Wal-mart Essay

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In 2003 Walmart became the world’s largest retailer and posted sales of $245 billion with net income of $8 billion. This amazing accomplishment came hard fought and was driven by the founder, Sam Walton. His relentless passion for storewide efficiency is legendary and his innovations throughout the supply chain were groundbreaking for the industry. Along with reducing costs over the entire business enterprise, Sam Walton pioneered new distribution and inventory systems. He then leveraged the inventory data collected to aggressively price Walmart products. Through his leadership, Walmart has presented itself as a value leader by keeping prices low and costs even lower. Since the first store opened in 1945 Walmart has used inventory management, cost cutting, and low prices to drive turnover and increase sales volume.
Walmart was an early adopter of Information Technology and has leveraged advances in that field to master inventory control, distribution and individual product availability. Early on, due to Walmart’s remote regional territory, they decided to build distribution centers as part of their infrastructure. Part of this strategy was to cut out the middlemen and deal directly with the suppliers. This radical idea reduced item costs by 3-4%. Walmart also created novel cross-docking techniques, which, in many cases, transferred cargo directly from long-haul carriers onto short-haul carriers without dwell time within the distribution centers. This innovation drastically reduced their inventory costs and helped increase inventory turns. Finally, in the mid-90s, Walmart had gone away from Sam Walton’s “buy American” campaign and began importing goods from China, which reduced the cost of goods by up to 20%.
In the early 1990s, Walmart upgraded its information-sharing module, Retail Link. This allowed Walmart and its supplier’s to see real-time inventory data, which made it possible to make quick and accurate manufacturing and inventory decisions. Retail Link helped Walmart reduce stock-outs and overstocking, a problem that affected 8% of items customers were looking to buy. The inventory data provided also aided Walmart’s suppliers by allowing them to schedule manufacturing and delivery more efficiently. In addition, Walmart squeezed many of their suppliers by making them carry the inventory costs until the product was sold. The transfer of these carrying costs had huge implications for Walmart’s bottom line. Walmart also provided a way for suppliers to optimize product layout in their stores with the introduction of MCAPS, the Modular Category Assortment Planning System. This tool allowed suppliers to analyze point-of-sale data, store traits, and 10 different consumer segments in order to customize product layout for individual stores on a month-by-month basis. These improvements allowed Walmart to offer a greater variety than their competitors and thereby capture new market segments.
Walmart aggressively expanded its number of stores as well as the segmentation of these stores by size and market. Before the late 1980’s, the Discount Store represented the majority of Walmart’s store type and overall revenue. In 1988, Walmart introduced the Supercenter that added food as part of its product offering. The Supercenter brought Walmart into the food business where it was able to remain profitable through its
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