Walter store
Walter grew in large part by leveraging Information systems to an extent never before seen In the retail Industry. Technology tightly coordinates the Walter value chain from tip to tail, while these systems also deliver a amenable data asset that is unmatched in U. S. Retail.
Tight inventory management is legendary at Walter through its just-in-time techniques that allow the firm to boast one of the best supply chains in the world. Walter has not only transformed its own supply chain, but also influenced how vendors throughout the world operate because the company has the economic clout to request changes from Its vendor partners and to receive them.
Pioneered the strategy of achieving high levels of growth and profitability through its precision control of manufacturing, inventory, and distribution.
Although the company is not unique in this regard, it is by far the most successful and most influential corporation of its kind and has put into practice various innovative techniques. To get a sense of the firm’s overall efficiencies, at the end of the prior aced a study found that Walter was responsible for some 12% of the productivity games the entire U. S. Economy. GOALS AND OBJECTIVES When Walter does something, it does it on a massive scale.
Walter’s computer system, for example, is second only to that of the Pentagon in storage capacity. Its information systems analyze more than 10 million daily transactions from point-of- sale data and distribute their analysis in real time both internally to its managers and externally via a satellite network to Walter’s many suppliers, who use the information for their production planning and order shipment. Much of the popularity of supply chain management has been attributed to the success of Walter’s partnership with Procter & Gamble (P&G).
During the asses, the two collaborated in building one of the first Collaborative Planning, Forecasting, and Replenishment (CPRM) systems, a software system that linked P&G to Walter’s distribution centers, taking advantage of advances in the world’s telecommunications infrastructure. When a Walter store sold a particular P&G item, the information flowed directly to P&G’s planning and control systems. When the inventory level of P’s products at Walter’s distribution center got to the point where it needed to reorder, the system automatically alerted P to ship more products.
This information helped P plan its production. Walter was also able to track when a P shipment arrived at one of its distribution warehouses, which enabled it to coordinate its own outbound shipments to stores. Both Walter and P realized savings from the better inventory management and order processing, savings that in turn were passed on to Walter’s consumers through its everyday low prices. Should we move this content somewhere else or leave it here? KEY ISSUES Walter has pioneered many innovations in the purchase and distribution processes f the products it sells.
Over 20 years ago, Walter drove the adoption of Universal Product Code (PUC) bar codes throughout the retail industry; it also pioneered the use of Electronic Data Interchange (DEED’) for computerized ordering from vendors.
Its hub-and-spoke distribution network ensures goods are brought to distribution centers around the country and then directed outward to thousands of stores, each of which is within a days travel. Through the use of cross-docking, one of its best- known innovations, half the goods trucked to a distribution center from suppliers ship to stores within 24 hours.
The other half, called “pull stock,” is stored at the distribution center until needed at stores. In addition, Walter uses a dedicated fleet of trucks to ship goods from warehouses to stores in less than 48 hours, as well as to replenish store inventories about twice a week. Thus, with flow-through logistics, the company speeds the movement of goods from its distribution centers to its retail stores around the world.
Today the retail giant continues to push the supply chain toward greater and greater efficiency, proportioning customer needs while employing new technologies and greener practices.
One of the early adopters of Hahn, Walter discovered the value of balancing vision with technology maturity levels after mandating its suppliers apply RIFF tags to crates and pallets bound for its stores. Some companies thrived using the new technology. Others, including Walter itself, ran into trouble. At the time of the mandate, RIFF technology was in its infancy, and costs for planning, hardware, software, and training were prohibitive for many suppliers. Additionally the technology was new enough that the industry lacked best practices for implementation.
Indeed, it lacked any examples that might help newcomers avoid pitfalls. Walter repealed its edict, but continues to probe the usefulness of the technology. In response to criticism from consumer groups, Walter tackled environmental sustainability in its supply chain and, as is frequently the case because of the company’s size, became a trendsetter for other retailers. After vowing to reduce its greenhouse gas emissions by the equivalent of taking nearly 4 million cars off the roads for a year, Walter directed its suppliers to think green throughout the full product lifestyle.
Suppliers are required to pay for sustainability efforts, a price most suppliers accept willingly to retain their allegations with Walter. Many also recognize that reducing energy use will benefit them as energy costs rise.
Harnessing energy, increasing recycling, reducing waste, and minimizing packaging and transportation all reduce cost in the supply chain in addition to appealing to today’s consumers and preserving global resources. In a third innovation, Walter is consolidating its global sourcing.
The new model focuses on increasing the percentage of products purchased directly from suppliers and buying from global merchandising centers rather than through individual countries. Third-party procurement providers, who previously enjoyed a substantial business from the retail giant, will find themselves increasingly bypassed in the supply chain. In addition to eliminating the cost off middleman, this effort may give Walter increased control over inbound freight.
Better control, in turn, can lower inventory costs.
Thus Walter’s continuous use of innovations leads to lower inventory and operating costs, which enables Walter to keep its lean costs. EXTERNAL ANALYSIS The external factors surrounding Walter are important to discuss in order to better understand their impact on their stock price. Many external factors play a role in the price of stocks, therefore it is imperative to evaluate external factors continuously, and adjust internal factors to mitigate any negative implications. Economy According to Exhibit 5, Walter experienced extreme growth in stock price from 2003 to 2007.
With the economic crisis in 2008, Walter stock prices plummeted.
Beginning in 2009, the Walter stock price slowly began to rise and fall periodically. Exhibit 5 shows a slow growth over a period of 3 years from 2009 to 2012 Monsoon & Mark, 2013, p. 23). Customer Behavior Sam Walton founded Walter stores to be “big box” discount centers. He envisioned having the lowest prices steadily, such as Walter’s slogan “Save Money.
Live Better” and “Everyday Low Prices. Guaranteed” (Walter, 2014). Customers bought into the Walter idea, helping it become the number one retailer in the world Monsoon ; Mark, 2013, p. 2). Technology Walter has certainly taken advantage of cutting edge technology.
Walter has systems, Retail Link, online purchasing options, and Project One Touch.
Each piece of technology was designed and implemented to increase productivity, increase sales, and decrease labor costs. As the largest retailer in the world, Walter must remain advanced in their use of technology to continue to meet the needs along the supply chain and their customers. Politics ; Legal Aspects It is well known that Walter has faced many political and legal actions in the past. As with any major corporation, politics and legal concerns are always at the forefront of maintaining a good global reputation.
From taxes to lawsuits, Walter must remain attentive to changes in laws, taxes, and more, not only in the United States, but globally.
INTERNAL ANALYSIS Walter’s supply chain is known to be a key enabler of growth for the company, and n advantage against competitors Monsoon & Mark, 2013, p. 3). Walter has implemented key processes throughout its supply chain which have made Walter the largest retailer in the world. Furthermore, Walter’s unique internal factors play a critical role in managing Walter stock to compensate, if possible, for any negative external factors.
It is imperative that we discuss and analyze the internal factors, strengths, and weakness in order to make sound financial decisions.
Company Culture Walter’s culture says it all in their slogan, “Save Money. Live Better” (Walter, 2014). Walter aims to have everyday low prices that save people money by implementing IDLE, which adjusts the retail price to optimize gross margins. This is a broad strategy practiced by many retailers Monsoon & Mark, 2013, p. 3).
They lend the idea that saving money means you will live better.
They aim to reach various audiences through several of their different stores such as superstores, supermarkets, grocery stores, and wholesale outlets; but the message is the same: “We’re committed to providing low prices every day. On everything. So if you find a lower advertised price on an identical product, tell us and we’ll match it. Right at the register” (Walter Corporate, AAA). Furthermore, Walter attempts to provide a “community-like” store, by carrying products that community purchases most.
Operations Walter’s store network is more than 10,000 retail centers strong in 27 countries, with more than 2. Million employees globally (Walter, 24th). All stores are simple in furnishings, and use standard materials to reduce costs. Additionally, light and temperature settings in all U. S. Stores are controlled centrally from Bonneville, AR Monsoon ; Mark, 2013, p.
6). This allows for Walter to have low operational costs. Purchasing ; Suppliers Walter worked to cut out the middleman in many of its processes. When it came to purchasing, Walter did not use wholesalers or distributes, but rather worked direct with suppliers to ensure correct amount of product was carried in stores.
Suppliers for Walter vary across the globe. With more than 40,000 suppliers, Walter was a major customer which gave them dedicated full-time supplier employees working to support their business (Walter Corporate, 24th).
Walter’s unique agreements with suppliers give them a competitive edge in the market. According to the Ken Mark, “Walter insisted on a single invoice price and did not . 4). Furthermore, Walter conducted field intelligence on stores to better understand individual stores, stock, sales, and more.
Inventory Walter procured private merchandise, not available elsewhere, which is appealing to customers. Walter’s stated strategy was to be a “house of brands,” procuring top brands in volume and selling them at low prices” (Walter Corporate, 24th).
Logistics According to the author, Walter’s distribution strategy is a significant aspect along the supply chain. Walter developed stores within short distances of one another, saturating the market around a central distribution center. Furthermore, Walter stores were located in low-rent, suburban areas close to major transportation systems.
This enabled Walter to be close to its distribution centers, reducing transportation costs, and time. Walter’s logistics team is more than 75,000 people, and with the largest private truck fleet of any firm Monsoon & Mark, 2013, p. 5).
Walter’s private truck fleet is truly one of the most influential aspects of their logistics system. This key piece enables Walter to deliver quickly and efficiently. Walter’s trucks also generate “backchat” revenue by transporting unsold richness on trucks, as well as serving as a “for-hire” carrier to generate additional dollars (Johnson & Mark, 2013, p. ).
Many of Walter’s suppliers maintained offices in Bonneville (Walter’s headquarters city) and analysts and managers who worked in these offices were supporting Walter’s business.
Walter’s strategy was to provide top brands at low prices. Walter having a great deal of power over its suppliers. Walter requires that suppliers accept payment entirely on their terms and that supplier share information on products beginning at the raw materials stage, Walter also controls with whom the suppliers speak and how and where they sell their goods Monsoon & Mark, 2013).
Distribution Having the largest private truck fleet of any firm (being able to control shipping and receiving). Some of the Walter private trucks also used ship “collect,” which means that the Walter owned truck would pick up goods directly from the supplier and deliver to Walter’s stores. Walter’s private fleet also generated revenue by “backchat,” which is transporting unsold merchandise, on a truck that would normally be empty.
This additional business avenue for Walter generated $1 billion per year Monsoon & Mark, 2013).
Store Network Walter stores aimed to be the “store of the community’ tailoring their store reduces to consist of items that are liked by the customers of that particular geographic community. It was stated in the Mark Monsoon & 2013, p. 6) case that “most other retailers made purchasing decisions at the district or regional level. ” The Every Day Low Price (IDLE) policy allowed Walter to channel the savings from not needing to advertise to price reductions for store goods.
To further increase customer demand Walter also worked with suppliers on price rollback campaigns, which are campaigns that had specific products on sale in addition to their everyday low prices.
Associates had authority to manually input orders or override impending deliveries based on store level information systems Monsoon & Mark, 2013, p. 7). Walter invested in a central database, a store level point of sale system, and a satellite network, allowing the company to improve on forecasting and come close to accuracy for sale items Monsoon & Mark, 2013, p. ). Retail Link, developed by Walter was the second to largest internet database. Walter’s suppliers had access to real-time sales data for their products in Walter’s stores.
Radio Frequency inbound, in stores or in distribution centers. The RIFF tags have saved an estimated $500 million a year for Walter Monsoon & Mark, 2013, p. 9). Walter has many strengths that have allowed the firm to grow at alarming speeds and allow many people to become loyal customers to the Walter franchise.
Most of Walter’s strengths are involved in their supply chain management that has created a strong foundation for the brand and has helped achieve a high sales total of 418,952 in year 2011 as seen in Exhibit 3 Monsoon ; Mark, 2013, p.
17) outranking many of Walter’s competitors. Many of the strengths of Walter have created major savings for the rim and also increase effectiveness and efficiency. It also removes many supply chain issues similar to bull-whip effect, and unknown distribution deliveries of products.
Walter’s supply chain strategies were sustainable for many years by using a centralized database, retail link, RIFF, tailoring store items to their neighboring community, and using a “backchat” function for their private trucks, however Walter will need to reduce waste in their high volume inventory purchases. Buying in bulk when customers are showing an interest in smaller formatted stores is not sustainable. Weaknesses Walter sourced products internationally, although the international offices worked with local offices for private labeling products the products were completely sourced in different countries than the U.
S. (taking U. S. Jobs). Store Network The stores were simply furnished and constructed with standard materials.
Light and temperature settings for U. S. Stores were all controlled manually from the headquarters in Bonneville, Arkansas. Human Resources Making operational changes quickly and taking advantage of technology to drive labor cost down. The many changes of Walter’s management team to decrease cost or operation expense has also been at the expense of its employees. Focusing on the Supply Chain Delays in restocking supplies due to how the key selling items arrived to the store from truckload deliveries.
Walter’s weaknesses shows a lack of environmental sustainability by not allowing each store in different states to have control over their own light and temperature settings, this is not putting the work environment in a safe and healthy position by limiting controls. Each state has completely different weather temperatures, and some cities change weather climates quicker than others do. Making operational changes quickly without receiving input from employees of an organization can cause employees to feel unvalued resulting in low morale. Having a strong supply chain does not always create a strong infrastructure.
Many other facets of a business must be explored and improved to sustain a changing economy, culture, and environment.
Opportunities Having top selling items like paper towels, toilet paper, and toothpaste be housed and shipped from dedicated “high velocity’ food distribution centers Monsoon & Mark, 2013, p. 10). Looking to reduce excess inventory which can reduce cost margins or Walter. Remodeling stores which would consist of improved checkout speed, customer service and store appearance. New Initiatives and a Reorganization The global merchandising centers to be reorganized into different categories.
Entering into partnerships with global suppliers for private label business. B. Project one Touch Aligning the complete structure of the supply chain to be operated together, which consist of merchandise flow, delivery schedules, and store labor schedules. C. Multi- Channel Strategy To improve its physical store and distribution center functions and Walter’s online resent. Allowing stores to receive sale credit for online purchases.
Having three shipping options available to customers: site to store, home free and pick up today.
Walter’s core competencies and competitive advantages stem from them having many opportunities and planning to implement new strategies that will evolve with changing times. Their idea to offer many shipping methods for their online shoppers and looking to develop high velocity distribution centers shows sustainability by developing strategies that address current needs for their customers. Walter’s executive’s top priority among new initiatives (opportunities) should be reducing the excess inventory, and utilizing a lean system as much as possible.
Walter has many centralized systems that can provide adequate communication to fulfill low inventory products quickly and remove the need to buy in high volume.
Threats Being a target for politicians with United Food and Commercial Workers Union forming anti-Walter campaigns with Walter employees. Figure – Walter protest (Huffing Post, 2013) Smaller format stores like Dollar General becoming more popular than Walter superstores. Buying in high volume/bulk which causes excess inventory.
Remodeling Walter stores which has caused a negative impact on Walter’s sales. Walter’s threats are there due to a few reasons one is the rise of smaller formatted stores, if customers continue to patronize smaller stores this will create a lower customer demand for Walter, in turn creating a loss in sales and profits for Walter.
Remodeling Walter stores is also an opportunity that the firm will pursue since the stores are built modestly with standard materials however, this has resulted in a drop in sales and if continued may result in a permanent loss of customers.
Walter being in the public eye for negative media also reflects a large threat being that Politicians and everyday civilians may not like the allegations raised against Walter and may decide to discontinue their shopping at local Walter stores. Walter’s social sustainability needs improvement and will not be met until Walter executives try to not only lower operating cost but also ensure a healthy and safe work environment for their employees.
DECISIONS Upon review of the SOOT analysis as well as Exhibits 3 and 5, it does not make sense to continue to hold on to Walter stock. Exhibit 3 shows growth in the total assets or each company that is similar to Walter between 2002 and 2012; however, Amazon. Com is one of the companies who has had a large growth during that time period. Walter’s total assess has grown approximately 2. 16 times while Amazon. Com grew its total assets 12. 7 times during the same time period.
In 1. 63 times while Cost has grown 2. 30 times during the same time period.
The value of Walter stock has remained basically unchanged for approximately 10 years as seen in Exhibit 5, which shows that the value of the stock between February of 2002 and February of 2012 has fluctuated between slightly above $40 and slightly above 60. However, the stock of the 500 large companies under the Standard & Poor’s 500 (S&P 500) shows a more drastic up and down movements showing more rapid and decrease gain.
When the S&P 500 stocks were growing between 2004 and 2008, the stock for Walter started to fall.
After the economic problems of 2008, the S&P 500 stocks took a drastic fall while the Walter stocks gained in value. Unfortunately, the Walter stocks have not increased in value since 2008 at the same rate as the S&P 500 stocks have done. Walter continues to hone its management of the flow of products and information mongo its suppliers, distribution centers, and individual stores through technology to increase its control of logistics and inventory. Thoughtful use of innovation has put Walter at the top of the retailing game.
Not all organizations can pull this approach off so well.
Walter is a unique case in which a single, very powerful firm took primary responsibility for improving performance across its own supply chain. By developing a superior supply chain management system, it has reaped the rewards of higher levels of customer service and satisfaction, lower production and transportation costs, and more productive use of its retail store space. Fundamentally, it boils down to Walter’s ability to link together suppliers, distribution centers, retail outlets, and, ultimately, customers, regardless of their location.
