If you are reading this, you are likely already familiar with Walmart’s supplier portal, Retail Link, as well as the Decision Support System (DSS). What you might not be familiar with, however, is what Walmart expects from its suppliers and which insights can empower you to make the most of your Walmart business.
Walmart suppliers should be familiar with the concept of Gross Margin Return on Inventory Investment (GMROII), which helps suppliers generate more interest in their products. In this article, we detail how to measure GMROII in Retail Link using DSS.
In the retail world, there are three separate key performance indicators (KPIs):
Each metric involves several more minor metrics. However, since these metrics all feed into the same primary KPI and are all available on one Decision Support report, we are going to combine them into the first metric.
The first report all Walmart suppliers should be reviewing every week is the Supplier Performance Scorecard. This scorecard is a “same page thinking” document, highlighting all of the metrics that Walmart considers on the way to arriving at its ultimate performance indicator. The result of sales, profitability, and asset efficiency metrics is the Gross Margin Return on Inventory Investment or GMROII.
In its simplest form, GMROII is an indicator of how much money Walmart made, in gross margin dollars, for every dollar of a supplier’s inventory that Walmart owned at cost. GMROII combines sales volume, profitability, and asset efficiency. Let’s discuss each metric briefly and how they work together to arrive at your GMROII score.
The easiest to quantify, sales volume, is simply the total dollar sales to the Walmart consumer. This metric is not the supplier’s sales to Walmart; it is the register sales at Walmart stores.
Using Decision Support (or another retail analytics app), suppliers can measure their sales volume in reports as Year-over-Year or Week-over-Week. Suppliers may look at sales reports using fiscal years or calendar years.
Suppliers can use DSS to drill down into their vendor numbers. They can also compare online sales and in-store sales.
Several different metrics fall into the category of profitability. The two most important are Initial Margin percentage and Maintain Margin percentage.
Asset efficiency is often the most elusive metric for suppliers to conceptualize. Several metrics fall into the category of asset efficiency. Essentially, these metrics tell Walmart how efficiently Walmart is handling its assets (i.e., the supplier’s inventory).
This metric requires an ideal balance of inventory – not too much, not too little. Walmart strives to keep its shelves full, so it monitors a metric known as Replenishment Instock percentage. However, it also seeks to keep inventory costs down by monitoring metrics like Weeks of Supply and Unit Turns.
Unit Turns = Units Sold / Average Inventory at Walmart
The three metrics discussed above – sales, profitability, and asset efficiency – work together to form GMROII. Since GMROII combines these three metrics, it allows Walmart to identify items that might, for instance, have higher sales volume, but the sales might have occurred at a lower profit margin or less efficiently. For this reason, it is imperative that Walmart suppliers go well beyond simply reporting on product sales, concentrating on the end results of all of their efforts: GMROII.
Using SupplyPike’s Retail Intelligence app, you can quickly view your GMROII metrics via dashboards with actionable insights.
Measure sales volume using the Sales Comparison metric:
Retail Intelligence – Sales Comparison
Measure profitability using the Performance Report metric:
Retail Intelligence – Performance Report
View your assets’ efficiency using the Walmart Inventory metric:
Retail Intelligence – Walmart Inventory
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Tim has been in the Walmart supplier community for over 15 years. His expertise is in Consulting, Business Analytics, and Retail Link for Walmart suppliers.Visit their Website ➝