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Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs . . . Is Yours? Michael Bergdahl, September 2011

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Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Automated Replenishment Inventory Turnover Vendor Partnership Cost Control Strategy Culture of Cost Controllers

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Page 1: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Wal-Mart is a Supply Chain Driven

Company Obsessed With Lowering Costs

. . . Is Yours?

Michael Bergdahl, September 2011

Page 2: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering

Costs . . . Is Yours?

Low Profit Business Model

In-Stock

Spoke and Hub Strategy

IT Infrastructure

Cross Docking Distribution Centers

Private Fleet Ownership

Page 3: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering

Costs . . . Is Yours?

Automated Replenishment

Inventory Turnover

Vendor Partnership

Cost Control Strategy

Culture of Cost Controllers

Page 4: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

2010 Sales = US418 billion

2010 Net Profit = 3.2%

Total Profit = US$13.4 billion

Supply Chain drives Walmart’s Low Margin Profitability Model

Page 5: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

120,000 products

60,000 Suppliers

8900 Stores

120 Distribution Centers

Supply Chain drives Walmart’s Low Margin Profitability Model

Page 6: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Out of stock is out of business

Supply Chain Goal = In-Stock

Page 7: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Walmart’s expansion strategy was controlled by its distribution strategy.

Spoke and Hub Strategy

Page 8: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Largest privately owned IT systems in the world

Page 9: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Cross-docking distribution centers

No Warehouses

Page 10: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

7000 privately owned truck fleet – largest in the USA

Page 11: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Automated Replenishment Automated Replenishment “Just in Time Inventory”“Just in Time Inventory”

Wal-Mart’s inventory turnover goal for suppliers is 100% every 60 days

Page 12: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

High velocity inventory turnover allows Walmart to

make money on money!

Walmart is Like a Bank . . .

Page 13: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Vendor Partnership

Wal-Mart cuts out the middleman . . .

Buys from the source!

Page 14: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Power of low priced products

Many small retailers purchase inventory for their stores from

Walmart’s shelves!

Page 15: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Wal-Mart’s relentless pursuit of low prices is:

one part controlling expenses and one part buying at the lowest prices.

Walmart passes expense savings along to its customers.

Cost Control Strategy

Page 16: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

The Wal-Mart Effect

Wal-Mart’s low grocery prices save USA families

of four US$3100 / yr

Page 17: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

You Can Save Your Way to Prosperity

Sam Walton was absolutely fanatical about controlling

expenses

Page 18: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Culture of Cost ControllersCulture of Cost ControllersOffice SuppliesOffice Supplies

Paper usagePaper usage

Overtime BudgetOvertime Budget

No Headcount Increases No Headcount Increases

Executive TravelExecutive Travel

Technology – Temperature of StoresTechnology – Temperature of Stores

Page 19: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

The Sam Walton Way Expense Control

Standards

Walmart gets its employees to manage expenses like they are

writing the check from their personal checking accounts.

Page 20: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Every time Wal-Mart spends a dollar foolishly,

it comes out of our customers' pockets.

Sam Walton

The Bottom Line:

Page 21: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Wal-Mart is a Supply Chain Driven

Company that also has retail stores!

Page 22: Wal-Mart is a Supply Chain Driven Company Obsessed With Lowering Costs... Is Yours? Michael Bergdahl, September 2011

Questions

?????????

Join My Walmart’s Best Practices LinkedIn Group @

www.michaelbergdahl.net