Logistics case analysis: The success of the world’s business giant Wal-Mart

When it comes to the name "Wal-Mart", Chinese consumers are no stranger to it. It is an American retail company. Its founder Sam. Wal-Mart started its retail business in the small town of Bentonville in 1945. After decades of perseverance, it finally established a global retail empire. Sam. Walton was once named the richest man in the United States by Forbes magazine, and was awarded the "Presidential Medal of Freedom" by President Bush in 1991 for his outstanding entrepreneurial spirit, which is an honor for American citizens.

Wal-Mart is one of the companies with the highest return on investment in the United States. Its return on investment was 46%, and even during the recession of 1991 it was 32%.

His history is far less long than Sears, a century-old store in the American retail industry. But in just over thirty years, it has developed and grown into a retail enterprise in the United States and even the world.

Currently, Wal-Mart’s business philosophy and management skills have become hot topics in American management circles.

Competitive strategy of rural areas surrounding cities

In its early days, Wal-Mart faced powerful retail giants such as Cisco and Kmart. At that time, most of the business of these large retail companies was concentrated in large and medium-sized cities, while small towns were ignored. Because they believe that small towns do not have the conditions to open retail companies, they can only set up stores in areas with a population of more than 25,000, and Sam. Walton seized this favorable opportunity and formulated and adopted the strategy of "surrounding the cities from the countryside" and selected small towns to serve as market segments. Their specific implementation strategy is to fill the market one county at a time in each state until the market in the entire state is saturated, and then expand to another state. From a county to a state, a state to a region, and then from a region to the whole country. Sam. Wal-Mart's principle is to build stores as long as the population is between 5,000 and 10,000. Wal-Mart successfully exploited a market segment in small towns that other retailers had forgotten about, and grew rapidly while avoiding competition from other retailers. By the time other retailers realized it, Wal-Mart's business had become a prairie fire, unstoppable, and it had gained a firm foothold in the national retail industry.

In order to ensure its rapid development, Wal-Mart not only opened new stores, but also established Sam's Club: each customer can have a membership for only $25 and obtain a large number of products at wholesale prices. At the same time, Wal-Mart has also adopted mergers and acquisitions, and has 112 chain stores. Strategic measures have ensured Wal-Mart's rapid development.

Business strategy of discount sales

In addition to correct strategic positioning, Wal-Mart's rapid development also benefits from its pioneering "discount sales" strategy. Every Wal-Mart store has a big slogan "Everyday Low Prices." The same item is cheaper at Walmart than at other stores. Wal-Mart advocates the business philosophy of low cost, low fee structure and low price, and advocates giving more benefits to consumers. "Saving every dollar for customers" is their goal. Walmart's margins are typically around 30%, while other retailers such as Kmart's margins are around 45%. The company holds a manager meeting every Saturday morning. If a branch reports that a certain product is priced lower in other stores than in Wal-Mart, it can immediately decide to lower the price. Low prices and reliable quality are Wal-Mart's major competitive advantages, attracting batches of customers.

A complete distribution system guarantees high efficiency

Wal-Mart's products are known for their "high quality and low price". To be "cheap", we can only work hard to lower the purchase price. Wal-Mart purchases goods directly from factories, greatly reducing the number of intermediate links in products. At the same time, savvy buyers always engage in hard bargaining, trying to keep the price as low as possible. In the past, in the retail industry, branches placed orders with various manufacturers, and then each manufacturer shipped the goods to each branch. Wal-Mart promotes "unified ordering and unified distribution." Orders from each branch are first consolidated to the headquarters, which then coordinates the ordering. After the goods are sold, they are sent directly to the company's distribution center. Wal-Mart has 20 distribution centers across the country, and the distribution centers deliver products to various branches. The location of the distribution center has been carefully studied to ensure that the time it takes for products to be shipped from the distribution center to each branch cannot exceed one day. The company has a dedicated fleet of more than 6,000 trucks and ships an average of 4,900 boxes per day.

Wal-Mart's stores stock more than 80,000 products, and 85% of them are directly supplied by the company's distribution centers, while other competitors can only reach 50% to 60%. As a result, the average time it takes for Wal-Mart's retailers to place an order on their computers and have it on their shelves is only two days, compared with about five days for other competitors because they cannot ship more merchandise through their own distribution networks. The efficient distribution system greatly reduces Wal-Mart's transportation costs. Wal-Mart's cost of shipping goods to stores is only 3%, while competitors charge 4.5% to 5%. This ensures that Wal-Mart can sell its products at low prices and obtain the same profits as its competitors. Coordinated ordering can not only obtain price discounts and bring economies of scale, but the unified allocation of resources also greatly shortens the time for goods to be transported from factories to retail stores, greatly improving work efficiency.

It can be said that the efficiency and scale achieved by Wal-Mart in the distribution system are one of Wal-Mart's competitive advantages.

Implementing high-tech information management

Wal-Mart's ability to achieve low prices depends on a complete distribution system. The distribution system is guaranteed by advanced computer technology. Companies use computers for distribution systems and inventory management. The company's headquarters has a high-speed computer connected to 20 shipping centers and more than 1,000 stores. Every item sold through the scanner at the store's checkout counter is automatically charged to the computer. When a certain quantity of goods is reduced to a certain quantity, this signal will be sent out, allowing the store to promptly request the purchase from the headquarters. After the headquarters arranges the supply of goods, it will be sent to the distribution center nearest to the store, and then the computer in the distribution center will arrange the delivery time and route. . All required items will appear on the shelves 48 hours after the store places the order. This kind of efficient inventory management enables the company to quickly grasp the sales situation and replenish inventory shortages in a timely manner; it neither overstocks inventory nor causes goods to be out of stock, accelerates capital turnover, and greatly reduces capital costs and inventory expenses.

At the same time, the company signed a contract with Daimler-Benz in 1986 and spent US$24 million to establish a satellite interactive communication system. With this system, communication can be carried out in all stores and distribution centers. The company has a 6-channel satellite system that can conduct video calls with more than a thousand stores at the same time. In this way, meetings and decisions at the headquarters can be transmitted to each branch via satellite, and new product demonstrations can also be conducted. Wal-Mart spent $700 million a year to build its current computer satellite system. This is the world's largest civilian database, larger than AT&T's. This high-tech communication system enables timely, fast and smooth flow of information within the company. It is this advanced communication system that is the basis for Wal-Mart's efficient management. The high-tech distribution system is an important factor for Wal-Mart to grow and maintain control.

What supports Wal-Mart is its unique corporate culture

Wal-Mart has nearly 400,000 employees. The company treats its employees not as "employees" but as "partners" and "colleagues." The company stipulates that subordinates are always called "colleagues" instead of "employees". Sam. Walton proposed that "care about your colleagues and they will care about you" and cultivate the spirit of employees to "love the company as they love their home". The company's concern for the interests of its employees is not just a matter of words or a few slogans about corporate culture, but a set of detailed and specific implementation plans. The company's policy that embodies the concept of "employees are partners" is three mutually complementary plans: "profit sharing plan, employee stock purchase plan, and loss incentive plan.

In the profit sharing plan, the company It is guaranteed that every employee who has worked for the company for more than one year and who works at least 1,000 hours per year is eligible to share. Using a formula related to profit growth, Walmart assigns a percentage of each qualified employee's salary to this plan. They can take this share in cash or stock when they leave the company. In the employee stock purchase plan, employees can purchase stocks at a price lower than 15% of the market value through salary deductions.

Loss is the enemy of the retail industry, and the way Wal-Mart controls this is to share with employees the company's profits from reducing shrinkage. If a store controls shrinkage within the company's goals, that store will be rewarded. Every employee in the store gets a bonus of up to two hundred dollars. As a result, Wal-Mart's shrinkage is half the industry average.

Moreover, it also promotes a greater sense of trust among employees.

Wal-Mart sets its weekly business meeting on Saturday morning. The Sunday morning meeting is a place where business ideas and management strategies are discussed and debated. At the meeting, you can make suggestions, praise progress, and discuss solutions to problems. In this way, problems discovered can be solved immediately during the weekend instead of having to wait until next week. Sam. Saturday morning meetings are central to Wal-Mart's culture, Walton said. Its basic purpose is to exchange information, reduce everyone's mental burden, and unite the team. The company often holds social activities after the Saturday morning meeting, shouting slogans, encouraging people, and having a party to reduce the burden of each employee, make employees feel physically and mentally happy, and at the same time enhance cohesion and unite the team. Employees can easily bring the fun atmosphere generated by Saturday parties to work, and this is exactly what Wal-Mart is pursuing to "keep the store a relaxed and happy atmosphere."

The company also requires every employee to raise their hands and take an oath from the first day they enter the store, ensuring that when customers walk ten feet away from the salesperson, they must come forward to say hello and greet them with a smile.

In order to train employees, the company established the Walton Institute to provide employees with the best training possible. The company launched a "write to the general manager" campaign to encourage employees to write to the general manager.

These all show that the company pays attention to the voices from the grassroots. Because Wal-Mart's creed is "it is front-line employees who contact customers, not bureaucrats sitting in the office." This system ensures timely feedback of information and also prompts employees to put forward many effective suggestions for improving management. All these constitute the unique Wal-Mart culture, which is the mainstay of supporting this retail giant.

What to do with China’s retail industry?

Hualian in Shanghai, Suguo in Nanjing, etc. are all “secluded” and have strong regional limitations. At the same time, foreign retail industries have "landed" on a large scale in the Chinese market, such as Wal-Mart, Carrefour, Canton, etc., which has had a huge impact on the state-owned retail industry. However, almost all foreign-funded retailers in my country are concentrated in large cities, and state-owned retail enterprises are not without room for development. We look forward to the early emergence of China’s Wal-Mart.