America, the land of “free enterprise” has millions of companies in its market. The metropolitan statistical district of Houston, Texas actually has more than 600,000 companies, most of which employ 2 to 10 employees. As companies grow in the number of people they employ, the number of businesses around them decreases. Most companies do not grow beyond the size of the smaller group for many reasons. Some companies grow to be the target of competition or the “model” on which the smarter and smarter managers build their practices to achieve the “best class” in their industry or market. Wal * Mart has definitely gained its place at the top of the US business and global retail dominance.
Founded by a retailer named Sam Walton with his brother in 1962, Wal * Mart has become that company to watch and emulate in the 21st century. Walton, a “Ben Franklin” franchise holder between 1945 and 1962, teamed up with his brother, Bud Walton, to establish the first Wal * Mart store in 1962 in rural Arkansas. Their strategy was simple. They have opened discount stores in rural America where big business and big retailers have often ignored the “fly over” areas. The strategy of group buying power and passing savings to customers began on a flying journey as the company grew steadily in the 1970s and 1980s.
When Walton set up stores in small towns of 5,000 to 25,000 inhabitants, he carried out his plan to “place supermarkets in small towns with a single horse that everyone would ignore.” He believed that if they offered, “prices are good or better than the stores in cities within a four-hour drive … people will shop at home.” David Glass, CEO, explained, “We always push inside out. We never jump in and fill in again.”
Walton instilled a friendly, caring atmosphere in the small town of No.1 in America by indoctrinating “associates” with the idea that Walmart “has its own way of doing things.” He used to shop on competitors like K-Mart and Target. He was counting the number of vehicles in their parking lots and “measuring their rack space.”
Sam Walton believes the first key to a company’s success lies in the way the company treats its “partners”. He felt that if he wanted his partners to care about customers, colleagues should know that the company was taking care of them. Do his farsightedness in managing people, many partners have become wealthy as the share price has continued to climb to a value that turns ordinary individuals into the wealthy. Walton discouraged such displays of wealth claiming that such behavior does not reinforce the company’s raison d’être, to take care of the client.
Walton described his management style as “managing by wandering”. Of managing people, Walton said, “You have to give people the responsibility, you have to trust them, and you have to check them.” This philosophy requires the sharing of information and numbers. The aim was to empower colleagues, maintain technological superiority and build loyalty among partners, customers, and suppliers.
The free flow of information to the fellows gave the fellows a real and real sense of ownership of the organization and allowed them to exercise authority to continuously improve their operations, especially the key corporate profit engine, supply chain management and process improvement. One of the main tools for managing an element of their chain, inventory, is called “attributes.”
Bradley and Trait Clouds describe the Walmart Concept in their article as “the process of indexing product movements in store for more than a thousand store and market attributes. The local store manager, using inventory and sales data, chose which products to display based on customer preferences, and the shelf space allocated to a product category according to demand In his or her store. Pairing the inventory to a specific store’s market demand eliminated or at least alleviated the need for advertised sales or “fire sales” allowing it to be described as the customers’ favorite place for “everyday low prices.” Walton and Glass later insisted on spending less than The average market for advertising complements the “Satisfaction Guarantee” policy to instill customer loyalty on purchase.
Cost containment caused customer loyalty. In store operations, Walmart in 1993 incurred rental space on average 30 basis points less than its competitors. The construction costs for the new store were significantly lower than competitors K-Mart and Target. Wal * Mart has allocated 15% less inventory space than the industry average, allowing more space for sales inventory. Square footage sales were about $ 300 per foot compared to $ 209 target and $ 147 for Target and Keymart, respectively. Stores tend to remain open more flexibly than competitors, which has also contributed to higher sales figures per square foot.
The company organized each store into 36 divisions, and a department manager was as a store within a store managing each department. The company outperformed K-Mart by installing Electronic Standardized Product Code (UPC) scanning equipment in 1988. The labor expense of individually labeling inventory was eliminated by installing shelf tags instead. The company spent $ 700 million linking stores to the headquarters in Bentonville, Arkansas via satellite. Collecting and sharing this sales and inventory information allowed managers to identify slow-moving inventory and manage the supply chain by minimizing purchases and avoiding information accumulation and deep discounting.
The company runs the distribution chain. They put in place a “cross-dock” to reduce and reduce the stock in the warehouse. When the inside truck arrives at the warehouse, the outbound truck is stopped directly next to it or closed and the cargos are unloaded from the inside truck and transported directly to the out truck eliminating the need to sit in the stock. The way it was transported upon its arrival reduced Wal * Mart’s cost of sales by nearly one percent over the competition for comparable costs.
Wal * Mart treated its distribution chain as a profit center as well by strategically locating a warehouse or geographic distribution point where it could serve 150 stores and every truck leaving the warehouse could serve or advance on the same route to four adjacent stores. The distribution gave store managers different delivery options as well as overnight deliveries.
Wal * Mart manages vendor relationships in a known “no-nonsense” manner. Unlike other retailers and especially supermarkets, Walmart subscribers are neither welcome nor seated at the buyers office. Sam didn’t prefer this arrogant show and photo. It is simply placed in a bare room with a table and chairs. The company was administratively sued in 1992 when representatives of the manufacturers began unsuccessful proceedings with the Federal Trade Commission. The company did not allow a single supplier to account for more than 3% of purchases thus enhancing the leverage they wield over the companies.
Wal * Mart is a leader in sharing information and partnering with vendors. In their relationship with companies like GE, Proctor, and Gamble, they linked computers to show real-time sales and product data for inventory so these companies could manage the delivery of their supply chain. “They expanded the electronic data exchange to include forecasting, planning and shipping applications.”
In 1992, Fortune rated Wal * Mart as “one of the 100 Best Companies to Do in America”. David Glass, CEO, says, “There are no superstars at Wal * Mart” who could beautify the team environment. He said, “We are a company of ordinary people who get too accomplished.” The largest corporation in the United States is non-union. Shareholders are trusted, treated like owners, and information is shared and attributed to them. Sellers comment on the loyalty and dedication of their partners.
Colleagues are encouraged and rewarded for bright ideas, which may go into many other businesses or not be recognized or be stolen by owners or managers who may steal credit. Stealing such credit and emptying the appropriate party of credit only serves to defeat colleagues and instill a sense of worthlessness. Wal * Mart does the exact opposite. Everyone is rewarded for profitability through contributions to the partners’ profit sharing account. In 1993, Sam established his “Yes We Can Sam” ideas program and then “Reduce the Incentive Scheme” to reduce theft and loss of inventory. The program allowed Wal * Mart to remain at least 3-tenths of a percentage below the industry average in slipping.
Sam and David were smart enough to realize that they couldn’t be in hundreds of stores all the time if they ever decided to appropriately compensate every store manager who could earn in excess of one hundred thousand dollars a year. The company offers incentive salaries at the top to reach and exceed expected profitability and goals. The company offered health benefits to an employee who worked more than 28 hours per week, and it also awards productivity and profitability bonuses to those hourly workers.
The names of the tight management are the names of the successors of Sam Walton, David Glass and his company. Holds weekly meetings on Friday mornings where they shout and shout about the individual items sold but before the meeting goes up the issues are resolved. Glass promotes the idea that “there is no hierarchy at Wal * mart that everyone’s ideas matter and that no accomplishment is too small.”
The company began diversifying its assortment of stores in the early 1980s by acquiring other chains and opening Sam’s clubs. The idea involved introducing only a limited number of SKUs. They funded inventory through accounts payable and generated the net income mainly by charging “members” on the annual franchise to enter and shop in “the club”.
Sam’s Clubs inventory costs have been reduced further since only 30% of inventory was shipped from Wal * Mart’s warehouse. 70% sent directly from the seller. Since the stock was turned over frequently during the year, Sam’s Clubs didn’t really pay for the stock until or until after it was sold out.
Now, Glass is quoted as telling managers, “If they didn’t think internationally, they’d been working for the wrong company,” Discount Store News, (June 1994). Furthermore, Glass stated to Business Week in 1992 that “you can’t replace Sam Walton, but he has prepared the company to do well whether he’s here or not.”
Basically, Wal * Mart was founded by a guy who was smart enough to realize that since he can’t be ubiquitous to serve customers, he needs to create and maintain an atmosphere where the people who worked with him want to make money and serve customers. While he was growing the company, he and his administrative staff continually evaluated the supply chain and pioneered and enacted many unconventional ways that created better and better value for customers and reduced the cost of giving the customer what he wanted, which was the purpose of the company to start with not to mention why the company paid. By encouraging the cultivation of ideas from the grassroots of the organization, Wal * Mart became the # 1 retailer at the bottom of the price column.
This author recommends that Wal * Mart management looks to diversify in-store by adding more of what it already does well, adding to the life experience cheaply in-store. Other extra services can be added to any unprofitable square footage like barbershop, dentists, etc …