What would it take to get “small box” stores to actually work?
If you didn’t see my earlier post regarding the potential for using just-in-time techniques to reduce store footprint, here’s an excerpt that I’ve shared elsewhere:
So in our just in time model, the chicken and Coke would be placed in the selling area at 3:00 on Friday afternoon, and would be sold out by 8:00 Friday evening. Walmart could then use the space to sell stuff that people would buy late on Friday night. (Use your imagination.) Then, probably around noon on Saturday, they’d start putting the beer in the selling space. The same space would be reused over and over again to sell different stuff.
The stores need a much smaller footprint, due to continuous reuse and repurposing of the space within the stores.
I admitted that we probably weren’t ready for this today, since the economics of grocery delivery don’t support the frequent trips to the store that would be required.
The real life example is a company called Whole Foods. Perhaps you’ve heard of it. Before the Amazon acquisition, Whole Foods set out to reduce its back-of-store inventory. I didn’t account for this (which I should have, considering my familiarity with the Sears/Kmart allegations), but the Whole Foods theory was that if just-in-time practices were introduced, then warehouse deliveries could go straight to shelves, and not have to be held in freezers or bins in the back of the store. As Business Insider notes, the goal was to
help Whole Foods cut costs, better manage inventory, reduce waste, and clear out storage.
Of course, for the system to work properly, two things have to happen.
First, Whole Foods needs to be able to anticipate store demand. In my extremely simplified example in my prior post, I made some assumptions about when people would buy chicken and Coca Cola, and when they would buy beer. Whole Foods – especially since it’s now part of Amazon – would presumably have access to much better data.
Second, the delivery system needs to work. If the demand system anticipates a surge of product sales on Friday at 4pm, then that truck had better get to the store before that time.
In the case of Whole Foods, both assumptions failed.
…any unexpected increase in shopper demand or a product-shipment delay can result in out-of-stock items across every department, multiple employees said.
“If a truck breaks down and you don’t get a delivery, then you have empty shelves,” an assistant manager of a Chicago-area Whole Foods said.
An employee of a Texas Whole Foods store told Business Insider that stocking issues were “horrible” over the holidays and that the produce department “looked embarrassing.”
“I get constant and consistent complaints from customers for continuously being out of staple [products],” the Sacramento employee said. “It’s frustrating as an employee and also as a shopper.”
And if you go to the Business Insider post, you can see a ton of pictures of empty or near-empty Whole Foods shelves, many taken by angry customers.
But while Business Insider spent a lot of time diagnosing the problem, it didn’t suggest a solution. Even the article admits that the pre-JIT system led to overstocks in the back-of-store inventory, and spoilage of some of the food back there.
Hopefully Whole Foods and its corporate overlords are analyzing the supply issues, determining what is wrong with the ordering model, determining why some deliveries are delayed, and coming up with solutions to fix the whole thing.