deriving value from supply chain innovation bill simon evp and chief operating officer walmart u.s....
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Deriving Value From Supply Chain Innovation
Bill Simon
EVP and Chief Operating Officer
Walmart U.S.
October 14, 2009
Deriving Value From Supply Chain Innovation
Save money. Livebetter.
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• 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
Walmart Stores Inc. at a glance
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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
• Fleet drivers log more than 850 million miles per year
• 147 Distribution Centers
• Nine disaster distribution centers strategically located across the country.
88,000 associates
53,000 trailers
8,000 drivers 147 DCs7,200 tractors5 miles of conveyor
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Sam’s Vision
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Play “Quoting Sam”
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Our mission is to save people money so they can live better
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Aligned strategies focused on the customer
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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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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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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. Ignorethe conventional wisdom.”
--Sam Walton
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Integrated Logistics, Transportation and Store Ops
My first ask of the team……
Challenge the current paradigms through recommendations to change howwe manage the supply chain all the way to the customer.
Deriving Value From Supply Chain Innovation
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• 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
Guiding principles of that ask
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Examples of what would be transformational
Supply Chain
Transformation
Optimize the Base
Deriving Value From Supply Chain Innovation
Step Change
Incremental Change
Support Future Growth
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The supply chain role in supporting Walmart’s business strategy
Price Leadership
Drive Profitable Growth
Integrated Multi-
Channel
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Supply chain innovation supports customer strategy
Creating speed and consistency at reduced costs
Space
Utilization
Internally Integrated
Broad
en
Supply
Cha
in
Boundar
ies
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Early Results Image Area
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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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In-Store inventory reduction improves customer experienceF
eb
Mar
Ap
r
May
Jun
Jul
Au
g
Sep Oct
No
v
Dec Jan
Feb
Mar
Ap
r
May
Jun
Jul
Au
g
Sep Oct
No
v
Dec Jan
Note: Sales and Inventory for stores only
FY08 FY09
Store Inventory YOY Growth
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Good Great
Good Great
Store backrooms – moving from Good to Great
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Continued improvements in productivity
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.
0%
2%
4%
6%
Q4 FY08 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09
Backroom Productivity: +8.6%
Front-End Productivity: +2.6%
Increase in Labor Productivity FY09 Productivity
Deriving Value From Supply Chain Innovation
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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 high-performance 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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Q&A