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 over 11,000 stores across 28 countries.
The culture of the company was built on the premise that Walmart could save the customer money, therefore allowing the customer to live a better life. Because of this, 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. Yet it is not uncommon when a new store opens to find thousands of people applying for a couple of hundred jobs.
The Walmart Supply Chain
Walmart is also famous for its supply chain strategy. Their drive to reduce prices through the supply chain existed long before the term became popular. They have 6,500 trucks that collect goods from suppliers, instead of suppliers delivering to them.
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 analyze aggregated information
Step 4: Identify gaps, prioritize and communicate
Step 5: Implement continuous tracking
The Walmart Rule Book
The Walmart rule book for suppliers is supposedly 46 pages long — yet it is the dream of many suppliers to have their goods sold in Walmart stores.
For many years, Walmart has had a supplier scorecard program, but in April 2012 it 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 its suppliers exactly what is expected of them and then monitoring the supplier’s progress. Walmart is there to assist wherever it can. Each supplier can see the sales of their items week by week and the numbers that Walmart uses to evaluate profitability, while 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, but 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, as well as a means by which the supplier can improve 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 “wiggle 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 on the same page.
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.
Krunchbox can help you improve your relationships with all of your retailers, including Walmart. By analyzing your electronic point-of-sale data, krunchbox empowers suppliers to increase sales, optimize their inventory and more. Sign up for a demo of krunchbox today and see what it can do for your business.