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Wal-Mart Stores, Inc. (NYSE:WMT) Attempts To Resolve Its Inventory Issues

Wal-Mart Stores, Inc. (NYSE:WMT) has been dogged by issues of insufficient stock of certain items in stores. The company has adopted a system where inventory is held at distribution centers instead of in the store back rooms. Opinions are varied about whether the strategy is helping or hurting Wal-Mart’s business. However, looking at the company’s latest quarterly report, there are indications that Wal-Mart is successfully resolving out-of-stock problems in its stores.

Wal-Mart Stores, Inc. (NYSE:WMT) reported in second quarter 2015 that inventory went up 2.2% in the quarter, compared to the 4.8% increase in revenues. In comparable stores, inventory was down 2.4% year-over-year.

Driving supply chain flexibility

These days, Wal-Mart holds inventory at central warehouses rather than inside the store back rooms. The practice has enabled the company to improve flexibility in its supply chain, leading to the positive development noted in the latest quarter.

The strategy of keeping inventory at the distribution center has also been cited as helping Wal-Mart Stores, Inc. (NYSE:WMT) to cut its working capital. Through central storage of inventory, Wal-Mart is able to make items available at its stores depending on demand rather than forecasts drawn at headquarters, thus the supply chain flexibility.

Strategy good for e-commerce

Out-out-stock situations cause customer frustration and can turn many shoppers away, which is why resolving the problems is a great move by Wal-Mart. Moreover, storing inventory at a central warehouse supports the company e-commerce efforts, because of the easy access and movement of items.

Is Wal-Mart hiding a problem?

However, some think that Wal-Mart Stores, Inc. (NYSE:WMT)’s decision to hold inventory at distribution centers instead of store back rooms indicates a problem. There are feelings that Wal-Mart’s new-found strategy could have come as a fix to staff shortage in stores. Without adequate workers, replenishing shelves from the store back rooms could be a problem.

Whether the issue is to simplify movement of inventory or it is a way to deal with thin personnel, Wal-Mart Stores, Inc. (NYSE:WMT) seems to be resolving out-of-stock challenge.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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