With over 11,000 stores in 27 countries and an average of $32 billion in inventory, Walmarts supply chain is an impressive logistical accomplishment. Nevertheless, Walmarts out-of-stock problem has been making waves in the recent years, periodically highlighted by both financial analysts and news channels including Forbes and Bloomberg. So, what went wrong?

Analysts have attributed Walmarts problems to mismanaged inventory. In fact, one of the most important metrics for retailers is inventory turns - or the rate at which a retailer will cycle through its entire inventory. The faster the turn, the lower the cost,

as helpfully outlined by this inventory holding cost barometer infographic.Walmarts logistics are calculated down to incredible precision, from automatic resupply orders from Walmarts global head office to delivery trucks programmed to take the most efficient routes. Despite the meticulous detail that went into optimizing Walmarts processes from top down, many shoppers were still not getting the experience that they expected from the retail giant.A customer interviewed by Bloomberg quite succinctly describes the problem: If its not on the shelf, I cant buy it.Walmart claims 90% to 95% in-stock level. Although this figure seems impressive, especially when taking into account the enormous size of its operations, it also means that the company could be foregoing $1.29 billion to $2.58 billion in potential sales (calculated as 5-10% of its inventory level of $25.8 billion on its 2012 annual report).In fact, actual losses could be substantially greater - customers are much less likely to return to a store that continuously fails to restock products that they want.Retail is a fiercely competitive industry, and with players such as Amazon gaining traction, mismanagement of inventory could make or break a business virtually overnight.Walmart is famed for its extremely lean and technologically advanced supply chain, which makes the problem even more puzzling for onlookers. According to insiders, there were many cases where stock was available in storage, but due to shortage of staff, it got delayed for moving out to the shop

floor.Customers gradually stopped shopping at Walmart because of bad service and empty shelves, and management worsened the problem by further cutting back staff to save in costs. Hence, a vicious cycle.In this case, Walmart failed because they didnt anticipate and forecast the effect that their out-of-stock inventory level would have on the customer experience. Even for giants like Walmart, inventory management remains the core of their business

Questions

A. Analyze wallmart inventory management systems and its advantages? B. What are the challenges faced by wallmart and how it was resolved?