October 14, 2009
Deriving Value From
Supply Chain Innovation
Bill Simon
EVP and Chief Operating Officer
Walmart U.S.
Deriving Value From Supply Chain Innovation
Save
money.
Live
better.
Walmart Stores Inc. at a glance
• Founded in 1962
• $400+ billion corporate annual revenue last fiscal year
• 2.2 million associates
• 200,000,000 customers shop Walmart worldwide weekly
• Focus on female customer— she influences 85% of typical
household purchases worldwide
• Walmart U.S. operates 3600+ stores in 50 states – 6000+ facilities
worldwide
• 85% of American households shop our stores at least once per
year
• Offer 120,000+ SKUs in a typical supercenter—motor oil to
peaches
• Operates various store formats throughout the U.S. and the world
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Deriving Value From Supply Chain Innovation
Walmart US Logistics at a glance
• Mission is to provide a responsive, reliable and efficient
network in order to deliver unbeatable prices in clean, fast
and friendly stores
•
•
•
•
Combined DC network delivers 5.5 billion cases per year
88,000 associates
Fleet drivers log more than 850 million miles per year
147 Distribution Centers
Nine disaster distribution centers strategically located
across the country.
53,000 trailers
5 miles of conveyor
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8,000 drivers
Deriving Value From Supply Chain Innovation
7,200 tractors
147 DCs
Sam’s Vision
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Deriving Value From Supply Chain Innovation
Play “Quoting Sam”
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Deriving Value From Supply Chain Innovation
Our mission is to save people money so they can live better
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Deriving Value From Supply Chain Innovation
Aligned strategies focused on the customer
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Deriving Value From Supply Chain Innovation
What is the next BIG thing?
“ Beware of the tyranny of making small changes to small
things. Rather, make big changes to big things.”
--Roger Enrico, former CEO and chairman of PepsiCo
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Deriving Value From Supply Chain Innovation
Business needs drive innovation
• Losing share to beer
• Beer more convenient
• Liquor unable to advertise on TV
• Utilized existing beverage
technology
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Deriving Value From Supply Chain Innovation
Innovation in Health and Wellness….$4 Rx and 90-day for $12
• Competition more convenient
• Must compete on our
strengths…price
• Innovation requires calculated risk
• Innovation requires courage
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How fast can you swim?
“Swim
upstream. Go the other way. Ignore
the conventional wisdom.”
--Sam Walton
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Deriving Value From Supply Chain Innovation
Integrated Logistics, Transportation and Store Ops
My first ask of the team……
Challenge the current paradigms through recommendations to change how
we manage the supply chain all the way to the customer.
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Deriving Value From Supply Chain Innovation
Guiding principles of that ask
• The supply chain strategy must support the retail strategy
• Must contribute to earnings per share
• Big transformational ideas…not incremental changes
• A complete and sustainable solution
• Must encompass the entire supply chain from the manufacturer to the
customer
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Deriving Value From Supply Chain Innovation
Examples of what would be transformational
Step
Change
Supply
Chain
Transformation
Incremental
Change
Support Future Growth
Optimize the Base
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Deriving Value From Supply Chain Innovation
The supply chain role in supporting Walmart’s business strategy
Price
Leadership
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Deriving Value From Supply Chain Innovation
Drive
Profitable
Growth
Integrated
MultiChannel
Supply chain innovation supports customer strategy
Creating speed and consistency at reduced costs
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Deriving Value From Supply Chain Innovation
Early Results
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Deriving Value From Supply Chain Innovation
Image Area
Delivering efficiency in logistics
FY09 Logistics Summary
• Cost per case reduced by 142 bps
and by 425 bps holding fuel prices
constant
• 8.6% increase in distribution center
labor productivity
• 3.0% increase in cases shipped with
6.9% reduction in miles
• 2nd consecutive year without
building a distribution center
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Deriving Value From Supply Chain Innovation
In-Store inventory reduction improves customer experience
FY08
Note: Sales and Inventory for stores only
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Deriving Value From Supply Chain Innovation
FY09
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Store Inventory YOY Growth
Store backrooms – moving from Good to Great
Good
Great
Good
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Deriving Value From Supply Chain Innovation
Great
Continued improvements in productivity
Increase in Labor Productivity
FY09 Productivity
6%
Backroom Productivity:
+8.6%
4%
2%
0%
Q4 FY08 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09
Front-End Productivity: +2.6%
Note: Labor productivity measured as sales per labor hour. Backroom productivity measured as cases received per backroom labor
hour. Front-End productivity measured as items transacted per cashier hour.
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Deriving Value From Supply Chain Innovation
Mission leadership expectations
1.
Understanding the mission leadership challenge: Imagine what we
could achieve if we led all our people in one fully aligned and highperformance way of working around a fully aligned and inspired Walmart
vision and strategy
2.
Clear understanding of interdependencies — no silos
3.
Clear about the high-performance leadership behavior required to win
4.
One clear Mission Leadership Dashboard, against which each leader
is able to monitor the “effect” they’re having on a regular basis
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Deriving Value From Supply Chain Innovation
Q&A
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Deriving Value From Supply Chain Innovation