More challenges from Wal-Mart

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One good turn deserves another. Wal-Mart wants to sell more goods with less inventory, and that will put more pressure on the likes of Procter & Gamble Co. to speed up the supply chain. This is another Wal-Mart challenge for suppliers, but it will benefit consumers and the economy by removing inefficiencies from the retail ecosystem.

As Ad Age's Jack Neff reported last week, Wal-Mart hopes to slash inventory by $6.5 billion. That's equal to 20% of the goods Wal-Mart Stores had on shelves and in warehouses last January. It's also more than the total inventory of a fierce Wal-Mart rival, Target.

Wal-Mart's goal is daunting considering the efficiency of its existing distribution machine. In 1995, Wal-Mart turned over inventory five times. By last year, it had improved turnover to 7.8 times inventory.

Wal-Mart wants to have the right product on the shelf when the consumer is ready to buy, but it also wants goods to spend less time in distribution centers and stores. So it's pushing suppliers to speed up the conveyor belt.

It's a proven idea. Toyota presses suppliers to seek better ways to make and deliver parts for just-in-time manufacturing. Wal-Mart aims for just-in-time retailing-a theoretical "zero inventory" state-as another way for America's favorite store to offer more value.

Wal-Mart bashing is a popular sport, but no retailer has done more to deliver value to the masses. On this measure, it's hard to find a bigger consumer advocate than Wal-Mart. (That's one reason a Wal-Mart Bank could be the perfect consumer antidote to exorbitant banking fees.)

Wal-Mart uses its clout to get suppliers to follow its lead. But the company in the end appears to be a fair business partner that works with suppliers to meet the needs of consumers.

Smart suppliers can prosper. Wal-Mart's largest supplier, P&G, in March blamed "retailer de-stocking"-primarily at its largest customer-for a minor disappointment in sales growth. But P&G stock hit an all-time high the same month. There's money to be made selling at low prices, always.
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