Wal-Mart execs discuss turnaround in U.S. stores behind ‘one best way’

The Walmart U.S management team has in the past few years paid attention to detail in its store operations changing basically every process along the way, according to Judith McKenna, chief operating officer for Walmart U.S.

McKenna and Mark Ibbotson, executive vice president of Walmart U.S. central operations, addressed the media during the retailer’s shareholder events. Talk Business & Politics asked the execs to quantify the process changes and explain the rationale behind the massive undertaking.

Ibbotson said it began by looking for ways to simplify processes around the entire retail box – from how to change out the oil in the deep fryers to the best way to slice lunch meat in the deli. He said there were sometimes 9 or 10 steps for routine store processes that were simplified to two or three steps which are easier to teach and follow.

He said the “one best way” has been applied to virtually every process in the stores. For instance, last year the retailer discovered it was leaving too much frosting in large frosting tubs. Bakers were using spoons and spatulas to frost the cakes made in the bakery. A review of the department and close attention to detail discovered a considerable amount of frosting was being discarded because it was too hard to get out.

The retailer estimates it was wasting about 36 truckloads of frosting every year with the routine process used in its store bakeries. Wal-Mart began using a scraper with rounded edges that fits in the rounded corners of the tubs so that all the product can be easily retrieved and used.

ALL OR NOTHING
Walmart U.S. CEO Greg Foran has said many times that “retail is detail” and discipline has been applied to the retailer’s large U.S. store fleet. Ibbotson and McKenna told Talk Business & Politics this has been a “huge undertaking” given there are thousands of operational processes taking place in stores every day.

“When we looked at the situation two and a half years ago we knew it was going to be massive in scale but it was a matter of changing everything or doing nothing at all,” McKenna said.

Ibbotson said the work began with looking at processes that could have the biggest impact on the bottom line and improve customer service. He said they have moved around the entire store looking at every single job and the processes involved from picking fruit for online orders to instituting “top shelf,” which helped clear out the back room of inventory and get the product out on the floor where the customers are located.

Top shelf has been rolled out nationally and allows stockers and customers to have access to overflow inventory at the aisle. The additional shelf placed above the modular displays allows the stockers to be out on the floor and more easily work their areas without having to move back and forth from the backrooms, where inventory had been stored.

Foran has said a cleaner backroom and top shelf inventory management helps the retailer be in-stock more often. Being out of stock on items has historically been an estimated $2 billion opportunity for the retailer, given its scale.

FRESH FOCUS
Foran has said many of the process changes to “one best way” involves improving customer service which is why so much emphasis has been placed on improving techniques in rotating fresh produce and working to ensure items picked for customers using online grocery meet customer approval.

Charles Redfield, head of Walmart U.S. food division, said last year more than 3,300 U.S. stores had produce areas revamped because they needed it. He said fresh is a traffic driver and the first impression maker for stores and “we’ve got to get better at it.”

He said recently that offering online grocery and training a slew of personal shoppers who pick fresh produce has lifted the bar for the retailer. Redfield said doing this right makes the in-store shopping experience better because of that higher bar.

Ibbotson said customer service around faster check-out also received attention with more self-check registers being used in certain stores and high velocity lines to help those with large baskets get through the checkout faster is also being tested.

WORK IN PROGRESS
Foran told analysts in October 2014, shortly after he was named CEO of Walmart U.S., that it would take time to turn the big ship around. Six months into the job Walmart U.S. reported same-store sales growth 0.6% for the first quarter of 2015, up from negative 0.4% in the year-ago period. Total sales revenue was $70.245 billion, up 3.5% year-over-year. Fast-forward two full years and the comp-sales results improved to 1.1% in the first quarter of this year, and total revenue rose to $75.436 billion, up 2.92% from the prior year.

Foran said recently he’s proud of the improved store results, but there is still work to do.

“One of the metrics that sticks out to me is the improved traffic. That is the result of us putting together the right plan two years ago and executing against that plan, to get some of the basics right in the business. But the secret sauce in all of this has been our associates and the training we have been doing with them,” Foran said.

He said the improved traffic for 10 consecutive quarters indicates the changes are working. He said all the work done to revamp store operations and especially the improved training for employees are making a difference.

“It’s been an enormous challenge circa 2015 and we are about one-third of where we want to get to. There is lots more to do. It’s hard and grinding work,” Foran said.

The turnaround is about improving the operations at each of the retailer’s more than 4,600 U.S. stores. While Foran estimates the majority of the fleet have surpassed their goals, he is also moving the bar higher where he finds it necessary.