Has Wal-Mart figured out how to do same day delivery? The Wall Street Journal seems to think so — at least within their Mexican operations (Mexico Delivers for Wal-Mart, Feb 20).
Has Wal-Mart really figured this all out? I have my doubts. (more…)
How should Wal-Mart fill web orders? That seems like a straightforward question. And, given that Wal-Mart sold over $7 billion of stuff on the web last year, you would think they would have figured that out by now. Still as the Wall Street Journal tells it, the retail giant is still working through how best to fill orders (Wal-Mart’s E-Stumble With Amazon, Jun 19).
E-commerce at Wal-Mart is run as a distinct business, with its own headquarters, CEO and merchants who buy items specifically for the website. Every year, executives would start a “five-year planning exercise, but the plans were never executed and management would say the sales weren’t there to justify the investment capital,” says a former online-division executive. “Even now e-commerce is a rounding error in the U.S. market.” Wal-Mart said it expects $10 billion in online sales this year, which would amount to about 2% of its $469 billion in annual revenue.
As Wal-Mart’s online orders grew, it turned to makeshift spaces carved out of store-serving distribution centers and third-party warehouse operators to help handle the load. The extra layer added to its costs. Wal-Mart’s online shipping can cost $5 to $7 per parcel, while Amazon averages $3 to $4 per parcel, analysts say—a big difference considering some of Wal-Mart’s popular purchases are low-cost items like $10 packs of underwear.
As the quotes make clear, this is all about how to match Amazon so Wal-Mart remains relevant as more transactions move on-line. To put the challenge in perspective, check out this graphic of Amazon’s distribution network.
Another day, another Wal-Mart story. This one is from Businessweek and deals with troubles Wal-Mart is reportedly having getting goods on the shelves (Walmart Faces the Cost of Cost-Cutting: Empty Shelves, Mar 28).
Wal-Mart Stores (WMT) has been cutting staff since the recession—and pallets of merchandise are piling up in its stockrooms as shelves go unfilled. In the past five years the world’s largest retailer added 455 U.S. Walmart stores, a 13 percent increase, according to company filings in late January. In the same period its total U.S. workforce, which includes employees at its Sam’s Club warehouse stores, dropped by about 20,000, or 1.4 percent. …
At a Feb. 1 gathering of Walmart managers, U.S. Chief Executive Officer Bill Simon said Walmart was “getting worse” at stocking shelves, according to minutes of the meeting obtained by Bloomberg News. Simon said “self-inflicted wounds” were Walmart’s “biggest risk” and that an executive vice president had been appointed to fix the restocking problem, according to the minutes.
Note that this is not a supply chain issue. Rather it is a store operations problem. The goods are getting to the stores; they are just not getting out to the shelves.
At the Kenosha (Wis.) Walmart where Mary Pat Tifft has worked for nearly a quarter-century, merchandise ready for the sales floor remains on pallets and in steel bins lining the floor of the back room—an area so full that “no passable aisles” remain, she says. “There’s no manpower in the store to get the merchandise moving,” says Tifft, who oversees grocery deliveries and is a member of OUR Walmart, a union-backed group seeking to improve working conditions at the chain. “Customers come in, they can’t find what they’re looking for, and they’re leaving.”
Right now, same day delivery is one of the hottest topics in e-commerce with multiple firms experimenting with different ways of fulfilling on-line orders tout suite. See this Wired graphic-fest for a summary of what different firms are trying.
Then there is this.
Wal-Mart Stores Inc is considering a radical plan to have store customers deliver packages to online buyers, a new twist on speedier delivery services that the company hopes will enable it to better compete with Amazon.com Inc. …
“I see a path to where this is crowd-sourced,” Joel Anderson, chief executive of Walmart.com in the United States, said in a recent interview with Reuters.
Wal-Mart has millions of customers visiting its stores each week. Some of these shoppers could tell the retailer where they live and sign up to drop off packages for online customers who live on their route back home, Anderson explained.
Wal-Mart would offer a discount on the customers’ shopping bill, effectively covering the cost of their gas in return for the delivery of packages, he added.
(Wal-Mart may get customers to deliver packages to online buyers, Reuters, Mar 28)
The article describes this as being at the “brain-storming stage” and I must admit that I don’t know where that lands on Woody Allen’s notion-concept-idea spectrum. Indeed, it strikes me as being something of an elaborate April Fools’ joke.
Check ou this quote from the Wall Street Journal (Bad Roads, Red Tape, Burly Thugs Slow Wal-Mart’s Passage in India, Jan 11):
In the world of perishable goods perishing, India has few rivals. Lacking proper storage facilities, enough refrigerated trucks and adequate highways, the world’s second-largest fruit-and-vegetable producer loses about one-third of its produce each year to spoilage, the government says, roughly $10 billion worth.
India also is bogged down by an entrenched system of government-imposed middlemen, the scope of which has few parallels, essentially an army of traders and agents who charge various fees along the way. That alone can increase farm-to-store costs sixfold, analysts estimate.
Just what does this system look like? The video below (which regrettably you have to go off the Ops Room to see) gives you an idea:
Obvious a contorted supply chain like this doesn’t arise over night, so why is the Journal writing about it now? In a word, Wal-Mart!
Last fall, following a relaxation in India’s foreign-investment rules, [Wal-Mart] said it was planning to open its first stores in the country in the next two years, tapping into a prized $490 billion retail sector. But to cash in, Wal-Mart and other foreign retailers will have to solve a fundamental problem: how to move goods into stores efficiently in a country that offers big retailers little in the way of modern logistics and is plagued by dilapidated infrastructure.
The hurdles are particularly daunting in the food sector, which makes up more than half of the revenues at the Bentonville, Ark.- based company.
It is shaping up to be an interesting holiday season in retailing. It is not even Halloween and retailers are starting to roll out various programs to attract customers. Toys R Us is allowing parents to reserve toys and now Wal-Mart is testing same-day delivery for web orders with fulfillment being done from its many stores (Wal-Mart Delivery Service Says to Amazon: ‘Bring It’, Wall Street Journal, Oct 9).
Called Wal-Mart To Go, the service costs $10 regardless of the size of the order. The products will be shipped from the company’s stores, not from a warehouse or distribution center. Wal-Mart began testing the same-day service last week in Philadelphia and northern Virginia.
It added Minneapolis on Tuesday and will add San Jose and San Francisco later this month. The trial will last through the holidays. …
Wal-Mart is betting that its network of thousands of stores, combined with an improved online presence and strong financials, can help it compete head to head with Amazon, which has increasingly stressed fast, free or low-cost deliveries. Amazon launched same-day shipping in 10 cities in 2009.
But shipping from stores, rather than from warehouses as Amazon does, is expensive, analysts said.
“It can be three to four times the cost for the retailer to pick items and pack them from a store versus having a really efficient, automated process back in a distribution center,” said Al Sambar, a retail strategist at consulting firm Kurt Salmon.
So is this a good idea or just a crazy Hail Mary to grab some attention as we head into the holidays? (more…)
We have had a few posts about the reported poor working conditions in e-commerce fulfillment centers (see here and here). Now The Guardian has an article describing similar issues in distribution centers for bricks-and-mortar retailers (‘They shout at you and harass you’: how workers toil at Walmart’s US suppliers, Jul 25). Many of the complaints are similar to those heard about fulfillment centers: unrealistic quotas, poor pay and benefits, and a general disregard for worker safety. And, as with some of the earlier reports, these are being publicized by organizations tied to unions.
For my money, the most interesting part of the article is its characterization of the Wal-Mart’s supply chain in California’s Inland Empire.
While much recent attention has focused on abuses at the outsourced Chinese supply chains of companies like Apple, some experts believe Walmart’s US-based supply chain is built on a similar model, but one constructed within America US itself.
As is common in China, the supply chain is marked by layers upon layers of subcontracting. So, while every single box packed and unpacked at NFI Crossdock is destined for Walmart, the warehouse is owned, run and staffed by myriad other companies. The supply model has been dubbed “insourcing”, and experts say it is defined by ruthless cost-cutting as each layer of subcontracting seeks to eke out a profit margin.
“Walmart’s suppliers run out of places to squeeze out the costs, and they are left with the workers,” said Catherine Ruckelshaus, co-author of a recent report on the supply chain called Chain of Greed, that was produced by the National Employment Law Project.
Walmart is not the only big-box retailer supplied by the huge warehouses of the Inland Empire. Other major firms, such as K-Mart, Home Depot and Toyota, also work there. But Walmart sets the model for the others by its sheer size.
Some time ago we posted on Wal-Mart’s attempt to lead the creation of a sustainability index. The idea was to provide consumers with clear guidance on the impact of what they bought. Instead of wondering why one product cost a buck more than a different brand, they would have some information on why. Along the way, it was hoped that such transparency would lead to greater competition between firms to drive costs out of the system in a responsible fashion. So how’s that all going? According to Fortune, not so well (The trouble with green product ratings, Jul 13), forcing Wal-Mart to back off some of its initial goals.
There are several dimension to the challenges Wal-Mart has encountered. For one, not everyone has gotten on board. Wal-Mart had hoped to create a standard for the retail industry but other big retailers such as Target have not signed up. Also, the article suggests that some big brands while going along with Wal-Mart to some extent are not overly thrilled. Further, there have been some administrative headaches like finding program directors. However, the biggest problem appears to be just the daunting nature of the task.
The trouble with any consumer scoring systems is that ultimately consumption is about trade-offs. All products — no matter how “green” — impact the planet in some way. The best a consumer index can do is suggest that one product in some particular way might have less of an impact on the planet than another. To achieve this, mountains of data have to be gathered about the impact of thousands of products across every stage of their life cycle, from raw materials and manufacturing to final disposal, while including social factors like workplace conditions. How much waste was generated by the factory in rural China that made that zipper? How much phosphate was used to make this laundry detergent? Were the chips in that Blu-ray disc player manufactured in an energy-efficient way?
It gets even more complicated once such data are obtained: How should various forms of sustainability be ranked? Is soil erosion less important than carbon emissions? Gary Hirshberg, founder and CEO of Stonyfield Farm, now a subsidiary of the food giant Dannon, has been trying to measure the impact of his own organic yogurt products since the early ’90s. “I’m not saying it’s impossible,” he argues, “but it’s very difficult to do in a credible way.” …
It’s enough to make you wonder whether creating a sustainability index is even worth the Herculean effort. Hirshberg thinks not. A company, for example, might earn high marks for using recyclable packaging, but Hirshberg found that Stonyfield reduced its carbon footprint more by switching to yogurt cups that aren’t recycled. It turns out that cups made from plants and then thrown into landfills generate far fewer greenhouse gas emissions than recycled plastic containers. Similarly, a yogurt company might score high for using organically fed dairy cows, but Hirshberg found that a significant source of his company’s methane emissions — a potent greenhouse gas — is cow burps, of all things. (Stonyfield is in the process of reducing those emissions by tinkering with the feed.)
“In the end we realized that to get a real score is a very costly, complex process that’s probably not worth it,” Hirshberg says. Instead he founded a nonprofit, Climate Counts, that does not rate individual products but scores the world’s largest companies on their commitment to fighting global warming and the transparency of their sustainability efforts.
According to the WSJ, Something is rotten in the state of Walmart (“Wal-Mart Tries to Recapture Mr. Sam’s Winning Formula“)
When it reports earnings on Tuesday, the retailer is widely expected to post its second straight year of declining domestic same-store sales. Wal-Mart’s U.S. comparable-store sales already had fallen for six consecutive quarters, an unprecedented losing streak.
The article puts some on the blame on recent changes at Wal-Mart. In an attempt to attract wealthier customers, they have changed the mix of products they sell with stronger emphasis on organic food and trendy fashion goods. They have also reduced the clutter in the stores and improved what people refer to as servicescape. Wal-Mart also got away from its promise for every-day-low-prices. As growth slowed and Wal-Mart began running out of room to build new supercenters, the chain began running promotions and discounts on select products—Wal-Mart calls them “rollbacks”—while raising prices on other items.