Among consumer goods and services focused supply chains, Wal-Mart clearly warrants special attention. The global based retailer continues to provide clout and sheer scale of operations that any producer, manufacturer, direct competitor or supply chain cannot ignore.
This week, and for the first time ever, this retailer is hosting more than 500 manufacturers to spur more “Made in the USA” products that can be offered across Wal-Mart’s outlets. The retailer has committed upwards of $250 billion over the next ten years to support more domestic sourcing of products, and is one of very few companies with the clout and influence to make something happen in this area. Supply Chain Matters has previously complimented Wal-Mart on this initiative and we trust others will as-well. More on this topic in a later commentary.
Business media and indeed Supply Chain Matters have also called attention to troubling signs involving lagging sales growth in the U.S. along with other more visible issues. The retailer recently reported its fifth straight quarter of negative U.S. sales and reduced traffic.
For an in-depth perspective on what is really occurring behind the scenes, along with a renewed sense of urgency, we call reader attention to this week’s Wall Street Journal front-page article: Wal-Mart Looks to Grow By Getting Smaller. (paid subscription required)
This article specifically profiles the retailer’s new CEO, Doug McMillon, described as a “Wal-Mart lifer” and his uncharacteristically new efforts directed at altering prior Wal-Mart business models in favor of more innovative approaches. In essence, the WSJ concludes that McMillon is looking beyond a traditional short-term focus in a concerted two-fold effort to bring the retailer into the next century of retailing. These efforts have considerable supply chain and B2B business network implications in the months and years to come.
Described is a new sense of urgency instilled across the entire executive leadership team which includes increased piloting of new ideas. “For the first time in its history, Wal-Mart will open more smaller grocery and convenience-type stores than supercenters.” The WSJ cites internal sources as indicating that the retailer is evaluating plans to open free-standing liquor stores and adding more gasoline service stations in certain states. A test store near Denver allows shoppers to order groceries online and pick-up that order in a drive-thru. The notion of “everyday low prices” is giving way to “dynamic pricing” based on competitive market data.
In its latest fiscal year, the retailer plowed $500 million into its new online E-commerce business, including the addition of three new online fulfillment centers, and has plans to invest an additional $150 million in the current fiscal year. Last year, the retailer was cited as having the highest online sales growth, 30 percent compared to Amazon’s 20 percent gain. Wal-Mart now has upwards of $10 billion of total revenues coming from its online channels.
McMillon’s focus further remains on day-to-day operations of stores including smarter merchandising and in-stock inventory management along with cleaner stores. The article notes that at a recent annual meeting of store managers, an executive admonished store managers to take more active ownership of stores and clean-up their operations. If you have, as this author has, visited a Wal-Mart store of-late, you may have observed that stores are more disheveled with associates that exhibit a lack of caring about shoppers needs. Wal-Mart also has to come to grip with its ongoing labor management practices. The WSJ makes note that earlier in the year, the National Labor Relations Board accused the retailer of unlawful retaliation against workers who took part in protests over working conditions.
Our community can well relate to the fact that keeping shelves adequately stocked was the primary emphasis of Wal-Mart’s prior RFID item-tracking initiatives, which yielded minimal impact and continual resets.
Whether Wal-Mart will succeed in all tenets of its current two-fold business strategy is certainly fodder for added speculation and water cooler debate. However, the continued clout and influence of the retailer on the ultimate success of supply chain and demand fulfillment initiatives is unmistakable, and thus, cannot be ignored. As a participant in Wal-Mart’s supply chain, your organization will again be tasked with many short and longer-term initiatives in support of these parallel efforts.
Keep in mind what is going on behind the scenes as a giant retailer attempts to change its culture and business models to meet the realities of the new era of retailing and customer fulfillment.
© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.