Walmart is an Americas number one company. What makes them so?
What makes Walmart become America’s number one company? America, “free enterprise” land has millions of companies in its market. The Houston metropolitan area, Texas actually has more than 600,000 businesses, most of which employ from 2 to 10 employees. When companies grow in the number of people they employ, the fewer companies that surround it. Most companies never grow beyond the size of the smallest group for various reasons. Some companies grow to be targeted competition or “models” in which smarter smart managers base their practice on achieving “best class” status in their industry or market. Walmart® has gained a position at the top of American business and global retail dominance.
Founded by a retailer named Sam Walton with his brother in 1962, Walmart® has become a company that is watched and copied in the 21st century. Walton, the “Ben Franklin” franchisee between 1945 and 1962 collaborating with his brother, Bud Walton, to find the first Walmart® in 1962 in rural Arkansas. Their strategy is simple. They opened discount merchandise stores in rural America where big businesses and big retailers usually ignored the “fly over” area. The strategy of mass purchasing power and providing savings to customers began to accelerate as the company grew which continued into the seventies and eighties.
When Walton was in stores in small cities with a population of between 5,000 and 25,000 he implemented his plan “To put large-sized shops into small towns with one horse that were ignored by everyone.” He thought that if they offered, “Prices are better or better than shops in cities that are four hours away by car … people will shop at home.” David Glass, CEO, explained, “We always push from the inside out. We never jump and then re-fill.”
Walton managed to instill a caring, small-town atmosphere in America’s number one company by indoctrinating “partners” in the idea that Walmart® “has his own way of doing things.” He is used to shopping for competitors like K-Mart and Target. He will count the number of vehicles in their parking lot and “measure their shelf space.”
Sam Walton believes the number one key to the company’s success lies in the way companies treat their “partners”. He felt that if he wanted his colleagues to take care of customers, then the employees had to know that the company was taking care of them. Do it for the foresight in the management of many company associations to get rich because the stock price continues to rise in value, changing every day individually to the rich. Walton did not recommend such wealth shows claiming that such behavior did not encourage the reason for the company’s existence, to take care of customers.
Walton described his management style as “Management by going around.” Walton said about managing that person, “You have to give responsibility to people, you have to trust and examine them.” This philosophy requires sharing information and numbers. The target is to empower employees, maintain technological excellence, and build loyalty within companies, customers and suppliers.
The free flow of information to coworkers gives the organization an actual and actual sense of ownership and allows them to exercise authority to continually improve their processes, especially their main institutional profit movers, supply chain management and process improvement. One of their main tools for managing their chain elements, inventory, is called “traiting.”
Traiting in the meaning of Walmart® is explained by Bradley and Ghemawat in their article as “A process that indexes the movement of products in stores to more than a thousand shops and market properties. Local store managers, use inventory and sales data, choose which products to display based on preference customers, and allocate shelf space for product categories according to the demand in their stores. Pairing inventory to demand store market demand is eliminated or at least reduces the need for advertised sales or “fire sales” that allow companies to make it the preferred place for customers to “low prices every day. “Walton and later Glass insisted on spending below the market average for advertisements equipped with a” satisfaction guarantee “policy to instill loyalty in buying customers.
Detention of costs causes customer loyalty. In the operations shop, Walmart®, in 1993 there was an average rental space of 30 basis points lower than competitors. The cost of erecting new stores is much lower than competitors of K-Mart and Target. Walmart® dedicates inventory space 15% less than the industry average, making it possible for square footage that is more dedicated to sales inventory. Square record sales are around $ 300 per foot compared to $209 and $147 for Target and K-Mart respectively. Stores tend to remain open more flexible than competitors, which also contributes to the higher number of sales per square meter.
The company organizes each store in 36 departments and department managers as stores within a store that runs each department. The company has surpassed K-Mart by installing a uniform product code (UPC) for electronic scanning equipment in 1988. The labor costs for individual label inventory were eliminated by installing rack tags instead. The company spent $700 million to connect shops with headquarters in Bentonville, Arkansas via satellite. Collecting and sharing sales and inventory information as such allows managers to determine slow-moving inventory and manage supply chains by reducing collision avoidance purchases and large discounts.
The company manages the distribution chain. They institutionalize “cross-docking” to reduce and minimize inventory in the warehouse. When a bound truck arrives at the warehouse, a truck tied out is parked right next to it or close and shipping is lowered from the truck in and transferred directly to the truck that is already out of bounds thereby eliminating the need to sit in stock. The method for starting when arriving contributes to Walmart® is almost one percentage point of sales costing less than competition for such costs.
Walmart® treats its distribution chain as a profit center and strategically places a warehouse or distribution point geographically where it can serve 150 stores and each truck that leaves the warehouse can serve or deliver on the same route to four adjacent stores. Distribution gives store managers various shipping options and night delivery.
Walmart® manages its vendor relationships in a well-known “no-nonsense” way. Unlike other retailers, especially department stores, buyers of Walmart® are not welcomed and sit in the buyer’s office. Sam will not like the arrogant presentation and image. They are only placed in empty spaces with tables and chairs. The company was sued administratively in 1992 when factory representatives began an unsuccessful process with the Federal Trade Commission. The company does not allow single vendors to account for more than 3% of purchases, more leverage is leveraged on the company.
Walmart® is a pioneer in sharing information and partnering with vendors. In conjunction with companies such as GE and Proctor and Gamble, they connect computers to display real-time sales and inventory product specific data so that the company can manage the delivery of their own supply chain. “They are expanding their electronic data exchange to include forecasting, planning, and shipping applications.”
In 1992, Fortune magazine included Walmart® as “one of the 100 best companies to work in America.” David Glass, CEO, claims “There is no superstar at Walmart®” that can beautify the team environment. He said, “We are a company of ordinary people who transgress.” The largest companies in the United States are not trade unions. Associates are trusted and treated as owners and information is shared and entrusted to them. Vendors comment on the loyalty and dedication of their partners.
Associates are encouraged and rewarded for brilliant ideas, which in many other companies will leave, not recognized or stolen by owners or managers who will steal credit. Stealing credit like that and canceling the party that deserves credit only serves to defeat colleagues and instill feelings of worthlessness. Walmart® does the opposite. Everyone is rewarded for profitability through contributing to the association’s profit sharing account. In 1993, Sam instituted the “Yes we can Sam” program for ideas and then “downplay incentive plans” to reduce theft and loss of inventory. This program allows Walmart® to remain at least 3 tenths of a percent lower than the industry average in slippage.
Sam and David were smart enough to realize that they couldn’t be in hundreds of stores all the time if at all so they decided to compensate each shop manager who could make more than one hundred thousand dollars each year. Companies offer the above incentive payments to reach and exceed profitability and forecast targets. The company offers health benefits to employees who work more than 28 hours each week and also provide productivity and profitability bonuses to workers who work every hour.
The strict boxing management named the successors to Sam Walton, David Glass and the company. He held a meeting on Friday morning where they shouted and shouted about the items being sold but before the meeting was postponed, the problem was resolved. Glass promoted the idea that “There is no hierarchy at Walmart® and that everyone’s ideas are counted and that there are no achievements that are too small.”
The company began diversifying its store mix in the early eighties by acquiring other chains and opening the Sam Club. The idea includes offering only a limited number of inventory storage units (SKUs). They finance inventory through debt and generate net income primarily by charging “members” for annual privileges to enter and shop at “Clubs.”
The cost of supplies at Sam’s Club has diminished because only 30% of the inventory has ever been shipped from Walmart®’s warehouse. 70% is sent directly from the vendor. Because inventory changes very often throughout the year, Sam’s Club really never pays inventory until it’s sold or even afterwards.
Now, Glass has been quoted as manager saying “That if they don’t think internationally, they work for the wrong company,” News Store Discounts, (June 1994). Furthermore, Glass mentioned to Business Week in 1992 that “You cannot replace Sam Walton, but he has prepared the company to run well whether he is here or not.”
Basically, Walmart® was founded by a man who was smart enough to realize that because he could not be anywhere to serve customers, he needed to create and maintain an atmosphere where the people who worked for him wanted to make money and serve customers. When he grew his company, he and his management staff constantly assessed the supply chain and thought about and pioneered ways that were often considered unorthodox that created better and better customer value and lowered the cost of giving customers what they wanted which was the goal of companies to start with not to mention why companies are paid. By encouraging the development of ideas from grassroots organizations, Walmart® has become the main retailer at the bottom of the price pole.