leaner inventories, optimizing working capital and improving overall cost-effectiveness.
Walmart's inventory management ensures that products are consistently available to meet customer demand. This high level of product availability contributes to customer satisfaction, as shoppers can find the items they need when they visit Walmart stores or shop online.
Walmart's use of advanced technologies and data analytics for demand forecasting empowers the company to make informed decisions. This data-driven approach helps optimize inventory levels, preventing overstocking or stockouts and ensuring that the right products are available at the right time.
The cross-docking strategy and efficient supply chain network enable Walmart to restock shelves quickly. High inventory turnover ratios indicate that products move swiftly through the supply chain, minimizing the risk of obsolete or expired stock.
Different types of inventory at Walmart serve specific functions within the company's overall supply chain and retail operations. Here are some key types of inventory at Walmart and their respective functions:
Finished goods inventory comprises the products that are ready for sale and available on store shelves. This is the most critical type of inventory for Walmart as it directly corresponds to the products available for purchase by customers.
Buffer inventory, also known as safety stock, is held to mitigate the impact of uncertainties in demand or supply. It acts as a cushion to prevent stockouts in case of unexpected surges in demand or disruptions in the supply chain. Walmart strategically maintains buffer inventory to ensure product availability during fluctuations.
Anticipation inventory is stocked in anticipation of predictable events, such as seasonal demand or promotions. Walmart carefully plans and manages anticipation inventory to align with peak shopping seasons, holidays, and promotional events, ensuring that it can meet heightened demand during these periods.
Work-in-progress inventory includes partially completed goods that are in the process of being manufactured or assembled. While Walmart doesn't manufacture its products, this type of inventory is more relevant to companies involved in production. For Walmart, it might include goods in the process of being packaged or labeled.
There are various key performance indicators (KPIs) and metrics to measure the performance of Walmart’s inventory management. These metrics measure the efficiency of its supply chain, the effectiveness of inventory turnover, and the overall health of its inventory.
Here are some metrics used to measure Walmart inventory performance:
Inventory turnover is a critical metric that measures how many times Walmart's inventory is sold and replaced over a specific period. A high inventory turnover ratio indicates efficient inventory management, quick product movement, and minimized holding costs.
Inventory Turnover Ratio = Cost of Goods Sold (COGS) / Average Inventory
The stockout rate measures the frequency with which Walmart experiences situations where products are not available to meet customer demand. A lower stockout rate indicates better inventory management and improved customer satisfaction.
Stockout Rate = (Number of Stockouts / Total Number of Sales) x 100
This metric calculates the average number of days it takes for Walmart to sell its entire inventory. A lower number of days implies faster inventory turnover and is generally considered a positive indicator.
Days of Inventory on Hand = 365 days / Inventory Turnover Ratio
Order fill rate measures the percentage of customer orders that are completely fulfilled from available stock. A high order fill rate indicates Walmart's ability to meet customer demand promptly and accurately.
Order Fill Rate = (Number of Complete Orders / Total Number of Orders) x 100
Effectively managing inventory on the Walmart Marketplace requires careful planning, strategic execution, and adherence to Walmart's guidelines.
Whether you are a third-party seller or a direct supplier, here are essential steps and tips for managing inventory effectively on the Walmart Marketplace:
Familiarize yourself with Walmart's specific guidelines and requirements for inventory management. This includes product listing standards, shipping policies, and any specific regulations for your category.
Set up an account on the Walmart Seller Center, the platform where you manage your inventory, product listings, and orders. The Seller Center provides tools and resources to help you efficiently manage your business on the Walmart Marketplace.
Ensure that all product information, including titles, descriptions, and images, is accurate and complies with Walmart's requirements. Clear and detailed product information can reduce customer inquiries and improve the overall shopping experience.
Optimize your product listings for search by including relevant keywords and attributes. This helps your products appear in relevant search results and increases their visibility to potential customers.
Set up an efficient order fulfillment process to ensure timely shipping. Walmart places a high emphasis on fast shipping, so meeting or exceeding delivery expectations is crucial for maintaining a positive seller rating. You can take advantage of Walmart Fulfillment Services and have Walmart handle your order and inventory management, shipping and customer service.
Regularly monitor your inventory levels to prevent stockouts.
Walmart encourages sellers to maintain high in-stock rates to provide a consistent shopping experience for customers.
Consider participating in Walmart's 2-Day Shipping program, which offers fast and free shipping to customers. This can enhance the visibility of your products and improve the likelihood of sales.
Take advantage of Walmart's analytics tools to gain insights into your sales performance, customer behavior, and inventory turnover. You can use this data to make informed decisions about your inventory management strategy.
Familiarize yourself with Walmart's returns policy and provide excellent customer service in handling returns. Clear return policies can positively impact customer satisfaction and repeat business.
Stay updated on any changes or updates to Walmart's policies, procedures, and features. This ensures that you can adapt your inventory management strategy to align with the latest requirements.
Effective inventory management is a non-negotiable factor for ecommerce success.
Thanks to Walmart’s sophisticated inventory management system, you can fulfill your orders faster, increase customer satisfaction levels, increase sales and become a successful Walmart seller.