How Walmart collaborates with its vendors
Sam Walton opened his first Walmart store on July 2, 1962 and within 5 years he owned 24 stores. The rest is history. The company now employs 2.2 million people and serves about 245 million customers each week. That’s about ten times the population of Australia! They now have 11,000 stores across 27 countries.
The culture of the company was built on the premise that Walmart could save the customer money and this would mean that the customer could live better.
Walmart is famous for running the company on a shoestring. Their “shared room” policy when staff stay in hotels is quite famous. And they are notorious for paying badly. And yet it is not uncommon when a new store opens to find thousands of people applying for a couple of hundred jobs.
Walmart is also famous for its supply chain strategy. They have 6,500 trucks that collect goods from suppliers as opposed to suppliers delivering. Their drive to reduce prices through the supply chain existed long before the term became popular.
Their rule book for suppliers is supposedly 46 pages and yet it is the dream of many suppliers to have their goods sold in Walmart.
Supplier performance is carefully managed on a day to day basis and goes way beyond IBM’s classic 5 step framework:
Step 1: Identify metrics, thresholds and targets
Step 2: Collect the data through various mechanisms
Step 3: View and analyse aggregated information
Step 4: Identify gaps, prioritise and communicate
Step 5: Implement continuous tracking
For many years Walmart have had a supplier scorecard program and in April 2012 they announced that it would broaden its scorecard from 15 questions to 100. The questions which had been generic were now category specific taking into account the differences between categories. While the word ‘sustainability’ was added to their program over 10 years ago with a focus on compact fluorescent lamps, laundry detergents and packaging, the spotlight has widened in the protection of the environment.
Walmart differs from other retailers by telling their suppliers exactly what is expected of them and then monitoring the supplier’s progress. They are there to assist wherever they can. Not only that, but each supplier can see the sales of their items week by week and the numbers that Walmart uses to evaluate profitability. And the buyers can watch supplier trends by comparing like suppliers. When Walmart began empowering their suppliers, some people said that the balance of power would change. Sam Walton from the early days believed that developing partnerships with suppliers would result in a win for both. In this light, the scorecard has to be seen as a facilitator to bring suppliers and Walmart closer and a means by which the supplier can improve their sales through Walmart and strive to achieve other goals including environmentally friendly offerings.
The relationship between Walmart and suppliers does not leave much space for “wriggle room”. Because of the transparency, buyers can never surprise suppliers about performance and suppliers can never muddy the water. Whether it is good, bad or mediocre, everyone is singing from the same hymn book.
Every few weeks Walmart offers a 3 hour webinar training course teaching suppliers how to use the capabilities of the scorecard, how to interpret the numbers and the key factors that impact on results.
While many retailers are not quite up to Walmart’s speed, fortunately the days of adversarial relationships between supplier and retailer are gone. But it is up to the suppliers to play the game bearing in mind that it is usually the retailer’s ball.