retail news in context, analysis with attitude

BENTONVILLE, Arkansas – Walmart is hosting its annual shareholders meeting and media days this week and MNB “Content Guy” Kevin Coupe is there to get a first-hand peek behind the curtains at the world’s biggest retailer.

Thursday, June 4, 2009…

8:16 a.m. After gathering to pick up credentials at the Holiday Inn & Suites in Rogers, Arkansas, we boarded buses to take us to our first stop – Walmart Distribution Center 6094, which is located approximately halfway between headquarters and the Northwest Arkansas Airport. We’ve been warned not to take any pictures or video in the distribution center, since much of what we will be seeing is proprietary.

These guys walk the walk, by the way. No paper press kits. We all get a flash drive with all the information we need on it. Smart. More companies and trade associations should learn from this – they talk about being “green,” and then they give out press kits that must be responsible for the felling of entire forests.

8:19 a.m. It is extraordinary how many languages I hear being spoken around me – Spanish, Russian, even what I think is Portuguese. (I’m cheating a bit here. I heard someone refer to people from Portugal, so I’m guessing that the language I don't recognize must be Portuguese.) There is a sense of anticipation here, like we’re on the road to Oz.

8:28 a.m. We see the Distribution Center. It isn’t anything like Oz. For one thing, it is flatter. For another, Oz is smaller.

8:30 a.m. The bus pulls into the parking lot, drives around a bit, and then leaves the premises. Either the driver took the wrong entrance, or this is going to be a colossal waste of time.

8:32 a.m. It was the wrong turn. He’s trying a different entrance. I’m feeling better now. My first time in a Walmart distribution center.

8:45 a.m. We’re gathered in a conference room being given some basic details about this Distribution Center. It is one of 147 owned by Walmart, and is dedicated to general merchandise and HBC. No grocery or fresh products here. It is 1.2 million square feet in size and contains 12 miles of conveyor belts.

The DC generally processes about 400,000 cases a day, but is capable of processing 600,000 cases daily during peak holiday seasons. It is a 24-hour a day facility.

We’re told that approximately 700 employees work here, and that more than 20 percent of them have been with the company for 20 years or more, and they make an average wage of $17 per hour. That doesn’t sound like a lot…but then again, Arkansas probably isn’t a wildly expensive place to live, and as many people make more than that as make less than that.

8:53 a.m. We venture out onto the floor, escorted by Kevin Jones, a Walmart executive who’s been with the company for a decade, and has been working in the DC for a couple of years. He tells us that in a majority of cases, before product even arrives at the DC, it already has been allocated to the store for which it is destined. For the 60 percent of product, it actually is in the warehouse for just 30 minutes to an hour…essentially coming in one door and going out through one of the 120 docks, each one assigned to one of the 120 stores that are served by this DC.

When things are working right, merchandise comes into the DC, goes out of the DC, gets to the store and is sold long before Walmart ever has to pay the invoice. Yikes.

8:57 a.m. The requisite “corn factor” that one expects from Walmart: the staging area where the DC hosts meetings of employees is actually a platform that sits in front on a replica of the original Walton’s five-and-dime store. Actually, on second thought, it isn’t so corny…it actually is an impressive reminder of the company’s roots, and how far it has come.

8:58 a.m. I ask one Walmart guy how come there are so many school flags hanging from the rafters. He explains that they are all schools that play football in the SEC conference…which apparently, if you are from Arkansas, is the only conference that matters.

9:03 a.m. Lots of empty shelves in the DC. Somewhat surprising, but Kevin Jones say that this is a good thing. “Our goal is to have empty racks, because that means we’re moving stuff through,” he says. Okay.

Also lots of aisles that seem dark. Also on purpose, Jones says. The lights are on motion sensors to both save money and reduce electrical usage; there’s no reason for aisles to be lighted up if there’s nobody in them. Makes sense to me.

9:05 a.m. Interesting. Looking around, it seems as if there are almost as many Walmart people on the tour as members of the media. My first thought is that they don’t trust us. My second thought is that it really is me that they don't trust. But it actually seems as if a lot of these Walmart people are from out of town, and this is part of their ongoing education.

9:12 a.m. Just noticed a big sign highlighting the ‘Sundown Rule”: every request gets responded to the same day that it is made.

9:14 a.m. Jones says that stores get between one and five truckloads of merchandise each day, depending on the size of the store.

9:15 a.m. In the break-pack area, where orders are pulled together that do not require full cases, there is a line on each and every box noting that each box costs 75 cents – an ever present reminder of Walmart’s relentless attention to detail.

9:16 a.m. Just noticed that virtually every pallet in the place is from Chep. This is not a scientific study, just an observation. But it seems like extraordinary penetration.

9:22 a.m. We’ve just climbed several sets of staircases to get to the upper levels of the DC, watching product fly over conveyor belts. Jones pulled off one box and showed us that it actually came into the DC at 9 a.m., and said that it was almost guaranteed to be on a truck ready to leave the DC by 9:45. Yikes.

All I can think of is that it is hard to imagine how RFID would make this system move any faster or more accurately. But if it does, and Walmart establishes RFID as a differential supply chain advantage, that’s going to be a major problem for anyone competing with the retailer.

9:32 a.m. Back downstairs now. Jones points out the non-conveyable freight…the stuff that just won’t work on the conveyor belts. Large flat screen televisions are sitting next to 40-pound bags of dog food.

9:40 a.m. Watching the boxes of product fly across yet more conveyor belts, get scanned by a laser, and then get diverted onto one of 120 slots that are set up for each store served by the DC. There’s one guy there whose sole job seems to be to make sure that the bar codes are facing up. On the one hand, it doesn’t seem like a very challenging way to make a living. On the other hand, if he screws up, the whole infrastructure falls apart and nobody gets the product they need. So maybe he’s worth $17 an hour…

9:45 a.m. With some pride, Jones says that logistics is Walmart’s biggest advantage….and he points out that the company’s most recent CEOs – Mike Duke, Lee Scott and David Glass – all came out of logistics.

9:50 a.m. not sure what this means, but just noticed that all the reporters seem to be taking notes using pens and paper. All the Walmart people are using PDAs. No wonder print journalism is dying.

9:55 a.m. They just showed us the aerosol room, which is where all the aerosol cans are kept separate for everything else. It can be closed down quickly in case of a fire or explosion, and somehow they’ve engineered it so any explosion goes out, not in. That may be true, but I wouldn’t want to test it.

10:05 a.m. Wow! We’re in the parking lot looking at two prototype trucks that Walmart is testing. One is powered by an Electric Hybrid engine, and the other uses reclaimed grease from the company’s food stores as fuel. (There’s the upside of the obesity crisis…the fast food that we’re all eating is going to kill us, but it’s going to create clean energy for trucking fleets. I wonder if the trucks go down the highway smelling like French fries. I’d ask, but they’d probably think I’m a wisenheimer.

Interesting stats. Walmart’s trucks logged 800 million miles last year and delivered 161 million more cases of product than the previous year…but actually logged 87 million fewer miles than in 2007. I think that’s called a differential advantage.

10:10 a.m. Elizabeth Fretheim, director business strategy and sustainability for logistics, tells us that Walmart is looking at every aspect of its fleet to find efficiencies – from hubcaps to tires to aerodynamics to “side skirts.”

10:15 a.m. DC tour is over. Time to get back on the buses and go to a Bentonville Sam’s Club store.

10:45 a.m. We arrive at a Sam’s Club. It is located behind a Neighborhood Market, which nobody seems to want to talk about.

10:48 a.m. Off the bus, ready to get the tour. Uh-oh. The employees are lined up at the entrance, and they’re clapping and cheering. My east coast cynic alarm just went off. Have to try to control it.

10:51 a.m. Cynicism episode over. Just talked to someone who reads MNB each day. These are wise and sophisticated folks.

10:53 a.m. We’re being shown the aisle that used to be called “hardware,” and that used to carry power tools. No more. The aisle is devoted to so-called “home efficiency” products – ranging from a dual flush toilet to light bulbs – that can help people be more green in their homes and offices while saving green on their purchases. This is impressive. Never seen anything quite like this penetration of environmentally friendly products anywhere else. In most cases, they use signs to quantify the savings that each product offers consumers beyond the cost of the actual item. For example, the dual flush toilet can cut water usage by 16,000 gallons a year and save a homeowner more than a hundred bucks annually.

11:04 a.m. Ah…we’re in the fresh section. Executives are explaining how Sam’s Club is being a lot more aggressive in finding products that are useful to its shoppers, no longer just funneling through the products that manufacturers want to sell. Real focus on home meal solutions. This section of the store smells great. My stomach is growling. Haven't had anything to eat since 5:30 this morning when I was finishing up MNB.

11:06 a.m. Just sampled the crab cake and jambalaya. Yum…

11:08 a.m. Tried the chicken salad made with rotisserie chicken, served on a fresh croissant. Nice and chunky, just the way I like it. Yumm…

11:09 a.m. Uh-oh. Tasted the key lime cake made with strawberry and coconut. Also very good. Am caught on slippery slope…got to move onto another section.

11:10 a.m. Just got a presentation on Sam’s Cooking Club, which seems like a very, very smart idea. Sam’s creates an infrastructure for people looking for meal ideas and money-saving tips. People sign up, and they get weekly menus and recipes that allow customers to work together to pull them together. Somebody does the shopping for items available at Sam’s, somebody does the cooking, someone else does the prep work and cleanup. Mostly branded products, but the service is free – it is an organizational idea that can drive sales through information and product. Like I said, very, very smart.

11:20 a.m. Just tired some orange chicken and rice. Not bad.

11:22 a.m. Ooooo…angus cheeseburger sliders. I’d eat a dozen, but there are too many members of the media around. I’ll just have two.

11:25 a.m. It’s interesting that whenever Walmart execs talk about their consumers, it is always as “mom.” According to them, she’s cooking, she’s cleaning, she’s raising the kids, she’s getting them to school, she’s feeding them, she’s trying to help them lead healthy lives, and she’s trying to find ways to be beautiful and healthy herself while doing all this other stuff.

I keep wondering, where the hell are all the men?

11:30 a.m. Guy giving us a presentation on HBC trends just mentioned that incontinence products are moving fast because of aging baby boomers and caregivers. As an aging baby boomer, I really don't want to hear it.

11:40 a.m. They’re giving us a chance to wander around and shop if we like. But I’m going to resist the impulse because whatever it is, I’ll have to figure out how to get it home on the plane. On the other hand, there was that ice cream sampling station that I passed before and tried to ignore…and maybe I could get seconds on the jambalaya.

12:15 a.m. Time to get back on the bus. Everybody else is going to lunch, but for some reason, I’m not hungry. Besides, I have to get back to my room and start working on tomorrow’s MNB…which I have to do early today because a) I’m getting together with some local MNB readers tonight at the Bonefish Grill, and b) we have to get on the bus at 5:30 a.m. to go to the annual shareholders meeting.

Later on in the day… Looking forward to the Friday shareholders meeting, which I’ve been told is a high form of theater. The rumors are that both Ben Stiller and Michael Jordan will be making appearances, but I keep wondering if Walmart might do something keyed to its plans to expand its Apple departments. He’s been on medical leave and is supposed to remain so until the end of the month, but wouldn’t it be something if Apple CEO Steve Jobs showed up tomorrow…it would give a boost to both Walmart and Apple, and would take some air out of the publicity balloon that has been helping the launch of Palm’s new Pre smartphone, which is being called legitimate and impressive competition to the iPhone. I’m just speculating…maybe even engaging in wishful thinking…but we’ll see….

More to come…Monday on MorningNewsBeat…

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