So here’s an interesting article about how Walmart is struggling with increased shrink after slashing hours to compensate for the higher wages they started paying.   It’s pretty much a cause and effect thing.  If there’s not enough or barely enough hours to run a store in the first place and you cut even more, something is going to suffer.  If the company thinks “The employees will just start working harder!” they are misguided as in virtually every retailer, the employees are already working pretty damn hard.  It’s a pretty simple formula:

Less hours=less getting done.

Less getting done=poor customer service=sales drop, thus causing more hours needing to be cut.

Less getting done=more shrink, further impacting the bottom line.

This has been happening where I work for the last 6 years or so, and the results are clearly evident to anyone working in the stores.   I’ve always thought they should take a group of test stores, give them more hours on a temporary basis and see what happens.  The increased sales would probably offset the extra wages.   Just my opinion though.  The bottom line is, you get what you pay for.

 

NEW YORK ( TheStreet) — Wal-Mart (WMT – Get Report) may want to rethink its decision to slash the hours for some of its workers if it wants to correct one profit-busting problem.

According to a report from Bloomberg, Wal-Mart has asked employees to leave shifts early or take longer lunches in order to reduce costs. Wal-Mart noted the reduction in hours is taking place only in locations where managers have over-scheduled workers relative to demand, and said the cuts wouldn’t affect efforts to better staff stores, shorten checkout lines and improve cleanliness and stocking.

That could be a misguided action by a retailer that should be focusing on preventing merchandise from inexplicably vanishing from shelves.

“Inventory shrinkage was meaningfully higher than planned for the quarter,” said Wal-Mart U.S. president and CEO Greg Foran on an Aug. 18 earnings call.  For a retailer, inventory shrinkage is the unexplained disappearance of merchandise. If a Barbie doll is placed in the wrong department by a worker, a piece of fruit goes bad on the shelf, or an item is stolen, a retailer will mark it down to nothing at the expense of its bottom line.

Foran, who is trying to move quickly to improve customer service at Wal-Mart’s supercenters, added, “We are reviewing the end-to-end inventory management process with a special focus on shrinkage and working to close gaps.” Wal-Mart is currently making investments in training programs for associates on how to better manage merchandise to avoid profit-killing shrink. Furthermore, the company is beefing up staffing in high shrink areas of the store, such as fresh food. Foran believes it will take time to see results, and that the problem will continue to weigh on profits for the remainder of the year.

For mighty Wal-Mart, keeping track of its merchandise inside of its stores has become a pressing issue on the minds of investors.

Recent speculation on Wal-Mart cutting hours at some stores to protect its pressured profits calls into question whether the world’s largest retailer is moving as aggressively as it should be to counteract rising inventory shrink. By reducing manpower at certain stores, even during off-peak shopping hours, that is fewer people in the store checking produce quality, keeping shelves neat and watching customers to ensure stuff doesn’t leave out the backdoor.

TheStreet visited two Wal-Mart supercenters in Long Island, NY this past Sunday to get a feel for Wal-Mart’s inventory shrinkage issue. Based on Wal-Mart’s investments in worker wages, re-training and hours, it’s an issue that should be starting to improve during the third quarter. Although the sample size is small,given the company’s year to date performance with respect to shrinkage and what was seen by TheStreet, suggests Wal-Mart should be investing in even more worker hours, not less.

1. Unopened, unshelved inventory. 

Merchandise delivered to a store has one goal: end up on the shelf for people to buy. Here is one example of what we’ve seen at Wal-Mart throughout store visits this year — products being left on wooden pallets for consumers to rummage through and in the process, possibly destroy.  Open but unshelved products such as the motor oil, above, are also easier to go missing.  

And yes, the basket of candles is parked in the automotive department. This single photo underscores the point that Wal-Mart needs more people in the store responsible for the proper handling of inventory.