WalMart's radical plan to cut inventory

Filed in archive Market Overview on June 12, 2006

I have already written about the effect of WalMart's current supply chain strategy on it's suppliers. Yesterday, I read a piece in the US News which was looking at this issue from another point of view:

Coca-Cola sells a lot of Coke, and quickly. Its athletic drink, Powerade, doesn't do as well. So Wal-Mart says it wants the soft drink shipped directly to stores and the athletic drink shipped to warehouses.

Sounds simple, right? It's part of a new push by Wal-Mart to cut $6.5 billion in inventory, and thus costs--an effort that has already paid off with increased profits in the company's most recent quarter. But the risk to Wal-Mart of cutting inventories is that Mom goes to buy Pampers, and they're out of stock. "Wal-Mart no longer carries the safety stock.

Do you think it's a threat?