Rolling Back the Walmart Way

Tags: Retail, Distribution, Supply Chain Management, Global Logistics

A Walmart associate stocks inventory on warehouse shelves

As Walmart continues to evolve from five-and-dime regional retailer to global powerhouse, Kevin X. Jones stays focused on supply chain best practices that guarantee the consumer everyday low pricing.

At his office in Walmart's Bentonville, Ark., headquarters, Kevin X. Jones demonstrates the straightforwardness one might expect from an engineering graduate of the U.S. Military Academy who served 22 years of active duty as Major in the Field Artillery branch of the U.S. Army. Jones' attitude reflects the retailer's focus on a single goal: giving customers what they want at an everyday low price.

"Everything we do is in the spirit of serving the customer," explains Jones. "As an everyday low-cost provider, the supply chain—especially transportation—is an important part of that model. Our focus is on ensuring we infuse low cost into a productivity loop that allows the company to progress."

Walmart's corporate culture plays a big part in achieving this goal. The company encourages an entrepreneurial spirit from the lowest levels all the way to the top. Associates are committed to a model and mission that founder Sam Walton and his family nurtured from a five-and-dime store into a $470-billion retailing juggernaut.

This commitment transcends the organization. While the retailer is often criticized for putting mom-and-pop shops out of business with its low-cost mantra, Walmart turned the tables on detractors by pledging $250 billion over the next decade to source more goods from American companies while incentivizing manufacturers to bring production back home.

Walmart has also guaranteed jobs to honorably discharged U.S. military veterans in their first year off active duty. The company projects it will hire more than 100,000 U.S. military vets over the next several years.

In addition, Walmart aspires to fulfill 100 percent of its energy needs from renewable sources. In May 2014, the company announced it will double the number of on-site solar energy projects at its U.S. stores, Sam's Clubs, and distribution centers by 2020.

The retailer operates six different store formats in the United States: Supercenters, Express stores, Neighborhood Markets, On Campus shops, Sam's Club, and its most recent endeavor, Walmart To Go, a Bentonville pilot store opened in March 2014. One unique aspect of the gas station/convenience store format is local flavor. As Walmart rolls out this new format across the country, it plans to feature products from local businesses, such as butcher shops and florists, in addition to the banks of gas pumps.

Even as Walmart looks to encourage more U.S. production, the greater expansion potential is in global markets where it can sell. The retailer operates more than 10,000 retail units under 71 banners in 27 countries, employing 900,000 workers. In addition to branded operations around the world, Asda, a UK subsidiary; and Japanese supermarket chain Seiyu are strong players in their respective countries. Walmart also claims a controlling stake in Massmart Holdings, a South African retail conglomerate that is quickly growing across the continent.

Inbound Logistics recently paid a visit to Kevin X. Jones' Bentonville office to discuss how Walmart continues to innovate while inspiring associates and supply chain practitioners alike.

Q: Walmart's 'Made In America' campaign attracted a lot of publicity. How are you partnering with suppliers to make this campaign a reality?

A: Our supply chain and transportation team works with merchants and vendors to help them actualize the plan. We help community leaders, manufacturers, and retailers understand how they can cut costs by nearshoring. It's exciting because we're providing customers with great products made in America, as well as creating jobs in local communities.

Q: There is no shortage of Walmart stores to sell American-made products, and you continue to introduce new retail formats. The Walmart To Go and On Campus university shops are recent examples. How do smaller formats complicate the way you manage and allocate inventory?

A: Serving low-volume stores as opposed to Supercenters poses some supply chain challenges. We used to provide cases to Supercenters, but we now deliver pallets to Sam's Clubs and 'eaches' to smaller formats. The Walmart to Go and On Campus stores are tethered to larger centers that service those locations.

Tethering is a concept where one store—a Supercenter, for example—can quickly replenish inventory to multiple smaller formats in the area. In effect, the larger store becomes a quasi distribution center, delivering greater product assortments to these other locations.

The key is flexibility. To determine the optimal processes, we create supply chain best practices, benchmark with outside industries, and deploy pilot programs. We serve some of our smaller stores with smaller trucks. We play out all these scenarios, then pick the best, most efficient solutions. Determining the best way to serve multiple formats remains an ongoing battle.

Q: Brick-and-mortar retailers are starting to leverage their many locations to offer new last-mile options and better serve customers. How is Walmart capitalizing on this exposure?

A: Having more than 4,500 stores in the United States is a competitive advantage in merging with e-commerce. We operate our stores to deliver what's best for the consumer's unique schedule and lifestyle. We ship from stores that are closer and more efficient for the customer. We offer the option to order online and pick up at the store the same day. And, while we don't provide the same breadth of assortment in stores as we do online, the opportunity exists for us to ship to stores for pickup.

Q: Omni-channel strategies are more developed in areas of the world where space constraints, infrastructure and last-mile complexity, and labor utilization warrant the use of different approaches. How are you leveraging Walmart's global presence to adopt new best practices?

A: Operating in 27 countries gives us the opportunity to take the best from every location. We import and export ideas. For example, we've used our Asda chain in Great Britain to better understand omni-channel retailing, because they service customers differently. We take the best of what's available around the world, then execute it in local countries and markets. We benchmark globally.

For example, look at how we ship product across the world. In the United States we're fortunate, because a lot of product is made here. But some countries don't have domestic markets—they rely on imports.

We've learned from these countries how to better import products. For examples, apples are produced all over the world, but growers are concentrated in Washington. We buy apples in bulk, then ship them internationally. We've learned how to optimize that process by following the example of countries that rely on imports.

This ties into Walmart's culture. Sam Walton's biography, Made in America, relates stories of how he would visit a competitor, then ask his team afterwards what they noticed. Invariably, they cited what the store was doing wrong. Walton, in turn, was quick to point out the competitor's good ideas. You can learn something from anyone if you're open to it.

Q: How is demand-driven logistics expressed across Walmart's supply chain?

A: A large percentage of our freight is collect, which gives us control. We look to convert as much prepaid freight to collect as possible, because it gives us an advantage—we then control the supply chain. We're further along in our general merchandise business than grocery, but we're making progress there, too.

The focus is on bringing as much in-house as we can. Walmart has such huge volumes that we can control efficiencies by buying transport at scale, as opposed to eaches.

Q: You mentioned Walmart's different product categories. How do you find or create transportation synergies across these unique businesses?

A: We rely on our carrier partners. Strategically, we put all of our lanes out to bid every year. We recently began talking to carriers more about portfolio management rather than just one silo. We ask carriers to think about their business broadly across our organization. That breeds efficiency.

This kind of communication allows us to have one partner that primarily handles temperature-controlled freight, but might also delve into dry goods. Or, we might have a dedicated carrier that also hauls some private fleet freight. We're moving to a scenario where a truck is a truck—and it's a resource. If it's a resource for the company, we want to use it to reduce cost. As we continue to integrate all the different modes—less-than-truckload, small package, truckload, intermodal—we're trying to get partners to think strategically.

Q: The most striking feature of Walmart's 1.2-million-square-foot Bentonville DC isn't its size, but the tenure of its associates, many of whom have worked for the company for more than 20 years. Even on the retail side, Walmart is committed to developing and retaining talent—about 75 percent of its store management teams began as hourly associates. Because associates are so important to Walmart's corporate culture and mission, what do you look for when recruiting the next generation of supply chain talent?

A: We believe that depth of experience is important—but breadth plays a part as well. I'll use myself as an example. I started at Walmart 15 years ago in outbound transportation, which is the private fleet component, handling shipments from distribution centers to stores. After that, I spent a few years in human resources, then warehouse operations. Now I'm in inbound transportation, managing the supplier-to-distribution center segment of the supply chain.

When employees have an opportunity to participate in various segments of the business, their decision-making is better informed. They aren't making decisions in a vacuum. They solve problems for the entire organization, as opposed to fixing problems in one area and passing them along to another.

Compared to 15 years ago, we're doing a better recruiting job. We partner with schools that have supply chain programs, and provide internships and employment offers. We even collaborate with schools that don't have programs, and help them develop curriculum.

I'm also biased toward veterans. Even though you can't singlesource one recruitment mode, Walmart has always been a strong supporter of hiring former military personnel. The work we've done the past few years to provide jobs and employment for our veterans is outstanding. It's the thing I'm most proud of about working for Walmart.

We recognize that every veteran doesn't want to be in retail. Our message is: If you want to be in retail, you have a place at Walmart.

Q: That's a powerful message not only to veterans, but also to other employees. What is Walmart's turnover?

A: Turnover is in the single digits. We hire employees, and we retain them through our culture, and the way we engage them in the business. That's our focus.

I come from the military, where we always talk about taking care of our soldiers. At Walmart, we talk about taking care of our associates. That means empowering associates so they can do their jobs better.

Sam Walton's late wife, Miss Helen, said it best: "It's not what you gather, it's what you scatter."