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Whole Foods is causing its own stocking issues – but Amazon needs to fix the problem (AMZN)
BI Intelligence
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Whole Foods stores are suffering from a food shortage that’s creating empty aisles and unhappy customers, and its inventory management system may be to blame, according to Business Insider.
Employees and customers alike have reported stocking issues at Whole Foods, and employees have pointed to the “order-to-shelf” inventory management system the grocer rolled out in early 2017 as the cause.
That timing would mean that Amazon, which acquired Whole Foods over the summer, did not have a hand in the new system, but it will need to handle its issues now.
The order-to-shelf inventory management system was introduced to improve Whole Foods’ wasteful system. Prior to the new system, Whole Foods wasted a good deal of inventory, an employee told Business Insider, and order-to-shelf aims to fix that. It does this by making sure stores only order what they need to meet demand and fill aisles, and has employees often taking orders straight from delivery trucks to the aisles, skipping stock rooms entirely. Managers also check the store to make sure nothing is overstocked and that all items are correctly placed. They'll also write up employees if mistakes are made, and employees are at risk of losing their jobs if they're written up three or more times. With these tactics, the program has successfully cut costs and reduced waste, according to employees.
While order-to-shelf has been successful in reducing excess inventory, it appears to be leading to empty shelves and low morale among employees. Stocking just enough products to fill shelves appears to often backfire, as delivery issues and excess demand can leave whole aisles bare since there’s no extra inventory. Out-of-stock products lead to missed sales and unhappy customers. Employees aren’t happy either, as the strict and high-stakes inventory checking tests have led many to stress, which could make them more distracted and create a worse shopping experience.
Amazon didn't introduce order-to-shelf, but it will have to fix its problems, along with other issues that have cropped up with the acquisition.
A big part of Whole Foods’ value when Amazon acquired it was its committed customer base that loved its organic selection and locally sourced products. But with stocking issues from order-to-shelf, its move awayfrom local suppliers, and questions about product quality, that value may be fading. Amazon needs to solve these problems, or it may find that integrating its grocery business with Whole Foods wasn't worth the $13.7 billion it paid for the grocer.
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