Discussion:
Finding Shelf Space at Wal-Mart Wal-Mart's business strategy of being a low-cost provider by managing its supply chain down to the minutia has paid off greatly. Each week, approximately 100 million customers, or one-third of the U.S. population, visits Wal-Mart's U.S. stores. Wal-Mart is currently the world's largest retailer and the second largest corporation behind ExxonMobil. It was founded by Sam Walton in 1962 and is the largest private employer in the United States and Mexico. Wal-Mart is also the largest grocery retailer in the United States, with an estimated 20% of the retail grocery and consumables business, and the largest toy seller in the U.S., with an estimated 45% of the retail toy business, having surpassed Toys "R" Us in the late 1990s. Wal-Mart's business model is based on selling a wide variety of general merchandise and marketing, at "always low prices." The reason Wal-Mart can offer such low prices is due to its innovative use of information technology tools to create its highly-sophisticated supply chain. Over the past decade, Wal-Mart has famously invited its major suppliers to jointly develop powerful supply chain partnerships. These are designed to increase product flow efficiency and, consequently, Wal-Mart's profitability. Many companies have stepped up to the challenge, starting with the well-known Wal-Mart/ Procter & Gamble alliance, which incorporated vendor-managed inventory, category management, and other intercompany innovations. Wal-Mart's CFO became a key customer as P&G's objective became maximizing Wal-Mart's internal profitability. Unlike many other retailers, Wal-Mart does not charge a slotting fee to suppliers for their products to appear in the store. Alternatively, they focus on selling more popular products and often pressure store managers to drop unpopular products in favor of more popular ones, as well as manufacturers to supply more popular products.
PROJECT FOCUS You are the owner of a high-end collectible toy company. You create everything from authentic sports figure replicas to famous musicians and movie characters including Babe Ruth, Hulk Hogan, Mick Jagger, Ozzy Osbourne, Alien, and the Terminator. It would be a huge win for your company if you could get your collectibles into Wal-Mart. Compile a strategic plan highlighting the steps required to approach Wal-Mart as your supply chain partner. Be sure to address the pros and cons of partnering with Wal-Mart including the cost to revamp your current supply chain to meet Wal-Mart's tough supply chain requirements.