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hostile to these supply chains; because they expose us to higher and higher pressures
to compete; cut costs; and also; at times; cut wages and benefits。 That is how Wal…Mart
became one of the world's most controversial companies。 No company has been more
efficient at improving its supply chain (and thereby flattening the world) than
Wal…Mart; and no company epitomizes the tension that supply chains evoke between the
consumer in us and the worker in us than Wal…Mart。 A September 30; 2002; article in
Computer…world summed up Wal…Mart's pivotal role: 〃'Being a supplier to Wal…Mart is
a two…edged sword;' says Joseph R。 Eckroth Jr。; CIO at Mattel Inc。 'They're a
phenomenal channel but a tough customer。 They demand excellence。' It's a lesson that
the El Segundo; Calif。…based toy manufacturer and thousands of other suppliers
learned as the world's largest retailer; Wal…Mart Stores Inc。; built an inventory
and supply chain man…
agement system that changed the face of business。 By investing early and heavily in
cutting…edge technology to identify and track sales on the individual item level;
the Bentonville; Ark。…based retail giant made its IT infrastructure a key competitive
advantage that has been studied and copied by companies around the world。 'We view
Wal…Mart as the best supply chain operator of all time/ says Pete Abell; retail
research director at high…tech consultancy AMR Research Inc。 in Boston。〃
In pursuit of the world's most efficient supply chain; Wal…Mart has piled up a list
of business offenses over the years that has given the company several deserved black
eyes and that it is belatedly starting to address in a meaningful way。 But its role
as one of the ten forces that flattened the world is undeniable; and it was to get
a handle on this that I decided to make my own pilgrimage to Bentonville。 I don't
know why; but on the flight in from La Guardia; I was thinking; Boy; I would really
like some sushi tonight。 But where am I going to find sushi in northwest Arkansas?
And even if I found it; would I want to eat it? Could you really trust the eel in
Arkansas?
When I arrived at the Hilton near Wal…Mart's headquarters; I was stunned to see; like
a mirage; a huge Japanese steak house…sushi restaurant right next door。 When I
remarked to the desk clerk who was checking me in that I never expected to get my
sushi fix in Bentonville; he told me; 〃We've got three more Japanese restaurants
opening up soon。〃
Multiple Japanese restaurants in Bentonville?
The demand for sushi in Arkansas is not an accident。 It has to do with the fact that
all around Wal…Mart's offices; vendors have set up their own operations to be close
to the mother ship。 Indeed; the area is known as 〃Vendorville。〃 The amazing thing
about Wal…Mart's headquarters is that it is so; well; Wal…Mart。 The corporate offices
are crammed into a reconfigured warehouse。 As we passed a large building made of
corrugated metal; I figured it was the maintenance shed。 〃Those are our international
offices;〃 said my host; spokesman William Wertz。 The corporate suites are housed in
offices that are one notch below those of the principal; vice principal; and head
counselor at my daughter's public junior high school…before it was remodeled。 When
you pass through the lobby;
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you see these little cubicles where potential suppliers are pitching their products
to Wal…Mart buyers。 One has sewing machines all over the table; another has dolls;
another has women's shirts。 It feels like a cross between Sam's Club and the covered
bazaar of Damascus。 Attention Wal…Mart shareholders: The company is definitely not
wasting your money on frills。
But how did so much innovative thinking…thinking that has reshaped the world's
business landscape inmany ways…come out of such a Li'l Abner backwater? It is actually
a classic example of a phenomenon I point to often in this book: the coefficient of
flatness。 The fewer natural resources your country or company has; the more you will
dig inside yourself for innovations in order to survive。 Wal…Mart became the biggest
retailer in the world because it drove a hard bargain with everyone it came in contact
with。 But make no mistake about one thing: Wal…Mart also became number one because
this littlehick companyfrom northwest Arkansas was smarter and faster about adopting
new technology than any of its competitors。 And it still is。
David Glass; the company's CEO from 1988 to 2000; oversaw many of the innovations
that made Wal…Mart the biggest and most profitable retailer on the planet。 Fortune
magazine once dubbed him 〃the most underrated CEO ever〃 for the quiet way he built
on Sam Walton's vision。 David Glass is to supply…chaining what Bill Gates is to word
processing。 When Wal…Mart was just getting started in northern Arkansas in the 1960s;
explained Glass; it wanted to be a discounter。 But in those days; every five…and…dime
got its goods from the same wholesalers; so there was no way to get an edge on your
competitors。 The only way Wal…Mart could see to get an edge; he said; was for it to
buy its goods in volume directly from the manufacturers。 But it wasn't efficient for
manufacturers to ship to multiple Wal…Mart stores spread all over; so Wal…Mart set
up a distribution center to which all the manufacturers could ship their merchandise;
and then Wal…Mart got its own trucks to distribute these goods itself to its stores。
The math worked like this: It cost
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roughly 3 percent more on average for Wal…Mart to maintain its own distribution center。
But it turned out; said Glass; that cutting out the wholesalers and buying direct
from the manufacturers saved on average 5 percent; so that allowed Wal…Mart to cut
costs on average 2 percent and then make it up on volume。
Once it established that basic method of buying directly from manufacturers to get
the deepest discounts possible; Wal…Mart focused relentlessly on three things。 The
first was working with the manufacturers to get them to cut their costs as much as
possible。 The second was working on its supply chain from those manufacturers;
wherever they were in the world; to Wal…Mart's distribution centers; to make it as
low…cost andfric…tionless aspossible。 The third was constantly improving Wal…Mart's
information systems; so it knew exactly what its customers were buying and could feed
that information to all the manufacturers; so the shelves would always be stocked
with the right items at the right time。
Wal…Mart quickly realized that if it could save money by buying directly from the
manufacturers; by constantly innovating to cut the cost of running its supply chain;
and by keeping its inventories low by learning more about its customers; it could
beat its competitors on price every time。 Sitting in Bentonville; Arkansas; it didn't
have much choice。
〃The reason we built all our own logistics and systems is because we are in the middle
of nowhere;〃 said Jay Allen; Wal…Mart's senior vice president of corporate affairs。
〃It really was a small town。 If you wanted to go to a third party for logistics; it
was impossible。 It