Wal-Mart distribution centers key to revenue growth

Wal-Mart’s distribution centers are efficient, well-oiled operations serving the world’s largest retailer 24 hours a day. But these massive hubs also could hold the key toward improved sales growth for Wal-Mart Stores Inc., according to Bill Simon, CEO of Walmart U.S.

Jabo Floyd, the general manager of DC (distribution center) No. 6094 in Bentonville, said “there are no cash registers in a distribution center,” so the only way they can contribute to Wal-Mart’s bottomline growth is through efficiency. Efficiencies within Wal-Mart’s distribution centers saved the company $15 million in 2012, the company said.

“If you have ever seen our distribution centers and how neat, how orderly and well-organized they are … then project yourself to the backroom of a supercenter, where there is more merchandise … you would see less organization, less efficiency,” Simon told a group of reporters last week in Rogers.

He said if Wal-Mart could have the same inventory management discipline in the backroom of its stores as seen in the distribution centers there would be “an incredible amount value to unlock.' Simon also said the supercenters have more inventory and warehouse square footage than any of the retailer's distribution centers.

He said unlocking this value is No. 1 or No. 2 on the list to do for Chris Sultemeier, senior vice president of transportation for Wal-Mart.

TIME IS MONEY
Floyd said products flow through the distribution center taking about 25 minutes to make their way from the warehouse floor into the truck once an order is created. As Wal-Mart works to keep stocked inventories lower, the ability to move product the day it is received into the warehouse from the supplier is crucial.

Floyd said products being unloaded on one end of the building can make their way through the warehouse and be reloaded in a truck for store delivery in less than 45 minutes. Orders are received from stores each night and are based on sales from that day. Those nightly orders are filled by the DC the following day and delivered based upon a customized schedule.

Products make their way into the Bentonville warehouse through 264 dock doors. The boxes then take a ride a state-of-the-art conveyer system that reads the label and sorts the product out to the warehouse floor or to the appropriate dock door for reloading. Each dock door is dedicated to one particular store. (There are 12 miles of conveyers that run across the average regional distribution center.)

FULLER TRUCKS
Floyd said large volume stores receive daily deliveries and smaller stores may get product delivered three times a week. From the Bentonville DC alone, trucks travel 1.8 million miles a month to reach the 130 stores it services.

Given that transportation is a huge expense for Wal-Mart Stores Inc. the company has continued to focus on improved efficiencies in its truck fleet.

Sultemeier said last year Wal-Mart reduced the “empty miles” driven and found other efficiencies that allowed the company to deliver 297 million more cases while driving 11 million fewer miles. One of the efficiencies was as simple as providing a step stool to the dock loaders, according to Floyd.

He said products are stacked tightly in a brick style inside the 53’ foot trailers and the shrink wrapped for more stability and shift resistance. Floyd said for years the trailers were often not stacked to the top, as most of the loaders were not tall enough to reach those heights. A two-step stool now sits outside each dock door and loaders are expected to stack floor to ceiling of each trailer.

He something as simple as this has made a huge difference in overall load efficiency.

Floyd said in a typical day warehouse workers will unload 150 to 175 trailers and load and dispatch another 100 to 150 trailers. A typical load consists of 2,000 cases and the Bentonville DC receives and ships nearly 550,000 cases each day.

GREEN GAINS
Sustainability initiatives have been big within Wal-Mart’s distribution center network and contributed millions to the bottomline since 2005. The DC network is in the midst conversion to LED lighting which is expected to be completed by 2016 with a cost savings of $11 million.

The retail distributor is also using hydrogen fuel cells to power a fleet of 255 forklifts used in one warehouse in Ohio, with plans for future expansion.

Solid waste recycling of plastic and cardboard within Wal-Mart’s distribution network contributed income of $18 million during 2012.

LOGISTICS NUMBERS
The distribution center in Bentonville was the No. 1 DC for the company last year and employs more than 1,000 workers in conjunction with the local transportation office. Floyd said nearly 600 of those employees have logged 10 years with the company and there is very little turnover among these logistics jobs.

Wal-Mart Careers said the average wage for its full-time logistics jobs average $19 per hour and DC managers can earn more than $150,000 annually.

Wal-Mart’s Logistics division employs 78,000, which includes 7,200 drivers in the retailer’s private fleet.

Wal-Mart drivers hauled more than 4.5 million loans of merchandise last year and prides itself on having one of the best safety records in the industry. Some 66 drivers for Wal-Mart have logged than 3 million consecutive accident-free miles. Phillip Null, who met with reporters last week achieved that accomplishment in 20 years.

Floyd said it would take the average consumer 200 years to reach that milestone, driving at an average rate of 15,000 miles annually.