Walmart Uses Inventory Data Collection Records to Defend Against Lawsuit

Meagan Douglas
Wed, Apr 10, 2013

Walmart will be using its inventory data collection records to defend itself against a former employee who is suing the company for wrongful termination, claiming that he was fired for not falsifying inventory data collection input as requested by superiors.

Sylvester Johnson, a former logistics and HR manager for Walmart, told The Nation earlier this month that he was terminated in part because he refused to alter store inventory records to make it seem like they were selling more goods than were actually sold. His lawsuit alleges that the practice was widespread in the company.

"We're talking about hiding tens or hundreds of millions of dollars in losses here - inflating the profits of a store, a district, a region, a division and ultimately the entire company," Johnson told The Nation. "In theory, such a practice could have artificially inflated the company's profit margins and stock price, amounting to a form of federal securities fraud."

Walmart firmly denies the allegation, telling The Nation that Johnson was let go because the company had concrete evidence he was violating their policies.

"Additionally, we have strict policies around inventory accounting, and the allegations Mr. Johnson have raised are completely false and unsubstantiated," company spokesperson Randy Hargrove told the news source. "In addition to Mr. Johnson, more than a dozen associates in his market were disciplined for failing to report the direction he gave them."

Although Johnson told The Nation that Walmart has an ingrained culture of tampering with its record keeping systems, Stephen A. Smith, a supply chain expert and a professor at Santa Clara University, said this is unlikely because the company is known for its stringent record keeping and state-of-the-art automated data collection software.

Automated Data Collection Software and Lawsuit Protection
While lawsuits such as one Walmart is now facing are rare, it is a scenario that companies should be prepared to meet by implementing automated data collection software.

Whether a company is facing an audit or a lawsuit, its records will be scrutinized. For example, the Washington state Department of Revenue requires businesses to turn over all electronic records and manually entered data during an audit. For a company that had previously implemented automated data collection software, this type of scenario would not be scary at all. Not only would all relevant information be easily accessible, but automated processes dramatically decrease the likelihood that the data was tampered with or altered in any fashion.

In addition, to best protect itself in the event of an audit or lawsuit, a company should have a comprehensive data collection system in place that provides complete oversight of both its own supplies and over its supply chain partners. That way, the actions of a partner will not inadvertently affect an organization's legal standing.

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