October 17, 2013
Walmart to Cross-Dock On a Small Scale
Forget about ship-from-store. Walmart is planning on going store-to-store. In efforts to grow sales and grab further share of the American retail market with its smaller store formats the chain is looking to manage the expenses of supplying these locations by shipping products from nearby supercenters rather than sending out large trucks from its distribution centers.
In a meeting this week with analysts, Walmart U.S. CEO Bill Simon said the chain is already engaged in picking items delivered to supercenters to send to customers. It is also currently in the first phase of test in which pallets are sent to supercenters and moved to other trucks for delivery to its Neighborhood Markets or Express format stores.
Mr. Simon said tests so far have been "very encouraging" and the backroom operations of supercenters haven’t been "substantially impaired" by the process.
Gisel Ruiz, executive vice president and chief operating officer at Walmart U.S., said, "If you think about our DCs and the backrooms of the stores, they’re actually more similar than what you would think. … We know the location of every box, the same thing in the DCs."
"I think it’s a fundamental shift in their real estate strategy" to look at things market-by-market rather than store-by-store and is a "sophisticated development," Stewart Samuel, program director at IGD, told Reuters.
- The 20th Annual Meeting for the Investment Community – Walmart Stores, Inc.
- Wal-Mart predicts sales will grow faster next year – Reuters
- Wal-Mart seeks to tether small stores to big ones – The Associated Press/The Detroit News
- Here’s How Wal-Mart Is Securing Stronger Sales Growth Next Year – Wall St. Cheat Sheet
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Discussion Questions
What do you think of Walmart’s plans to use supercenters as mini distribution centers for its Neighborhood Market and Express store formats? What do you see as the challenges it will need to overcome for the test to be rolled out chain-wide?
Poll
Walmart has made the technological investment to be able to do some very innovative things logistically. Using large stores as distribution centers is likely not an applicable strategy for most retailers, but for Walmart, if it helps them reduce costs and accelerates their just-in-time replenishment efforts, kudos to them for once again leading the way in new logistical concepts.
They are so good at supply chain and logistics that they will figure out how to scale this from test to rollout. Smaller trucks from super centers make sense. The hurdle will be keeping the supercenters stocked appropriately to maintain necessary inventory to serve both.
Cross docking makes more sense than using the supercenters as mini warehouses from which product is selected and distributed. The skill sets required are far less and it has minimal impact on the supercenters’ operation.
It may be necessary to do some of both, but the more Walmart allows its supercenter employees to concentrate on getting their freight out on the floor, the better off they will be. As has been noted in several discussions recently, Walmart seems to be having out-of-stock issues – some of which may be in the locations’ backroom.
This week’s WSJ article on Amazon is the sign of the times and things to come in logistics. Amazon is piloting a mini-warehouse within P&G warehouses. This “under-their-tent” strategy enables them to cut warehouse and shipping costs for CPG product … and get ever closer to same day delivery on everything from diapers to pet food.
Retailers must innovate or become irrelevant. You have to take your hat off to Walmart. It would be easy for the world’s largest retailer to get complacent, stuck in the success of the past.
Walmart’s new cross-dock strategy is a very innovative use, and further development of their logistics expertise and infrastructure. Their cross-docking strategy will make them very competitive … especially for large bulky and more profitable items like white goods.
As an interesting side note, Sears was cross docking white goods 15 years ago. So it definitely takes more than cost effective logistics to thrive.
Logistics and payments are the two major roles that bricks retailers manage well, leaving shoppers to manage themselves. And the growth of self-service retail has ALWAYS been powerfully driven by advances in logistics as a huge part of the supply chain. When you see Amazon operating out of a P&G warehouse, surely it makes sense for Walmart to break down supply lines, allow capillary growth on their major arteries to their largest stores.
Automation (robots) and IT will make this “old hat” within 20 years – maybe 10.
This is workable concept. Some years ago I worked with a client to insure all trailers leaving the DC were completely full. The transportation savings from not shipping air were outstanding.
Smaller stores have a problem of requiring every-other-day perishable deliveries, but do not have sufficient volume to warrant a full trailer delivery. Some retailers have tried to solve this problem by having the truck make multiple stops. This solves the problem but at a cost.
Food retailers operate with a fixed delivery schedule. Mass merchant retailers use the door per store method and only ship to a store when the trailer is full. What they are finding out this does not work well with short-dated product. When you blend the two approaches the result is shipping air. Loading a nearby small store pallet or two to fill the trailer should save money.
Efficient supply of products is one area of focus and this seems like a decent thing to try.
In many locations, the bigger challenge is on what products to put into a smaller format store in the first place. They aren’t just mini versions of a big store. Effective supply of the wrong product mix still won’t cut it for customers.
Maybe it’s just me, and I’m missing something, but having the supercenter be an extra step on the road from supplier to shelf – even if the shipment is only rerouted rather than reloaded – doesn’t sound like something to be enthusiastic about. It may well be the best way to supply the neighborhood stores, but that just reinforces my view that the whole “neighborhood” concept is dubious, or at least it’s a fundamental change from what WM was…i.e. the quickest and cheapest way from supplier to consumer.
And not to change the subject – much – but perhaps the most significant news to come out of Bentonville is this: “U.S. Walmart stores … reported a 0.3 percent decline in revenue at stores open at least a year in the second quarter.” From The Detroit News. Of course one can argue that this is the very reason why the “small is beautiful” movement is important…we shall see.
This de-centralization of distribution will be beneficial, but will also complicate the supply chain at the supercenters that will essentially function as RegionalDCs for the smaller neighborhood market stores. The supercenters will have to develop cross-docking capabilities, and potentially warehousing capabilities as well, if goods aren’t cross-docked immediately on receipt. It can get further complicated if Walmart decides to get suppliers to ship to these RDCs directly, rather than to the central Warehouses/DCs. If Walmart manages to solve/manage the complexities this “Store-to-Store” model introduces, the supercenters will also give them a vehicle to offer reliable “same-day-delivery” to end consumers as well. That may end up becoming a bigger deal then “Store-to-Store.”
Given the strengths of Walmart in IT and logistics, if anyone can do it to squeeze efficiencies, they can. Especially with the growth in smaller stores with smaller storage in the back and loading dock facilities, makes sense for Walmart to extend and do a mesh network for fulfillment. You can be sure they are measuring the results to make sure there are actually efficiency improvements.
Getting the product closer to the customer is always a good thing. Challenge is that by decentralizing now, you have to be very nimble and accurate with your supply chain as you may need safety stock at multiple store locations vs just the central DC. Cross-docking pallets is one thing, but a pick and pack operation is different. Who are the associates that pick and pack; are they separate from the store associates and do they require a separate management structure? What takes precedent, stocking the store or picking for another store? I think the operational challenges here are many.
This is a very cool idea and a great thing to test. If anyone can make it work, I’m sure it is Walmart. And like many things, if Walmart makes it work, it will be just one more item on a long list of things that together constitute a major competitive advantage.
What’s really great – and what’s the real source of the enduring competitive advantage – isn’t this particular test, but Walmart’s willingness to test innovations. Innovate or die.
Occasionally I spot a Safeway employee wheeling a shopping cart full of various items across their parking lot from the main store to their gas station/C-store. Replenishment from the big store to the small store. Walmart is working on an old idea. The DSD guys, however, still stock the Safeway C-store themselves with beer, soda, and chips, just as will happen with Walmart’s Neighborhood Markets and Express stores.
This substation channeling can save ten of millions of dollars a month in fuel, vehicle maintenance and toll expenses alone. This should be a corporate goal with real drive for success. The logistics mavens in Walmart will keep the market at bay for years if they can implement this and keep it tweaked.
This may be a great idea but at my local Walmart supercenter on any given day, the shelves are already poorly stocked. I went there just this Tuesday with a grocery list of 22 items. 4 of the items were out of stock, 2 were in-stock and not on the shelf (I asked a manager to get them from the back) and 2 items were gone…shelf stock ticket and all. Good luck keeping another store stocked from this one!
This really makes good sense because now Walmart can open stores where normal sized semi trucks cannot get to, like in dense urban areas. For example, the French Quarter in New Orleans, it would be impossible to get a large truck there. I believe the primary supermarket there is supplied out of nearby sister stores.
Other areas this makes sense are island neighborhoods with ferry-only access that semi trucks are too big for. Also in urban downtown stores, where deliveries must be done predawn and double parked.
Great idea! Cross-dock logistics are the wave of better efficiencies and lower costs for their future. Maximizing this will allow Walmart greater savings to better compete (and offer) Everyday Low Prices on more items in a smaller store footprint.
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Walmart has made the technological investment to be able to do some very innovative things logistically. Using large stores as distribution centers is likely not an applicable strategy for most retailers, but for Walmart, if it helps them reduce costs and accelerates their just-in-time replenishment efforts, kudos to them for once again leading the way in new logistical concepts.
They are so good at supply chain and logistics that they will figure out how to scale this from test to rollout. Smaller trucks from super centers make sense. The hurdle will be keeping the supercenters stocked appropriately to maintain necessary inventory to serve both.
Cross docking makes more sense than using the supercenters as mini warehouses from which product is selected and distributed. The skill sets required are far less and it has minimal impact on the supercenters’ operation.
It may be necessary to do some of both, but the more Walmart allows its supercenter employees to concentrate on getting their freight out on the floor, the better off they will be. As has been noted in several discussions recently, Walmart seems to be having out-of-stock issues – some of which may be in the locations’ backroom.
This week’s WSJ article on Amazon is the sign of the times and things to come in logistics. Amazon is piloting a mini-warehouse within P&G warehouses. This “under-their-tent” strategy enables them to cut warehouse and shipping costs for CPG product … and get ever closer to same day delivery on everything from diapers to pet food.
Retailers must innovate or become irrelevant. You have to take your hat off to Walmart. It would be easy for the world’s largest retailer to get complacent, stuck in the success of the past.
Walmart’s new cross-dock strategy is a very innovative use, and further development of their logistics expertise and infrastructure. Their cross-docking strategy will make them very competitive … especially for large bulky and more profitable items like white goods.
As an interesting side note, Sears was cross docking white goods 15 years ago. So it definitely takes more than cost effective logistics to thrive.
Logistics and payments are the two major roles that bricks retailers manage well, leaving shoppers to manage themselves. And the growth of self-service retail has ALWAYS been powerfully driven by advances in logistics as a huge part of the supply chain. When you see Amazon operating out of a P&G warehouse, surely it makes sense for Walmart to break down supply lines, allow capillary growth on their major arteries to their largest stores.
Automation (robots) and IT will make this “old hat” within 20 years – maybe 10.
This is workable concept. Some years ago I worked with a client to insure all trailers leaving the DC were completely full. The transportation savings from not shipping air were outstanding.
Smaller stores have a problem of requiring every-other-day perishable deliveries, but do not have sufficient volume to warrant a full trailer delivery. Some retailers have tried to solve this problem by having the truck make multiple stops. This solves the problem but at a cost.
Food retailers operate with a fixed delivery schedule. Mass merchant retailers use the door per store method and only ship to a store when the trailer is full. What they are finding out this does not work well with short-dated product. When you blend the two approaches the result is shipping air. Loading a nearby small store pallet or two to fill the trailer should save money.
Efficient supply of products is one area of focus and this seems like a decent thing to try.
In many locations, the bigger challenge is on what products to put into a smaller format store in the first place. They aren’t just mini versions of a big store. Effective supply of the wrong product mix still won’t cut it for customers.
Maybe it’s just me, and I’m missing something, but having the supercenter be an extra step on the road from supplier to shelf – even if the shipment is only rerouted rather than reloaded – doesn’t sound like something to be enthusiastic about. It may well be the best way to supply the neighborhood stores, but that just reinforces my view that the whole “neighborhood” concept is dubious, or at least it’s a fundamental change from what WM was…i.e. the quickest and cheapest way from supplier to consumer.
And not to change the subject – much – but perhaps the most significant news to come out of Bentonville is this: “U.S. Walmart stores … reported a 0.3 percent decline in revenue at stores open at least a year in the second quarter.” From The Detroit News. Of course one can argue that this is the very reason why the “small is beautiful” movement is important…we shall see.
This de-centralization of distribution will be beneficial, but will also complicate the supply chain at the supercenters that will essentially function as RegionalDCs for the smaller neighborhood market stores. The supercenters will have to develop cross-docking capabilities, and potentially warehousing capabilities as well, if goods aren’t cross-docked immediately on receipt. It can get further complicated if Walmart decides to get suppliers to ship to these RDCs directly, rather than to the central Warehouses/DCs. If Walmart manages to solve/manage the complexities this “Store-to-Store” model introduces, the supercenters will also give them a vehicle to offer reliable “same-day-delivery” to end consumers as well. That may end up becoming a bigger deal then “Store-to-Store.”
Given the strengths of Walmart in IT and logistics, if anyone can do it to squeeze efficiencies, they can. Especially with the growth in smaller stores with smaller storage in the back and loading dock facilities, makes sense for Walmart to extend and do a mesh network for fulfillment. You can be sure they are measuring the results to make sure there are actually efficiency improvements.
Getting the product closer to the customer is always a good thing. Challenge is that by decentralizing now, you have to be very nimble and accurate with your supply chain as you may need safety stock at multiple store locations vs just the central DC. Cross-docking pallets is one thing, but a pick and pack operation is different. Who are the associates that pick and pack; are they separate from the store associates and do they require a separate management structure? What takes precedent, stocking the store or picking for another store? I think the operational challenges here are many.
This is a very cool idea and a great thing to test. If anyone can make it work, I’m sure it is Walmart. And like many things, if Walmart makes it work, it will be just one more item on a long list of things that together constitute a major competitive advantage.
What’s really great – and what’s the real source of the enduring competitive advantage – isn’t this particular test, but Walmart’s willingness to test innovations. Innovate or die.
Occasionally I spot a Safeway employee wheeling a shopping cart full of various items across their parking lot from the main store to their gas station/C-store. Replenishment from the big store to the small store. Walmart is working on an old idea. The DSD guys, however, still stock the Safeway C-store themselves with beer, soda, and chips, just as will happen with Walmart’s Neighborhood Markets and Express stores.
This substation channeling can save ten of millions of dollars a month in fuel, vehicle maintenance and toll expenses alone. This should be a corporate goal with real drive for success. The logistics mavens in Walmart will keep the market at bay for years if they can implement this and keep it tweaked.
This may be a great idea but at my local Walmart supercenter on any given day, the shelves are already poorly stocked. I went there just this Tuesday with a grocery list of 22 items. 4 of the items were out of stock, 2 were in-stock and not on the shelf (I asked a manager to get them from the back) and 2 items were gone…shelf stock ticket and all. Good luck keeping another store stocked from this one!
This really makes good sense because now Walmart can open stores where normal sized semi trucks cannot get to, like in dense urban areas. For example, the French Quarter in New Orleans, it would be impossible to get a large truck there. I believe the primary supermarket there is supplied out of nearby sister stores.
Other areas this makes sense are island neighborhoods with ferry-only access that semi trucks are too big for. Also in urban downtown stores, where deliveries must be done predawn and double parked.
Great idea! Cross-dock logistics are the wave of better efficiencies and lower costs for their future. Maximizing this will allow Walmart greater savings to better compete (and offer) Everyday Low Prices on more items in a smaller store footprint.