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Organizational Behaviour

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Wal-Mart is the power house it is today because of its readiness to share information with its suppliers. As the store chain saw the benefits of sharing data with suppliers, they moved the information online on its Retail Link Web site. Rena Granofsky, a senior partner at J.C. Williams Group Ltd., a Toronto-based retail consulting firms says that Wal-Mart approached its suppliers as if they were partners and not adversaries, and by implementing such a collaborative planning, forecasting and replenishment program, they have began a just-in-time inventory program that reduced carrying costs for both the retailer and its supplier. Therefore there is a lot less excess inventory in the supply chain because of this system. This type of efficiency is a key in maintaining low price leadership amount retailers as well as allowing for far lower cost margins due to the supply chain. The company's cost of goods is estimated 5% to 10%

supplies are not there, customers lose faith in their supplier and look elsewhere for the merchandise. Perhaps the biggest problem K-mart has is its ability to keep stock on the shelves. K-mart in 2001 was able to keep its goods fully stocked on shelves only 86% of the time. In the industry, anything less than 90% is considered unacceptable. Wal-Mart, however, runs close to 100%. Wal-Mart and others have emphasized "everyday low price" selling, which is more predictable for both customers and the distribution system. Inventory, for such retailers as K-mart is having a negative effect. On the average, K-mart's inventory swells up as sales fall. In the beginning of 2002, for example, inventories rose by 5.6% as sales fell for K-mart. It is estimated that K-mart's cash flow would drop by $40 million for each 1% increase in inventory if this problem persisted. The bottom line is that in the third quarter of 2001, Wal-Mart raked in $52.7 Billion Dollars while K-mart only made $8 Billion (Saporito, Buamohl, Szczesny).



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