Friday, July 4, 2008

The Fourth Of July and the American Way - Wal*Mart

July 4, 2008 -

Celebrate the 4th - go buy something, go sell something, anything...just like Wal*Mart...

I was disparately seeking a timely and interesting subject for a Fourth of July post - and two of the sites I visit most, provided me with WAL*MART.

Cory Smith's "I love Walmart but I hate them too." post resonated with me as well as Ken Stewart's Global-nomics At Work In Your Backyard. Excellent work, gentlemen!

But I think this all started over here. A great site mixing Technology with Politics(YIKES!) I love the mix, I love the argument - Tsudohnimh is the author, go check it out.

You may ask, "What in the world does Wal*Mart have to do with Managed Print Services, Edgeline or printing?"

Good question. On this blog we talk specifically about printing - but in a "galactic" sense, I am really talking about the application of technology in the business world and the impact/results of that application.

So how did Wal*Mart get so big? The answer, my friend, is through the application of technology - something we Americans do quite well and should be more proud of.(U!S!A!)

History Lesson - Back to the Future

Do you remember Mr. Kresge? No?

Ok, to be fair, I know of the Kresge name because I grew up in his "back yard" and the library at my University had his name on it. But Sam owes Sebastian everything - and Sam knows it.

"Sebastian Spering Kresge opened a modest five-and-dime store in downtown Detroit...and changed the entire landscape of retailing. The store that Kresge built has evolved into an empire of more than 1,500 stores and an Internet presence that reaches millions of customers...

"When Kresge opened his first store in 1899, he sold everything for 5 and 10 cents. The low prices appealed to shoppers and allowed him to expand to 85 stores in 1912, with annual sales of more than $10 million..."

sound familiar ?

"...War and financial depressions hit America hard over the next decades, but Kresge stores were always there to offer families products at prices they could afford. They also offered people what other businesses at the time could not -- jobs to support their families...

By the 1950s, it was evident that the company needed to change to continue to be a leader in the growing competitive retail environment. That change came through Harry B. Cunningham, who became Kresge President in 1959. Cunningham had been studying other discount houses and developed a new strategy for the Kresge organization.

Under Cunningham’s leadership, the first Kmart discount department store opened in 1962 in Garden City, Michigan(a few miles from my house growing up). Seventeen additional Kmart stores opened that year, leading to corporate sales of more than $483 million that year...

In 1966, sales in 162 Kmart stores and 753 Kresge stores topped the $1 billion mark. In 1976, S.S. Kresge made history by opening 271 Kmart stores in one year, becoming the first-ever retailer to launch 17 million square feet of sales space in a single year." Want to learn more? Click Here.

Enter Technology-Inventory Control catches K-Mart short.

Up to this point, Inventory Control relied on clerks walking the floor with a clip board tallying all the empty space on the shelves. And then reporting this information up and over to the "Buyer" process. This could take weeks to get replacement stock back on the shelf. So K-Mart and all retailers stocked huge local, warehouses full of goods and merchandise to reduce the re-stocking cycle and increase "turns". 

Keeping these warehouses full added a great deal of cost (COGS). These costs were passed to the customer through the selling price of each product.What separated Wal*Mart from K-Mart was Wal*Mart's ability to know exactly what was being sold, down to the store, shelf and SKU - live.

Think about it. In the retail world, Inventory Control is the core of everything - and on-line purchase data, live customer reporting was (and still is) the Holy Grail. I.C. was a science and an art.

The application of technology allowed Wal*Mart to move away from the traditional way of managing the buy-stock-resell cycle. Implementing Just In Time inventory management, reducing warehouse cost, these savings were passed to the customer through lower prices at check-out. Lower prices increased the number of customers, increasing profit and allowing Wal*Mart to reinvest in even more technology - further reducing costs, and again increasing the number of customers and profits allowing for even more investment in technology(it's a cycle).

Wal*Mart's growth attracted more attention from manufacturers of consumer goods; everybody wanted to get on the train. The application of technology put Wal*Mart in the driving seat when it came to what was placed on the selves in all their stores - a major shift. Now, Wal*Mart could dictate the terms of how companies worked with Wal*Mart - forcing vendors and manufacturers to lower their production costs - through the application of technology - driving cost even lower.

All this before the 60 Minutes article, the protests and anti-Wal*Mart town meetings.

Are you interested in Wal*Mart's history of technology use ? Then check this time line out.
So in addition to dog food, lawn chairs, paint, and deodorant - throw in BarCode readers, IBM 3740's, the largest privately owned satellite network, EDI, RFID and now you have a pretty good picture of a company who ended 2006 with $349 billion in sales, nearly 2 million employees and 6,775 stores worldwide. All of this in spite of the 60 Minutes article, the protests and anti-Wal*Mart town meetings.

That's right 2 million employees.

And so now, we move away from technology and into the social and geopolitical.

- Corporations are made up of people
- Successful corporations sell goods at a price higher then what they bought them for
- The U.S. Government is not an entity upon it's self; the people of the United States are the government...
- Successful administrations give the people a safe place to work on "the pursuit of happiness"...

"I don't dislike Americans, I dislike your government."

People have said this to me dozens of times. Usually they are from Europe, you know, the "Sophisticated Continent".

Once, while in Costa Rica, a gentleman from Holland sat across from me drinking a beer and said, "I don't dislike Americans, I dislike your government."

I had to take him to task by explaining to him he didn't know what he was talking about because he was ignorant regarding Americans and our government. I explained to him that in America, the people are the government and for him to "dislike my government" meant he disliked me and all Americans.

Of course to most "sophisticates from the continent" rule by the people is a translation for mob rule or Anarchy. I think this is due to the Royal rulers in Europe's history and DNA.

This idea of the government being separate from the people is a kin to the corporation being separate from the public.

There is really no such thing as a living "corporation". A company can not be "evil", a company can not be "good"; people are good or evil(more likely a little of both). When I hear people bash WalMart or StarBucks or MicroSoft or the US government, I hear people bashing other people.

In politics we vote at the ballot, in economics we vote with our dollars.

This is a very very basic principle - if people don't like something they won't buy it(this is called "Demand"). Simple. So, if some think that a popular talk show host should be censored they aren't censoring a critic they are censoring the will of the purchasing public (the people). If no one listens to the show, no company would want to advertise on the show and the show should naturally die.

Another example - Music. If Madona's next song doesn't strike a chord with listeners nobody will buy it. If nobody "votes" for her song through dollars, Pepsi won't be calling, no MTV appearance, no Grammy, and she will need to re-evaluate her musical options and business strategies.

If Wal*Mart didn't provide a service people want, nobody would buy at Wal*Mart. And if Wal*Mart was a terrible employer, nobody would work there. We vote everyday.

Local Community based businesses vs. Lowes vs Ace

- Does anyone still sell buggy whips?

- Do the Luddites still have a club?(actually they do, right here)

- Is the earth still the center of the solar system?

- If a comet appears in the sky, does this mean the crops will be good this year?

- When a volcano erupts, shouldn't we throw a virgin in to appease the volcano god?

My point is, everything changes - one day Burroughs is king of computers, the next IBM; D.O.S. to Windows; Xerox to HP, WalkMan to ipod, Beta to VHS, HD to BlueRay - everything changes.

If you were to sell buggy whips after Henry Ford replaced buggies, you went out of business.

Change is everywhere and constant (so how a candidate can say, "I am for change" and actually get a positive response from an adoring public, is beyond me, it's like saying you're for the Earth spinning - I blame the public school system, but I digress)

Bring it Home

Belief systems change and the application of technology is the Agent of that Change. It worked for Wal*Mart, it brought K-Mart back from the Dead and we no longer expect good crops and fortune when we see a shooting star.

America leads the world in the application of technology. The initial six American naval frigates were the first of their kind, unique to America.(Carolina Oak found only in the U.S.) And were implemented to defend against a specific threat to trade(The Barbary Pirates), to reduce the re-stocking cycle and increase inventory "turns" of spice, tea, etc.

Today we apply the technology that put Apollo on the moon. In our flat panel TV's, cellphones, laptops, garden hoses, rain coats, glue and light bulbs all these products share a heritage with the USS Constitution and The Eagle - and can be purchased at deep discounts from your local Wal*Mart.

HAPPY FOURTH - go buy something.

** Photo credit to Dayaran.

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