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The Secret of Walmart's Unprecedented Success

Updated on November 18, 2011

Some Resources on the founder of Wall Mart

Forbes List

If you are trying hard to be rich, am sure you know that Billy Gates has done it again. Am sure you also know that Zuckerberger has gained considerable ranking and is now in the coveted position of top 20 of America’s richest people. You may have also noticed the Forbes commentary that even though everybody seems to be losing in profit margins owing to the hard economic times, the rich have somehow kept growing richer…

There are many fascinating facts in this year’s list but what really caught my eye was the Walton’s. Yes, the Wal-Mart Walton’s. Three Waltons in the top ten list - that made me want to investigate more on Wal-Mart. The only company that has managed to position three people on the top ten list of the richest men/women in the world. So what is the Wal-Mart secret?

How Sam Walton Began Wal-Mart
Wal-Mart's unprecedented success can be traced back to the founder. Sam Walton opened the first Wal-Mart store on September 1, 1945. Those were hard times. It was the period of the Second World War. Sam Walton knew that the biggest challenge for people was money. So he came into business with one major goal, help people to “save money” so that they could “live better”.

He had four major guidelines that still dictate day to day operations at Wal-Mart. He wanted to cut down on expenditure, to increase the sale volume, to embrace technology and to apply the most efficient logistics management. It is this culture that has been the biggest hinge on which Wal-Mart operates. The company is always looking for ways of saving money by cutting down on expenditure so as to give consumers the best prices. Again, this was modeled by the founder. Even after the company had begun bringing in billions, Sam Walton still drove a pickup (Honestly, it’s a lesson i would rather skip). This legacy has remained in the company to date. The managers for instance always stay at economy hotels when on business trips.

Supply Chain
Perhaps the most important contributor to the success of Wal-Mart is the supply chain management. Wal-Mart has successfully established one of the most efficient systems of logistics movement that has made it to be a reliable and efficient company. The most significant part of the supply chain is the distribution centers that the store has at different vantage points. The goal of this distribution centers is to feed the supply chain to make sure the demand and supply curve is maintained and kept at normal. Close to 85% of the goods supplied to Wal-Mart go through these centers. Some manufacturers even delivered goods to these centers directly

Another notable feature of Wal-Mart logistics is the fast responsive fleet team. A good logistics management is key in the success of any organization. The distribution centers of Wal-Mart are usually serviced by at-least 3500 company trucks. These trucks are responsible for transporting cargo from the centers into the stores. This team ensures that the shelves of Wal-Mart are replenished at last twice a week to make sure customers get all they need when they come shopping. To make sure the system is efficient the company only employs drivers who have enough experience and who have a clean driving license record. These drivers usually report to a co-coordinator who will dispatch them to the store that needs supplies.

The distributing process is simplified even further by employing a transportation system referred to as cross docking. This is a system where the company picks the finished goods direct from the manufacturers. The goods are then sorted out and then they are delivered to the customers. The idea is to reduce on the need of warehousing and avoid middle men hence cutting down greatly on costs. Let’s take a hypothetical case of a customer that sends Wal-Mart a requisition. On receiving it, Wal-Mart immediately converts it into a purchase order. This is then sent out to different manufacturers to find out which one is able and willing to deliver the goods. Once a supplier has been established, the goods are packed on site as per the customers’ needs and directly sent to the different customers.

Cross-docking is the most efficient way of transportation in the logistics management of the company. It means that the goods don’t have to go to the distribution centers before they are taken to the stores and finally sold. This ensures that Wal-Mart will end up selling the goods at a much cheaper price than it would have. This system of transportation is a blatant shift from the traditional structured way of logistics management. Cross docking removes the power of controlling of the transportation from the board room and makes it a practical and more efficient exercise

The company has managed to maintain its legacy of cutting on cost of production in order to reach to the wider market over the years. This must be the principle reason why it continues to be a favorite for many shoppers. And the sales of volumes has made the three Waltons smile all the way to the top ten list-Literally.


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    • ronhi profile image

      ronhi 6 years ago from Kenya

      @ Stephaniedas, Thanks for reading and posting your feedback. I really appreciate it

    • stephaniedas profile image

      Stephanie Das 6 years ago from Miami, US

      Nice hub. This is true-say what you want about Wal-Mart, but the company has done a heck of a job at increasing profit margins. I think that their marketing tactics are smart- they appeal to lower or middle class people with the promise of lower prices. The irony is that the business model of Wal-Mart is actually bad for working class people in the long run, because they outsource so much and don't offer employee benefits like affordable health insurance. Voted up!