Think Wal-Mart is just a retailer? Think again. Wal-Mart is a manufacturing, IT, logistics and distribution driven company that also has retail stores. In other words, it's a supply-chain driven company says Michael Bergdahl, a former Wal-Mart director who worked directly under Sam Walton. The influence of Sam Walton and the world's largest retailer cannot be underestimated says Bergdahl but companies can successfully compete against it.
In his new book,
What I Learned From Sam Walton: How To Compete and Thrive in a Wal-Mart Word, Bergdahl lays out strategies on: pricing, operations, culture, key product, expenses, talent and service (POCKETS).
"Manufacturers need to realign their game plan. Customers are in charge and shelf space is not guaranteed. Private label products will happily move onto the shelf if yours isn't available," explains Bergdahl. This is true for many retailers, not just Wal-Mart, and is especially true in Europe where private label products make up 40% of the retail market.
That puts the supply chain front and central to a manufacturer's profitability. Wal-Mart has honed the hub-and-spoke distribution strategy which provides one of its key operational competitive advantages, explains Bergdahl. While Wal-Mart needs only 10% of its stores square footage for inventory, competitors need 25%. That's because each store is within a day's drive of a distribution center.
In the book, Bergdahl quotes Jay Fitzsimmons, a Wal-Mart senior vice president and treasurer as saying that "we're in the distribution business. It's Wal-Mart's job to bring a product from the dock to the customer's trunk in as little as 72 hours."
One way that Wal-Mart brings in products so quickly is their unique relationship with vendor partners. Other companies can replicate this model and in fact Bergdahl suggests that companies take advantage of professional trade associations to create teams of local companies. And use the organization as a platform to share best practices advises Bergdahl. That's what the largest companies do -- they benchmark best practices against each other. GE, P&G, FedEx, Home Depot all share ideas.
Manufacturing products that customers want and backing that up with great service is how you can compete against Wal-Mart says Bergdahl. "Manufacturers want to be all things to all people and they end up offering the same products in all markets. That just doesn't work today. The products must be tailored to local needs." Micro marketing is key says Bergdahl.
"Differentiating products is how manufacturers will succeed today," says Bergdahl. Companies must hold onto their brands for that is their true value in the marketplace. "Manufacturers have to realize that they are in the business of branding and not manufacturing as we thought of it in the past. In some cases that means managing the brand and outsourcing the actual manufacturing process."
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