Suppliers benefit from Wal-Mart sourcing goals

From The City Wire - www.thecitywire.com

Officials with Wal-Mart Stores announced earlier this year a plan to source an additional $50 billion in products from the U.S. during the next 10 years. The company said Wednesday (June 5) it is still focused on the goal, with a company in Fort Smith a beneficiary of the effort.
Hal Sirkin, a senior partner with Boston Consulting Group, said the initiative will mean an additional 100,000 U.S. jobs if Wal-Mart is successful.

Michelle Gloeckler, senior vice president of Walmart home, told the media Wednesday afternoon that the retailer is making “great strides” since the initiative was announced earlier this year. She said two-thirds of the products in Walmart U.S. stores are already sourced from the U.S.

Gloeckler highlighted local candle maker Burt Hanna of Fayetteville as one of the existing U.S. suppliers who worked with Wal-Mart on this initiative.

Growing business with existing suppliers is one of the three ways Gloeckler said Wal-Mart will achieve its goal.

Hanna told The City Wire he employs 150 people in his Fayetteville operations and has been manufacturing candles, mostly private label (Mainstay) for Wal-Mart for several years. He said since Wal-Mart has expanded its efforts to source locally, his sales have increased.
Gloeckler said candle sales have risen from $4 million annually to $30 million, and she credits the buyers who are seeking out the opportunities with local suppliers.

Michael Rothbard, CEO of Authentic Comfort, said his firm manufactures memory foam toppers for Wal-Mart, which is 20% of Wal-Mart’s business in this product. He said all the product materials are sourced in the U.S. including chemicals from Peterson Chemical Technology in Fort Smith.
Rothbard said the company’s products are made in Georgia and California and support jobs there as well in other areas such as Fort Smith. He said U.S. manufacturing is more responsive to customer demand and is becoming more feasible for several industries.

 

Gloeckler said prior to offering the product from Comfort Sleeping, all of the form toppers sold at Wal-Mart were made in China. Rothbard said he had to prove he was able to provide quality and competitive prices. He said Wal-Mart rolled back the price by $10 on the product, added a “Made in the U.S.” tag on it, and sales are up double digit this year over last.
Sirkin said with inflation driving labor costs higher in China, more industries are finding they can be competitive using U.S. manufactured products.

 

“Overseas manufacturing is no longer the default option. Product coming from China is on the water 2.5 to three months,” Sirkin said.

 

Gloeckler said Wal-Mart is committed to U.S. sourcing because it just makes sense. She said some studies show consumers will actually pay more for a “Made in America” tag, “but we don’t they should have to.”

Wal-Mart Offers Money Back Guaranty on Produce

 

 

By Jessica Wohl

 

(Reuters) - Wal-Mart Stores Inc said on Monday it is offering a money-back guarantee on the fruits and vegetables it sells at its Walmart U.S. stores as it tries to gain more ground in the grocery business.

Walmart is the largest grocer and seller of produce in the United States. It has already lowered prices on produce as it tries to get its shoppers, many of whom are on limited budgets, to buy more healthy fare. Now, it is working on getting fresher produce to its stores more quickly and training its staff to do a better job of selling the goods.

Walmart is able to cut the time it takes to get produce into stores by buying directly from growers and relying on its own distribution centers and trucking systems. It has produce experts working with farmers in key growing regions and aims to double its sales of locally grown produce by December 2015.

Buying more local produce and cutting supply chain costs have helped Walmart keep a lid on prices, which has been key in its push to stay ahead of rivals that include traditional grocers such as Kroger Co and drugstores such as Walgreen Co. Walmart started to see sales gains in produce earlier this year after it began making improvements in produce handling.

Other chains, such as Safeway Inc and Texas' H-E-B, have already offered guarantees on their produce, but Walmart's push will be the biggest as it is the nation's biggest retailer.
Walmart customers not satisfied with the produce can bring their receipt back to the store for a refund. Walmart said the shoppers will not need to bring back the produce to qualify.

To ensure that fresh produce makes it to the stores, Walmart said unnamed third-party service providers will do weekly checks in more than 3,400 of its stores selling produce. Walmart said it would benchmark itself and its competitors week over week.

Walmart also said it recently began a produce training program for 70,000 employees. Store managers, market managers and produce department managers are set to learn more about handling fruits and vegetables. Quality guides for workers will illustrate how to identify top produce, the company said.

Grocers, restaurants and food makers are under pressure from consumers and public health officials to sell more healthful food in an effort to address the nation's obesity crisis. More than two-thirds of adults and nearly one-third of youth aged 2 to 19 are overweight or obese, according to the Centers for Disease Control and Prevention.

Food is a huge business for the world's largest retailer, which has been lowering prices, along with its healthier makeover, to boost sales. Groceries, from food and drinks to cleaning products, accounted for 55 percent of Walmart U.S.'s $274.5 billion in sales in the latest fiscal year.

(Reporting by Jessica Wohl in Chicago; editing by Gunna Dickson)

Wal-Mart Plasters Stores to Stay In-Stock

Empty spots for razors are seen inside a Wal-Mart store in North Dakota on March 13, 2013. Photograph: Corbis

Wal-Mart Stores Inc. (WMT) is turning up the pressure to keep its shelves adequately stocked by proposing to tie executive compensation to the issue -- and has asked an outside auditor to alert workers which items to focus on by plastering U.S. stores with neon green dots.

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May 24 (Bloomberg) -- Bloomberg’s Renee Dudley reports on the struggles with stocking shelves at Wal-Mart and their green dot solution. She speaks on Bloomberg Television's "Market Makers." (Source: Bloomberg)

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Wal-Mart Plasters Stores With Green Dots to Stay Stocked

Andrew Harrer/Bloomberg

 

Grocery items sit inside a cart at a Wal-Mart store in Alexandria, Virginia.

 

Earlier this year, Bloomberg News reported that Wal-Mart had trouble keeping its stores stocked as it cut back on workers per store. That has cost sales and driven away frustrated shoppers. In April, Acosta Inc., a Jacksonville, Florida-based consulting firm, began the green-dot program in Wal-Mart’s U.S. stores after previously conducting shelf audits without telling workers what items would be monitored.
The effort Wal-Mart (WMT) is expending to fix its stocking issues is notable for a chain that became the world’s largest retailer in part by gaining mastery over its supply chain and logistics.
“It’s like Tiffany’s falling down on quality,” said Wallace Hopp, associate dean of faculty and research at the Stephen M. Ross School of Business at the University of Michigan. “It’s the core of their essence. If you can’t manage inventory in retail, then you can’t manage retail.”
On May 16, Wal-Mart (WMT) reported that same-store sales in the U.S. fell 1.4 percent, the first drop after six straight gains. The Bentonville, Arkansas-based company also said second-quarter earnings per share will be $1.22 to $1.27. Analysts projected $1.29, the average of 24 estimates compiled by Bloomberg. The shares rose 1.3 percent to $77.31 at the close in New York.
The compensation proposal was submitted by Wal-Mart to shareholders in April, to be voted on until the company’s annual meeting June 7. On-shelf availability -- known as OSA -- would be one of several new metrics by which managers and executives could be judged.

Calculation Mystery

While Wal-Mart regularly cites OSA figures to investors, the company has declined to say how it has calculated those rates in the past -- although Acosta figures are at least part of them -- or how it would do so in the future. The Acosta audits focus on about 700 important items, which makes it easier to achieve a higher percentage of in-stock merchandise than if the whole store were counted. Wal-Mart supercenters carry about 142,000 items, according to the company’s website, so a typical Acosta audit represents about one half of 1 percent of a store.
It’s important to know how OSA data are derived so investors can track progress, said William Atwood, executive director of the Illinois State Board of Investment, which holds about 98,000 Wal-Mart shares.

Investment Decisions

“We want to make sure the data is precise and objectively derived, whether for investment decisions or for compensation decisions,” he said.
Carol Schumacher, a Wal-Mart vice president of investor relations, said in an analysts’ call last week that on-shelf availability in the first quarter was in the 93 percent to 95 percent range.
“Management is focused on OSA to drive sales,” she said.
It’s not clear how Wal-Mart derived that figure -- and that is where the story of the green dots comes in.
Wal-Mart audited its on-shelf availability in-house for years, said David Tovar, a company spokesman. In 2011, it hired Acosta to do the job.
Keeping shelves stocked can boost sales significantly, according to Acosta, whose clients have included Target Corp. (TGT), Whole Foods Market Inc. (WFM) and ConAgra Foods Inc. (CAG)
“In a superstore, if we fix a void at the beginning of the month, one single SKU in oral care translates to about $360,000 in sales at the end of the month,” Erick Kritsky, Acosta’s director of application development, said in a 2012 study. He didn’t specify a particular item.

Secret Audits

When Acosta began its Wal-Mart audits in 2011, it conducted them secretly, without telling store managers which items were being monitored or when. Each week, Acosta field auditors searched for a random list of 300 items out of 700 being monitored, according to a copy of Acosta’s rules at the time. They compiled data collected from most of the more than 4,000 Wal-Mart stores in the U.S.
Acosta was so committed to secrecy that when some Wal-Mart managers tried to influence the results by finding out what items were being monitored, Acosta managers told their employees to rebuff them and report such incidents, according to internal e-mails.
In an e-mail to auditors sent in May 2011, Ashley Dixon, an Acosta coordinator handling part of the project, said auditors should notify Acosta management if asked “to print or make a copy of the items you are checking so that they can prepare before your next visit” or “if anyone in the store attempts to adjust your audit information in any way.

Management Influence

‘‘This is extremely important,’’ she said. ‘‘We are taking management influence very seriously.’’
Kathy Caldwell, an Acosta executive vice president and Wal-Mart team leader, called the OSA auditing system ‘‘best-in-class.’’
‘‘Acosta has had an excellent partnership with Walmart for more than two years,’’ she said in an e-mail.
Wal-Mart seemed pleased with the audits. On a February 2012 earnings call, Bill Simon, chief executive officer of Wal-Mart’s U.S. operations, told investors that the company’s use of weekly ‘‘third-party physical audits” allowed executives to “see what customers see in their store.”
He said the company had “made great progress throughout the year” in improving on-shelf availability and was achieving rates in the mid-90 percent range.

Audits Stopped

After a while, the Acosta audits stopped. Then, earlier this year, following Bloomberg News reports of stocking issues, Wal-Mart asked Acosta to start monitoring the shelves again.
“Due to Walmart receiving a lot of negative press regarding their empty shelves, we are reinstituting the On Shelf Availability project,” Dixon said in an e-mail to her employees on April 22.
Acosta’s standard secret audit was almost under way when plans changed suddenly. Tovar, the company spokesman, said Wal-Mart decided that, in this case, it would be better to have Acosta mark the items to be monitored with neon green stickers next to the prices on shelves.
“We thought by not letting the stores know, that we would get a clearer picture, but that wasn’t the case,” Tovar said. “What we learned is it’s actually better to have transparency with stores so they know the key items that particular time of year.”

Boxer Briefs

Wal-Mart prepared a spreadsheet of more than 800 items -- merchandise that included peanut M&Ms, Hanes boxer briefs, Covergirl mascara and Crest toothpaste -- that needed “stickering.” The circle stickers would indicate to Wal-Mart workers which items Acosta would be searching for during its audits.
Tovar said the most recent round of auditing was “the first time the green dots were in place.”
He added: “The reason we went to the green sticker process is because we think this is going to help the store associates do a better job of being in stock in key items. Those are the most important items to be in stock on.”
Counting just the key items generates an incomplete picture, Hopp said.

‘Short-Sighted’

“If they green-dotted for the purposes of the audit, that’s short-sighted,” he said. “They should be much more concerned about having stuff in stock in the whole store.”
The process of putting stickers on the shelves of hundreds of products in thousands of stores delayed the auditing project. To make sure all the stores were “dotted” before audits began, some Wal-Mart employees were enlisted to help.
Managers at a Wal-Mart supercenter in Sarasota, Florida, told several workers to start putting green stickers next to merchandise that needed to be in stock, said Stu Ruzbacki, who stocked shelves at the store until this month.
“The store manager just picks someone from each department to put them up,” said Ruzbacki, who was fired after a dispute with his boss. “They pulled one from my team. He could be putting stuff on shelves. Instead, he’s putting stickers up all day.”
In a telephone interview on May 17, Matt Davis, who works as a cashier at the Wal-Mart in Putnam, Connecticut, said most of the items that have green stickers “were in stock, or overstocked, while shelves were empty around them.”

Does Wal-Mart Need to Re-think Its Grocery Strategy?

Recently, there have been several articles about Walmart’s challenges with keeping its shelves stocked in general and grocery items in particular. This front page article in the NY Times Walmart strains to keep grocery aisles stocked does not reflect well on Walmart’s capabilities in the grocery business in particular.
Walmart entered the grocery market in 1988, realizing that frequent trips by grocery shoppers could help improve traffic. For some history, Walmart’s share of the grocery market in the United States now stands at 25 percent. That’s up from 4 percent just 16 years ago.

Grocery made up 55 percent of Walmart’s United States sales in 2012, flat from the previous year. The company’s grocery prices are usually about 15 percent below competitors’, according to Supermarket News. According to the editor Mark Hamstra “Walmart does well in dry goods, but fresh food requires more manpower to stock and rotate goods, involves more waste and is a higher-cost operation.”

Many blame these issues on cuts in labor in the stores and that could well be part of the problem, but to us Walmart's challenge seems to be a lack of understanding of the different customer value proposition of fresh produce.

Walmart’s traditional customer value has been “Every day low pricing” and it has built a spectacular supply chain around it with many unique innovations and investments. According to Operations Rules page 7 “Walmart has built its reputation as the brick and mortar master retailer by focusing on squeezing cost and increasing efficiency in its supply chain, thus providing its customers with competitive pricing but not necessarily with extraordinary service.”

However, fresh grocery buyers look not only for the lowest cost, but also for freshness and attractiveness of the produce they will eat and feed their families. This shifts the customer value to areas where Walmart is not as strong. And in fact, “According to the notes from the Walmart meeting last month in Orlando obtained by The New York Times, while Walmart has 20 percent of the market share in dry grocery, it has 15 percent in fresh (areas like produce, meat, deli and bakery). Safeway customers are 71 percent confident in its fresh produce, the notes said, while Walmart customers are 48 percent confident in Walmart’s produce.”

According to the NY Times article, Walmart is planning to address these issues with a new inventory management system as well as changing shift responsibilities so fresh food is not stocked overnight and goes out at 10 a.m., not 7 a.m. Also, Walmart will add secret shoppers to check on produce quality weekly, and add “would I buy it?” guides for employees.

Walmart is not the only company struggling with this transition. We see this quite often with companies entering new markets or channels and not realizing that they need to change the way they operate to match the needs of these new ventures. One such example is Dell, known for its innovative configure to order manufacturing that matched its direct business model. Dell was known as a leader in high inventory turns, short response time and negative cash conversion cycle. When it entered the retail channel at the beginning of 2008, using the same strategy became a challenge in a competitive push driven environment. Dell tackled this challenge through understanding its customer segmentation, reducing complexity and creating a new logistics strategy to address the new environment. To read the full Dell case study, click here.

Therefore, we would recommend that Walmart rethink their operations strategy as it relates to selling fresh produce. It would help to study successful fresh food retailers and incorporate some of their know how. By incorporating the appropriate practices and staff levels while accepting that they need a different strategy from dry goods, Walmart can make the fresh groceries sector a success.

 

Bad News for Wal-Mart's Future?

Excerpted from AOL Jobs.

Wal-Mart (NYSE:WMT) tried to put a positive spin on its disappointing earnings report Thursday, which showed declining US sales. But a survey released Friday contains another bad sign for America's wealthiest company and largest employer: Just 38% of employees think Wal-Mart's business outlook is good.

The report from Glassdoor.com, the employment review website, looked at people's expectations for their employers for the coming six months. Wal-Mart didn't perform significantly below average, but it got a lower score than other major US brands. Forty-three percent of Target (NYSE:TGT) workers gave their employer a positive outlook, and a solid majority of Home Depot (NYSE:HD) and Whole Foods (NASDAQ:WFM) workers (61% and 62%, respectively) said their companies were on the upswing

Read more: http://www.minyanville.com/sectors/consumer/articles/Bad-News-For-Walmart2527s-Future253F-Walmart/5/20/2013/id/49916#ixzz2Tw1l7HwU

Why Wal-Mart Workers Are So Pessimistic
On Glassdoor.com, Wal-Mart employees repeat the same complaints: poor communication from upper management, low pay, no merit-based raises, and favoritism that pummels morale. Many lower-level workers strike the same note as this sales associate from Dillon, SC: "Not a job to make a career out of." They also frequently cite staff shortages, an issue that Bloomberg News reported on earlier this year. Customers wrote in complaining about poorly stocked shelves and missing inventory. Some said that they were driving farther to avoid their local Wal-Mart.

Wal-Mart, the Brand Under Siege

In the past year, Wal-Mart's image has been tarnished by worker protests, bribery allegations and speculation over the conditions at its foreign-suppliers' factories. According to brand-consulting firm BAV Consulting, Wal-Mart's brand perception among college-educated adults plummeted 50% between 2011 and 2012, reported the Wall Street Journal. To address some of these kinks in its image, Wal-Mart launched a new multimillion-dollar advertising campaign last month titled "The Real Wal-Mart," emphasizing its commitment to veterans, job creation and charitable work. Labor organizers didn't skip a beat, publishing their own website soon after with a less favorable portrayal of the mega-chain. It's title: "... Really Wal-Mart?"


Read more: http://www.minyanville.com/sectors/consumer/articles/Bad-News-For-Walmart2527s-Future253F-Walmart/5/20/2013/id/49916#ixzz2Tw1spxYB

Wal-Mart Again On Top Of Furtune 500

Adapted from Associated Press from CBC.com

Wal-Mart Stores Inc. once again leads Fortune's list of the 500 biggest U.S. companies by revenue, as the world's largest retailer succeeded in posting strong growth despite a challenging economy for its shoppers.

The Bentonville, Ark., company's revenue grew nearly 6 per cent in 2012 to $469.2 billion.
Exxon Mobil Corp. dropped to the second spot, with revenue of $449.9 billion, but was still the most profitable. Energy companies continued to dominate the top of the list, with rival oil and gas producer Chevron Corp. holding steady at No. 3 and refiners Valero Energy Corp. and Phillips 66, spun off from ConocoPhillips last year, joining the top 10.

The Top Ten

Company:	Revenue (in billions of $US):
1. Wal-Mart Stores	$469.2
2. Exxon Mobil	$449.9
3. Chevron	$233.9
4. Phillips 66	$169.6
5. Berkshire Hathaway	$162.5
6. Apple	$156.5
7. General Motors	$152.3
8. General Electric	$146.9
9. Valero Energy	$138.3
10. Ford Motor Company	$134.3

Moving up two spots to No. 5 is Warren Buffett's Berkshire Hathaway Inc., which owns everything from insurers to railroads to newspaper publishers and is in the process of acquiring Heinz Co. Manufacturing stalwarts General Motors Co., Ford Motor Co. and General Electric Co. slipped in the survey but all remained in the top 10.

Apple cracks the top 10

Bigger sales of iPads and iPhones helped Apple Inc. jump 11 spots to crack the top 10 for the first time, landing at No. 6. The Cupertino, Calif., company's soaring stock price also made it one of the most valuable companies by market cap last year, though shares have since posted a double-digit decline.

Another technology bellwether wasn't as fortunate. Hewlett-Packard Co. slipped to No. 15 from No. 10 as the Palo Alto, Calif., technology pioneer struggled with a broad consumer shift from PCs to smartphones and tablets and its own accounting missteps.

Also off the top 10 is government mortgage provider Fannie Mae, which dropped four spots to No. 12.

Meanwhile, social media powerhouse Facebook Inc., which last year went public in one of the biggest initial public offerings ever, debuted at 482 on the Fortune 500.

Wal-Mart wants you to think of it as a technology company

 

 

 

 

 

 

 

 

By Andria Cheng adopted from Marketwatch.com

Neil Ashe, president and  CEO of Wal-Mart Stores Inc.’s /quotes/zigman/245476/quotes/nls/wmtWMT+0.08% global eCommerce business, likes it when he heard description of Wal-Mart as a technology company.

He may have a good reason to do so.

Wal-Mart’s seeking to gain ground against its larger Web rival Amazon.com Inc. /quotes/zigman/63011/quotes/nls/amznAMZN+0.71%. It’s also figuring out how to increase its share of the market with more consumers toting mobile devices and comparison shopping online.

The company is also hoping its global database of customer information will give it a better read on consumers. In the past 18 months, Wal-Mart has built or expanded three technology centers in San Bruno, California; Bangalore and Sao Paulo. In the San Bruno and San Francisco Bay area, a 1,500-people global online commerce unit has been installed, separate from the corporate home base in Bentonville.

“Ecom is the next growth engine for Wal-Mart,” Ashe said at a Barclays Capital conference on Wednesday. “We have global leverage, not just in cost and capital investment, but innovation leverage.”

For example, Wal-Mart’s been testing same-day grocery delivery service in the Bay area with some know-how from its sister chain Asda in the U.K., which already delivers groceries across most of the U.K. and the No. 2 online grocer in that country, spokesman Dan Toporek told MarketWatch.
Wal-Mart, however, has a lot of catching up to do on the online front. The company, which analysts estimate will reach $490 billion in sales this year, in October projected its online sales would only reach $9 billion this year. In comparison, Wall Street estimated Amazon would rack up almost $75 billion in sales. Other retailers such as Williams-Sonoma /quotes/zigman/246567/quotes/nls/wsmWSM+0.91% generated a significantly higher percentage of their sales online.

Among some of its initiatives, Wal-Mart’s tech team will now constantly update its home page and search functions to make it easier and more interesting to shop. Over the next two days, for instance, Walmart.com in the U.S. is rolling out a new home page design that includes features that shows what’s trending on its site, including on a local store level.

While Wal-Mart is behind on the initiative compared to its retail counterparts such as Home Depot Inc. /quotes/zigman/229488/quotes/nls/hdHD+0.57%, the company this year also began to give credit to stores for online sales generated in their local area to encourage employees to help customers in stores find things online.
The company’s team also developed a tool last year that will allow it to compare its prices online on a real time basis against its rivals and adjust instantly, compared to in the past when it wasn’t as frequent or had to be done manually, Toporek said.

– Andria Cheng
– Follow her on twitter @AndriaCheng