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America, the land of ‘free enterprise’, has millions of enterprises in its market. The metropolitan statistical area of Houston, Texas, actually has more than 600,000 businesses, most of which employ from 2 to 10 employees. As businesses grow in the number of people they employ, they surround less and less companies. For many reasons, most companies never grow beyond the smallest batch size. Some companies grow the target for the competition or the ‘model’ on which the smarter, more knowledgeable managers base their practices to achieve ‘best class’ status in their industry or market. Wal * Mart has definitely earned its position at the top of the American business world and global retail dominance.
Wal * Mart was founded in 1962 by a retailer named Sam Walton with his brother, and in the twenty-first century became that company to look after and imitate. Walton, a Ben Franklin franchisee between 1945 and 1962, worked with his brother Bud Walton to establish the first Wal * Mart in rural Arkansas in 1962. Their strategy was simple. They opened discount stores in rural America where large businesses and large retailers typically fly ‘over’ territory. The strategy of buying purchasing power and passing on the savings to customers fled as the business gradually grew in the seventies and eighties.
Since Walton has established stores in small towns with a population of between 5,000 and 25,000, he implemented his plan “To place goods stores in small one-horse villages that everyone ignores.” He thought that if they offered, “prices are as good or better than shops in cities that are four hours away by car … they would shop at home.” CEO David Glass explained: “We always push from the inside out. We never jump back and then again.”
Walton has successfully created a small, friendly caring atmosphere in America’s largest business by indoctrinating ‘associates’ with the idea that Wal * Mart ‘has his own way of doing things’. He usually bought competitors like K-Mart and Target. He would count the number of vehicles in their parking lots and “measure their shelf space.”
Sam Walton believes the key to the business’ success lies in the way the company has treated their ‘associates’. He felt that if he wanted his employees to take care of the customers, then the employees should know that the company takes care of them. Due to its foresight in people management, the company became rich with many employees as the share price increased the value of the everyday individuals to rich people. Walton discouraged such displays of wealth because he claimed that such behavior did not advance the business’ raison d’être to care for the customer.
Walton described his driving style as ‘Driving by walking around’. Walton said of the management of people that “you have to give people responsibility, that you have to trust them and that you have to investigate it.” This philosophy had to share information and the numbers. The goal was to empower associates, maintain technological superiority, and build loyalty among associates, customers, and suppliers.
The free flow of information to associates gave associates a true and genuine sense of ownership of the organization and allowed them to exercise authority to continually improve their processes, especially their key institutional profit manager, supply chain management, and process improvement. One of their most important tools to manage an element of their chain, inventory, is called ‘traiting’.
In the Wal * Mart sense, traditions are described in their article by Bradley and Ghemawat as a process that indexed the product movements in the store to more than a thousand store and market properties. Using inventory and sales data, the local store manager selected which products to show based on customer preferences, and allocated shelf space for a product category according to the demand at his or her store. To determine the inventory according to the exact demand in the store, the need for advertised sales or “brand sales” is reduced, which allows the company Walton and later Glass insists on complimenting below average advertising spending with ‘ a ‘satisfaction guarantee’ policy to establish loyalty when buying customers.
Cost constraints have caused customers loyalty. In retail operations, Wal * Mart entered rental space by an average of 30 basis points lower than competitors in 1993. The cost of setting up new stores was significantly lower than competitors K-Mart and Target. Wal * Mart has 15% less inventory than the operating average, allowing more dedicated square footage for sales inventory. Sales of square footage were around $ 300 per foot, compared to $ 209 and $ 147 for Target and K-Mart, respectively. Stores tend to remain more flexible than competitors, which also contributed to sales per square meter being larger.
The business organized each store into 36 departments and a department manager as a store within a store managed each department. The company surpassed K-Mart by installing electronic product codes (UPC)’s electronic scanning equipment in 1988. Labor costs for the individual labeling of inventory were eliminated by installing farm plate marks. The company spent $ 700 million to connect the stores via satellite to headquarters in Bentonville, Arkansas. By collecting and sharing such sales and inventory information, managers had the opportunity to determine inventory that was moving slowly and manage the supply chain by avoiding and deeply discounting the purchased portfolios.
The company manages the distribution chain. They set up ‘cross dock’ to reduce and reduce inventory in a warehouse. When a bound truck arrives at the warehouse, a truck located outside is parked next to or closed and shipments of the incoming truck are unloaded and moved directly to the outside truck, eliminating the need to stock up. to sit, be eliminated. This method of moving it out has contributed to Wal * Mart’s nearly one percent sales cost less than the competition for similar costs.
Wal * Mart treated its distribution chain as a profit center by finding a warehouse or distribution point geographically where it could serve 150 stores and each truck leaving the warehouse could serve or deliver on the same route to four neighboring stores. Distribution gave store managers different delivery options as well as night deliveries.
Wal * Mart manages its entrepreneurial relationships in a familiar “no-nonsense” way. Unlike other retailers, especially department stores, Wal * Mart buyers are not greeted in a buyer’s office. Sam would not have preferred that haughty presentation and image. It is simply placed in a bare room with table and chairs. The company was administratively sued in 1992 when representatives of the manufacturers unsuccessfully started the Federal Trade Commission. The company did not allow a single seller to offset more than 3% of the purchases, which increases the leverage of the companies.
Wal * Mart is a pioneer in sharing and informing partnerships with sellers. In their relationship with companies such as GE and Proctor and Gamble, they connected computers to display real-time sales and inventory-specific data so that such firms could manage their own supply chain delivery. “They have expanded their electronic data exchange to include prediction, scheduling and shipping applications.”
In 1992, Fortune magazine listed Wal * Mart as ‘one of the 100 best companies to work in America’. CEO David Glass claims “There are no superstars at Wal * Mart” that could adorn the team environment. He said: “We are a company of ordinary people who are performing too much.” The largest company in the United States is non-union. Associates are trusted and treated like owners and information is shared and entrusted to them. Vendors comment on the loyalty and dedication of their co-workers.
Associates are encouraged and rewarded for bright ideas, which in many other businesses go through owners or managers, unrecognizable or stolen that would receive credit. If you steal such creditworthiness and destroy the right credit party, it only works to ward off associates and create a sense of worthlessness. Wal * Mart does just the opposite. Everyone is rewarded for profitability through contributions to the associated profit sharing account. In 1993, Sam introduced his “Yes we can Sam” program for ideas and then a “Shrink incentive plan” to reduce theft and stock loss. The program allowed Wal * Mart to stay at least 3 tenths of a percentage point lower than the industry average.
Sam and David were smart enough to realize that they could not be in hundreds of stores all the time if they decided at all to properly compensate the store managers who could earn more than one hundred thousand dollars annually. In addition, the company provides incentive payments for achieving and exceeding profitability and forecasting targets. The company offers health benefits to employees who work more than 28 hours a week and also gives productivity and profitability bonuses to such hourly workers.
Street fist management names Sam Walton’s successors, David Glass and company. He set up weekly meetings on Friday morning where they shout and shout about individual items being sold, but before the meeting is adjourned, the problems are resolved. Glass promotes the idea that “there is no hierarchy at Wal * Mart and that everyone’s ideas count and that no achievement is too small.”
The company began diversifying its store mixes in the early 1980s through the acquisition of other chains and the opening of Sam’s Clubs. The idea included offering only a limited number of inventory holding units (SKUs). They financed inventory by paying bills and generating net income, mainly by asking ‘members’ for the annual privilege of joining the ‘Club’ and shopping.
The stock cost at Sam’s Clubs was further reduced, as only 30% of the stock was ever shipped from a Wal * Mart warehouse. 70% was shipped directly from the seller. Because the stock was converted so frequently during the year, Sam’s Clubs really never paid for stock before it was sold or even after.
Glass is now quoted as saying to managers: “If they do not think internationally, they are working for the wrong company,” Discount Store News, (June 1994). Glass further told Business Week in 1992 that “you can not replace Sam Walton, but he has the company willing to run well, whether he is here or not.”
In essence, Wal * Mart was founded by a man who was smart enough to realize that since he could not be everywhere to serve customers, he needed to create an atmosphere and maintain where the people who were for him worked, wanted to earn money and served customers. As he grew the business, he and his management staff continually evaluated the supply chain and considered groundbreaking ways and many times considered unorthodox, which created a better and better customer value and reduced the cost of giving the customer what he wanted, which is the purpose of the company to begin with not to mention why the business was paid. By fueling ideas from the organization’s roots, Wal * Mart has become the leading retailer at the bottom of the price range.
This author recommends that the Wal * Mart management in the store diversify by adding more of what it already does well, maximizing the life experience at the cheapest in the store. Other additional services can be added to any useless square footage such as barber shop, dentists, etc …