Whole Foods (WF) has been in the news a lot lately. After being purchased by Amazon, the challenges of adapting to a new corporate culture and system have been highlighted. Chief among the points of friction is the "order-to-shelf" system that attempts to reduce the inventory that is wasted throughout Whole Foods.
Now, I have no connection with either Whole Foods or Amazon . . . and only know what has been reported in the media. True, or not, the story has implications for the positive and negative outcomes of a modern inventory management system.
This public issue has brought me back to my education and experience on business trends, particularly trends that have lead to ideas like this "order-to-shelf" mentally. This trend of managing inventory comes out of manufacturing settings were it is often called "just-in-time," this philosophy is a means to reduce the cost of inventory and help the company be successful. I first encountered this in an agricultural manufacturing company in 1998. Does the idea work? Sure . . . at least in theory . . . and sometimes, if done well, in practice. However . . .
Here's why I typically say it works "in theory and often NOT in practice.." We have a local store that is part of a national chain in a small town near where we live. We go there for all kinds of "acreage-related" needs. Feed, electrical, plumbing, outdoor wear. But increasingly, we are by-passing this store to go to an even smaller town to make our purchases--many of which are at a higher price point. Why? Because of the failures of a poor "just-in-time" system.
You see, I have had too many experiences with making the journey to big chain store (24 miles round-trip) only to find that they do not have enough inventory to meet my need. I go to buy six hinges and they only have five. I plan on getting an item that I know they stock only to find the shelf empty. I need a specific size of bolt and they only carry the most common sizes and they do not cary any others.
Contrast this to the other store. This store was a curiosity from the time it opened. It is obvious that one of the business strategies this family-operated store had from the beginning was to have an extensive inventory. When it opened many of us wondered how a little store in a very small town could keep such a large inventory and not go broke. Would they last beyond the first year? Well they have and it has grown exponentially. Talking with customers, it is clear that they are traveling from several counties to this little store because of the confidence that they can get what they need.
They are getting more and more of my business as well. For me, the bottom line is I'd rather pay a little more . . . than being inconvenienced. Every time I "waste a trip" to the chain store, I vow to make the family store my preferred destination. Especially when I reflect that this inconvenience is not only a waste of my time, it's also expensive--it means I will actually have to make another trip--back to the chain on another day (hoping the truck came in) or more likely, right away to the family store . . . and pay more anyway.
Once again, I have no doubt that inventory management systems, such as what Amazon is trying to implement, are a beneficial to the business if done well. Given the enormous success of Amazon, perhaps they will iron out the problems and Whole Foods will benefit. So if you can do this so well that it doesn't inconvenience your loyal customers. Do it. However, done poorly, the impact on the customer experience, demonstrates that the cashflow and bottom line are more important than the customer . . . and even the most loyal will go elsewhere.
The news about Amazon/Whole Foods also makes me reflect on what these systems do to the culture and engagement of the workers. But that's a consideration for another day. The news reports say that stress is high and seeing an employe crying has "become normal."