For many years, I had associated Whole Foods’ inventory with innovative and high quality products. However, recently I realized this widely sought inventory is lacking in its availability and volume. I had believed that Whole Foods inventory shortages were specific to the time of day I shop for groceries or perhaps specific to the location where I shop. I believed that this was the fault of the notorious acquisition of Whole Foods by its new parent, Amazon. Little did I know, this shortage is observed by Whole Foods customers and employees nationwide. It also turns out that the origin of the apparent shortage predates Amazon’s acquisition of our beloved Whole Foods.
Many customers are blaming Amazon while others suggest that the shortage is a result of heightened traffic and the increasing popularity of the organic foods retailer. Whole Foods employees, however, insist that supply-chain bottlenecks are a result of an inventory management system implemented at the retailer several months prior to Amazon’s acquisition in 2017.
Whole Food’s new inventory system, Order-to-Shelf (OTS), was implemented to optimize inventory levels, lower costs and reduce spoilage. The retailer also hopes that employee efforts will shift from inventory management to customer service as a result of the system’s efficiencies. Many Whole Foods employees, however, have found the reality on the ground is in contrast with the corporation’s anticipated results from the implementation of OTS. Although they acknowledge that spoilage has been significantly reduced, employees are outspoken about the system’s inefficiencies and the lack of stock which they claim is a byproduct of OTS.
So what is OTS?
OTS is a centralized inventory management system backed by a strict and extensive set of rules which are meant to encourage optimal purchasing, turnover and display of stock. This system, which essentially calls for vendors to supply low volumes of inventory frequently, has become incredibly bureaucratic. It is further supplemented by scorecards and on-the-spot tests where employees and retail locations have points deducted for miniscule mishandlings of inventory and paperwork. In short, it is a “crossing your t’s and dotting your i’s” type of system, which has led to employees disgruntlement, resignations and dismissals throughout the corporate chain.
Although OTS is blamed for empty shelves, Whole Foods corporate management is in support of the system’s implementation and intends to continue its embrace. The system does have its benefits, which include lower levels of waste and spoilage and general cost savings. A major concern for consumers, however, is still the lack of available stock.
It will be interesting to see how these concerns are mitigated by Whole Foods, especially as Amazon’s free 2-hour grocery delivery service (dubbed Amazon Fresh) becomes increasingly popular and increases demand for Whole Foods inventory.
Elad Menna, CPA, is a manager in GHJ’s Audit and Assurance Practice with over seven years of accounting experience and specializes in assurance services for food and beverage and manufacturing clients. Elad also services clients within the technology (SaaS), media and entertainment and nonprofit…Learn More
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