Wal-Mart: An American Original - Agenda

1. Wal-Mart: An American Original- Agenda • A Retrospective on its Growth 2. Innovative Business Model • How Did Sam Walton Get These Ideas? 3. Wal-Mart Today: The Challenges • Retreat from Germany in 2006 • Sluggish Growth in the US Market • Clamour at Home: The Price of Becoming Big 4. Wal-Mart’s Response • Global Ambitions • Re-thinking “One-Size-Fits-All” Approach • Flexible Workforce

2. How Wal-Mart Got There- A Retrospective on Its Growth • The Numbers: How “Big” is Big? • IT: The Driver of the EDLP strategy • Management Process … Partnership with Suppliers … Partnership with Employees … Obsessive Focus on Costs

3. Wal-Mart: A Behemoth … • 1962 : Sam Walton launched his first store • Location : Bentonville, a backwater in Arkansas, “a state where chickens outnumber people” • Today : World’s Largest Retailer • Four times as big as #2 Retailer, Carrefour • 5,482 stores in 14 countries as of Oct 31, 2005 • Revenues: 285B vs GE: $152B • Second-largest Company after ExxonMobil ($298B) • Workforce: 1.3 M Biggest private sector employer in the world

4. Walton’s Business Model was Different… • Located stores in small towns since big retailers such as Kmart and Sears dominated large towns • Kept overhead low • Offered incentives - Profit-sharing for staff • Partnerships for suppliers • Large investment in IT … To keep inventory low • Customers got friendly service AND, “Everyday Low Price”

5. Wal-Mart after 40 years …….Lord of the Things • Annual 2001 sales: $220 billion – Pre-text Profits: $9.3 Million ….. 60% of U. S. Retail Sales • #1 Food Retailer in the U.S.: $56 billion in 2001 ….. Opened since 1985 over 1000 massive dept./grocery supercenters, at 200,000 sq. ft., bigger than 4 football fields • # of employees worldwide: 1.28 million ….. More than the US Postal service ; # in China : 4,000 • # of Suppliers : 30,000 ….. In every continent but Antarctica • Value of 100 shares bought in 1970 @ $16.50 per share: $11.5 million • Wal-Mart’s % of P&G's $40 billion in annual sales : 15% P&G has a 150-strong Bentonville office & Senior EVP dedicated to Wal-Mart • Typical starting hourly wage: $6.50 Source: Business 2.0, March 2002

6. A Simple But Powerful Idea: Minimize the “Bad I” - Inventory • Walton figured out that most of the costs gets added after the product leaves the factory and moves through the supply chain: • Mfg.  Wholesaler  Retailer • 20% - 30% of retail price spent on keeping inventory in 3 warehouses • Walton eliminated the wholesaler • He instituted JIT inventory practices using “real-time” flow of information from a store’s sales floors to the supplier’s plants that dictated: • What to produce? When to ship? To which stores?

7. IT is Critical for Wal-Mart’s “Everyday Low Price” Strategy Invested in most of the waves of retail IT systems earlier and more aggressively than its competitors - Set industry standards in IT 1969 : Used computers to track store inventory 1980 : Adopted bar codes 1985 : Electronic Data Interchange (EDI) with suppliers Late 80’s : Wireless scanning guns 2003 : Mandated its 100 largest suppliers to place RFID (Radio Frequency Identification) tags on the boxes and pallets shipped to Wal-mart stores by January 2005 Focus of IT Investments: Applications that directly enhanced its core value proposition – EDLP – and increase sales through micromerchandising

8. IT: Only Area Where Wal-Mart Outspent Competitors Walton recognized early on that timely information is the key to maximizing sales and minimizing costs. The better your information about what’s selling and what’s not, store by store, the better you can avoid the twin perils of retailing • too little inventory or too much • Very Secretive About Its Information Systems • Custom-designed systems built by employees kept competitors off the trail • Hardware and software vendors bound by non-disclosure agreements • In 2001, Wal-Mart summarily announced that it would no longer share sales data with market research vendors like Information Resources Inc and AC Nielsen, since the reports of the vendors are available to all retailers who subscribe to that service.

9. Wal-Mart’s Fetishness About Secrecy- Sued Amazon for “Stealing Its Computer Secrets” • 1997: Amazon Forced to Set Up Distribution Network • Because Bertelsmann, the German media giant, went into a joint venture with Barnes & Noble, one of the two largest book store chains in the US, and launched an online book store to compete with Amazon AND Bertelsmann bought the largest book distributor in the US, who was Amazon’s Supplier • Amazon Lacked Core Competence in Distribution • Recruited 15 current employees of Wal-Mart and its vendors who had intimate knowledge of Wal-Mart’s computer systems behind the super-efficient distribution system. • Amazon’s Stand • “We’re not interested in other people’s trade secrets. We’re interested in hiring the brightest, hardest working, and most talented people wherever they might be.” • Wal-Mart’s Response • “There’s a lot of computer talent out there in the Valley. If you’re coming to Bentonville, you’re looking for something special.”

10. Sharing Sales Data With Suppliers- Key to Low-Price Leadership • Treat Suppliers as Partners, NOT Adversaries • Implemented a Collaborative Planning, Forecasting and Replenishment (CPFR) Program • JIT Inventory Program Reduced Carrying Costs - for Both Wal-Mart AND Its Suppliers • Wal-Mart’s Cost of Goods : 5% - 10% Less Than Competitors “CPFR has blurred the lines between Wal-Mart and the Supplier: You’re both working to the same end: To sell as much product as possible without either of us having too much inventory”. Source: Computerworld, Sept. 30, 2002

11. Wal-Mart’s Data Warehouse Current Level of Storage Capacity : 570 Terabytes * • Second only to the U.S. Government’s • More than all of the Internet’s fixed pages BUT ALL THAT DATA IS USELESS UNLESS IT IS USED Information is shared with its own Buyers AND Suppliers * Wall Street Journal, Dec 3-4, 2005

12. Value of the Data Warehouse- Wal-Mart’s Buyers • Helps to time merchandise deliveries - Its shelves stay stocked, but NOT overstocked “Predict what is going to happen, instead of waiting for it to happen” • Example : Analysis of purchases during Hurricane Charley indicated products to be stocked in Florida’s Wal-Mart ahead of Hurricane Frances that hit a few weeks later “Not just the usual flash-lights, but, for example, strawberry Pop-Tarts whose sales rates was 7 times the normal rate. The Pre-Hurricane top-selling item was beer! ” Source: New York Times, Nov 14, 2004

13. Value of the Data Warehouse - Suppliers Wal-Mart opened its data vault in January 1999 to its suppliers – cements Wal-Mart’s power over them • Extranet built by Wal-Mart, Retail Link, allows suppliers to see how their products are selling in different stores and which ones need to be replenished. • Vast and detailed data on sales and inventory exceeds what many manufacturers know about their own products. “They are very strict with their suppliers, but they give them the data they need.”

14. All That Data Is Mined!- Doing it since 1990 Analysis of its 90 million shopping cart transactions per week - To see how the purchases of the different items are related. - Company can then better identify items to market together. Obvious examples: - Charcoal and tongs go alongside the barbecue grills - Tiny baggies next to the pretzel boxes so Mom can pack snacks for the kids A not so obvious example! - Customers who buy Barbie dolls (it sells one every 20 seconds) have a 60% likelihood of buying one of three types of candy bars Source: Forbes, Sep 5, 1997

15. Micromerchandising Pays Off

16. Wal-Mart Stays Ahead of Competition! Competitors began to adopt many of Wal-Mart’s IT innovations including EDI and wireless bar code scanning in earnest in the mid-1990s. Target’s vice-chairman acknowledges that his company is “the world’s premier student of Wal-Mart”. Still Wal-Mart’s productivity, measured by real sales per employee, is higher than competitors. Sales per employee, $ thousand 1995 1999

17. The Wal-Mart Effect on Retail • 1987: • Wal-Mart’s Market Share: 9% • But 40% more productive than its competitors • 1995: • Wal-Mart’s Market Share: 27% • Productivity advantage widened to 48% • 1995-99: • Competitors reacted by adopting Wal-Mart’s innovations • Managed to increase their productivity by 28% • Wal-Mart raised the bar further by increasing its own efficiency by another 20% Source: “Retail: The Wal-Mart Effect”, The McKinsey Quarterly, 2002, No. 1

18. Company (Latest 12 months in 1994-95) Wal-Mart Circuit City K-Mart* Caldor* Bradlees* Federated Dept. Stores Selling, General & Admin. Costs As a % of Sales 15.8% (19.4% in 1984) 19.0% 22.2% 24.4% 29.4% 33.3% Wal-Mart Changed Retailing Economics *Now in Chapter 11 bankruptcy proceedings Source: Business Week, Nov 27, 1995

19. IT Innovation Is NOT Enough… … At least half of Wal-Mart’s productivity edge stems from managerial innovations that improve the efficiency of stores and have nothing to do with IT. • For Example: • Cross-training of employees allows them to function effectively in more than one department at a time. • Better training of cashiers and monitoring of utilization can increase productivity rates at checkout counters by 10% to 20%.

20. Wal-Mart’s Management ProcessKey Features 1. Low Wages… But “Golden Cuffs” … Started a Profit-Sharing Plan in 1971 for ALL Employees “ Based on profit growth, we contribute a % of the employee’s wages to his/her plan. The employee can take it in cash or Wal-Mart stock when they leave the company.” “After nearly 25 years at the company, Shirley Cox, a cashier, still earned barely $7.00 an hour. But she retired in her 40s on $250,000 of company stock…. the stock is a prevailing theme for everyone at Wal-Mart… if you hang around long enough, you can make a fortune on the stock.” 2. No class system, thus fending off all attempts at unionization … ALL employees are called “associates” drumming home the notion that managers and workers are partners 3. Promote from within … In 1996, 5,900 workers moved up to management jobs … 60% of the 30,000 managers are former hourly workers

21. Wal-Mart’s Management ProcessKey Features 4. Empowering of Front-Lines … Wal-Mart gives them information at their finger-tips and the freedom to act. “If someone asks me how we manage a $100 billion company, I tell them a store at a time, and we constantly challenge that unit to make it the best.” 5. Keeping Track of Competitors’ Prices “Later that afternoon, she leaves the store for an hour to compare prices at nearby Kmart and Target stores. She is reimbursed mileage. If a competitor’s prices are the same or lower than Wal-Mart’s, she consults with her supervisor about cutting her own prices up to 5 %.” 6. Management will not tolerate “shrinkage” Loss, theft and damage of inventory is capped at around 1% Other retailers settle for 3% - 5%

22. Wal-Mart’s Management ProcessKey Features • Work Ethic, Disdain for Extravagance and Customer-Centric • Lead by Example: Walton was a model of frugality and modesty who continually warned against complacency and sloth. He drove around in an aged Ford pickup truck and wore inexpensive clothes. • Wal-Mart’s corporate offices are cramped, dingy and cheaply furnished. Walton believed that executives should spend more time on the selling floor than behind desks. • To make sure they did, Walton, an avid pilot, assembled a small air-force that whisked them around the country, visiting Wal-Mart’s Monday through Friday. On the road, they stayed in budget hotels, and ate at family restaurants. • Every Saturday, at a meeting in corporate headquarters in Bentonville, they discussed their findings.

23. “A Model of Frugality”- In Practice • No signs of opulence or ego at the company’s headquarters. • Lee Scott, the current CEO, drives a VW beetle and shares a hotel room. John Menzer, head of Wal-Mart International, sits in a tiny office on the same floor as his staff. • Executives take out their own rubbish, pay for their coffee and are told to bring back pens from conferences ! • Another penny-saving practice: call vendors collect ! • Expenses on a buying trip should not exceed 1% of the cost of the items purchased.

24. In the Founder’s Words … There’s no two ways about it: I’m cheap. Wal-Mart never bought a jet until we hit $40B in sales and expanded as far away as California and Maine, and even then they had to practically tie me up and hold me down to do it. A lot of what goes on these days with high-flying companies and these overpaid CEOs, who’re really just looting from the top and aren’t watching out for anybody but themselves, really upsets me … Why should we stay so cheap when we’re a $50+B company: Because we believe in the value of the dollar. We exist to provide value to our customers, which means that, in addition to quality and service, we have to save them money. Every time Wal-Mart spends one dollar foolishly, it comes right out of our customers’ pockets.

25. “The Bigger Wal-Mart Gets,The More Essential It Is We Think Small” Walton’s Management Principles (circa 1990, 1528 stores) • For several decades now we’ve worked hard at building a company that’s simple and streamlined and takes its directions from the grassroots. It’s a pretty tall order for an outfit that is spreading out all over the country as fast as we can. • At our size today, there’s all sorts of pressure to regiment and standardize and operate as a centrally driven chain. • I’d hate to work at a place like that and I worry every single day about Wal-Mart becoming that way. • Nothing at all profound about any of our principles – in fact, they’re all common sense. Most of them can be found in any number of books or articles on management theory. • But I think the way we have applied them at Wal-Mart has been just a little bit different.

26. Most Important,Think One Store At a Time That sounds easy enough, but its something we’ve constantly had to stay on top of. Because our sales and earnings keep going up doesn’t mean that we’re smarter than everyone else, or that we can make it happen because we’re so big. What it means is that our customers are supporting us. We know what we have to do: keep lowering our prices, keep improving our service, and keep making things better for the folks who shop in our stores. That is not something we can simply do in some general way. It isn’t something we can command from the executive offices because we want it to happen. We have to do it store by store, department by department, customer by customer, associate by associate.

27. Store Within A Store:“Push Responsibility – And Authority – Down” … “Toward that department head who’s stocking the shelves and talking to the customer.” What sets us apart is that we train our department heads to be managers of their own businesses. In some cases, these businesses are bigger in annual sales than a lot of our first Wal-Mart stores. This works only because we decided a long time ago to share so much information about the company with our associates, rather than keep everything secretive. We let them see all the numbers so they know exactly how they are doing within the store and within the company. They know their costs, their markup, their overhead and profit margins. It’s a big responsibility and a big opportunity. And, we give them incentives to want to win.

28. Sales Review Meetings at Corporate- One Store At A Time • When we sit down at our Saturday morning meetings to talk about our business, we like to spend time focusing on a single store, and how that store is doing against a single competitor in that particular market. We talk about what that store is doing right and what it’s doing wrong. • Focus on a Single Store • Enables us to improve that store • Learn a particular way in which, say, the Panama City Beach Wal-Mart is outsmarting the competition on beach towels. • Get that information out to all our other beach stores around the country. “I don’t know any other large retail company – Kmart, Sears, Penney’s – that discusses their sales at the end of the week in any smaller breakdown than by region. We talk about individual stores - if we’re talking about the store in Harrisburg, Illinois, everybody here is expected to know something about that store – how to measure its performance, whether a 20% increase is good or bad, what the payroll is doing, who the competitors are, and how we’re doing.”

29. Keep Your Ear To The Ground • A computer is not – and will never be – a substitute for getting out in your stores and learning what’s going on. It can tell you down to the dime what you’ve sold. But it can never tell you how much you could have sold. • That’s why we at Wal-Mart are fanatics about our managers and buyers getting off their chairs here in Bentonville, and getting out into those stores. We have 12 airplanes – only one of them is a jet, I’m proud to say – in our hangars out at the Rogers, Arkansas, airport, and that’s why they are there. We stay in the air to keep our ear to the ground. • Our whole travel system is really an outgrowth of the way I managed those 9 stores back in 1960. I would get in my old Tri-Pacer and fly to those stores once a week to find out what was selling what wasn’t, what the competition was up to, what kind of job our managers were doing, what the stores were looking like, what the customers had on their minds. Of course, I have continued to visit stores almost constantly ever since, but with almost 2,000 stores today, a lot of other folks have to get in on the act.

30. The Real “Hands-On, Get-Down-In-The-Store Stuff” … • Our district managers are doing the job that I did back in 1960. But we also have 18 Regional Managers based here in Bentonville. Every Monday morning, they pile into those airplanes and head across the country to the stores in their region. • It’s a condition of their employment. They stay out 3 to 4 days, usually coming back in on Thursday. We’ve drummed into their heads that they should come back with atleast one idea that will pay for the trip. • Then they gather with the senior management of the company – all of whom should also have been visiting stores earlier in the week if they expect to ask any intelligent questions or know the first thing about what’s going on – for our Friday morning merchandising meeting. • In addition to the field work, we have computer printouts at the meetings which tell us what’s selling and what’s not. But the really valuable intelligence that surfaces in these sessions is what everybody has brought from the stores.

31. Bentonville, Arkansas, Does Not Come to the World- The World Comes to Bentonville! Source: “One Nation Under Wal-Mart; Fortune, Feb. 18, 2003

32. As the Company Grew,It Exercised Its Muscle on Suppliers • Wal-Mart meets with each Supplier to establish sales goals for the coming year after review of sales results for past weeks and months. • Keeps a Supplier Scorecard • Punctuality of deliveries • Data-documented problems about meeting orders or returns of defective products by customers • Suppliers not meeting sales targets would face tougher negotiations in the future from the steely Wal-Mart buyers. • RFID Mandate to Top 100 Suppliers in 2003 • In the Horizon: Scan-based Trading • “Suppliers own each product until it is sold. Wal-Mart will never take those orders onto its books. Think of the impact of shedding $50B of inventory. The impact will probably be felt by suppliers, but none are likely to complain.” … Meta Group Retail Analyst

33. Wal-Mart Lives in a World of Supply & Command,Instead of a World of Supply & Demand • An Example: Cross-Docking • Pre-assembled orders for individual stores from a supplier’s truck go seamlessly from an unloading dock at Wal-Mart’s Distribution Center directly into a truck bound for stores … Get goods into stores without even unpacking them – let alone allowing them to sit in storage ! “Until we reached a billion dollars, a lot of suppliers just ignored us way out here in the Arkansas Outback. Now, of course, we’re too big too ignore.”

34. Vendor-Financed Inventory ! • How Cross-Docking Works • At Wal-Mart’s new distribution centers, P&G’s trucks are unloaded directly to trucks that will head for Wal-Mart Stores. The toothpaste is never even put on warehouse shelves. Once a truck is full, it heads to the stores. • Products are put on the shelf within 4 hours, and are usually sold within 24 hours. • Despite this tight delivery schedule, Wal-Mart has 10 days to pay P&G. • Benefit of Cross-Docking: Vendor-Financed Inventory • “Sell the goods before we have to pay.”

35. How Wal-Mart Drives a Tough Bargain • Suppliers are shown to “the row”, a long corridor of drab, windowless cubicles at the Bentonville headquarters, each adorned with a notice that Wal-Mart’s buyers do not accept bribes. • It’s like a scene from a bazaar: sweaters spill out of suitcases and haggling over prices continues all day. … “We were grapes, but now we are raisins. They suck you dry.” • “There’s a difference between being tough and being obnoxious. Every buyer has to be tough, That’s the job.”

36. How Wal-Mart Drives a Tough Bargain • Buyers are told: “You’re not negotiating for Wal-Mart. You are negotiating for your customer. And your customer deserves the best price you can get. Don’t ever feel sorry for a vendor. He knows what he can sell for, and we want his bottom price.” • Vendors are told to quote the best price: “If they told me it’s a dollar, I would say, ‘Fine, I’ll consider it, but I’m going to go to your competitor, and if he says 90 cents, he’s going to get the business. So make sure a dollar is your best price.’ If that’s being hard-nosed then we ought to be as hard-nosed as we can be. You have to be fair and upfront and honest, but you have to drive your bargain because you’re dealing for millions and millions of customers who expect the best price they can get. If you buy that thing for $1.25, you’ve just bought somebody else’s inefficiency.”

37. A Telling Example of Wal-Mart’s Growth- Went Past Toys “R” Us by 1998 Toys “R” Us: Largest Toy Retailer in the U.S. --- Value Proposition: Choice, Quality, Reasonable Price --- Displaced Dept. Stores and small specialist toy retailers --- 25% share of the market – Before Wal-Mart! Today: Wal-Mart: Largest Toy Retailer:25% market share --- Toys “R” Us Share:15% (2003 Sales: $11B) --- Value Proposition: One better than Toys “R” Us: Rock-Bottom PRICES WAL-MART STRENGTHS: --- Super-efficient supply chain --- Mass retailer, with a broad diverse array of products --- Can afford to use toys as a loss-leader (lose money on toy sales) to lure in customers who then purchase higher-margin goods - Toys “R” Us just doesn’t have that luxury Source: Wall Street Journal, August 31, 2004

38. 41 Years of Nonstop Growth

39. “Sense & Respond” Management Process of Wal-Mart : Why They are Unbeatable Disappointing sales on Friday, Nov 26, 2004 (the day after Thanksgiving), Traditionally the biggest shopping day of the year • Wal-Mart knows it literally at the end of the day Because of their state-of-the-art information system

40. How did Wal-Mart Management respond to it? • Within a couple of hours, Michael Duke, the president of Wal-Mart, had gotten messages on his Blackberry that sales were off at stores around the country. • He brainstormed with execs and store managers about which products to mark down. • A team met over the weekend to finalize the list and contact suppliers. • On Tuesday, stores nationwide offered the new prices. Source: www.fastcompany.com

41. How did Wal-Mart Management respond to it? • On Thursday, Wal-Mart broadcast a video for its stores suggesting new displays. • The next day, the displays were up, and a new ad campaign was underway. 7. On Saturday, the company conducted a meeting with 500 employees asking for more ideas -- and acted on 21 of their recommendations. The result? The retailer expects December sales to be up three percent. Alth ugh it's not the holiday season it had initially hoped for, it represents a heck of a comeback. Source: www.fastcompany.com

42. Wal-Mart’s Exception Management – Driven by IT “At Wal-Mart, problems are referred to as “exceptions”. We keep watching everything that just happened. We are pretty near real-time. We can tell people that they need to go do something, and we are within hours, depending on the event.” “The event may be a truck’s failure to drop off or pick up something. It could be the absence of an important product in the store’s backroom or in the distribution centre that serves the store. Or, it could be an act of nature like the hurricanes that descended, one after another, on Florida in 2004” Source: New York Times, Nov. 14, 2004

43. Reflecting on the Wal-Mart Business Model- What Is It Grounded On? Use of IT Cost Control Partnership with Suppliers Partnership with Employees How did a Small-town Merchant get these Innovative Ideas? Walton tells it all in his folksy, conversational style in his autobiography; “Sam Walton: Made in America – My Story”, Bantam Paperback, June 1993 He died in April 1992, after fighting a two-year battle against a form of bone cancer.

44. How did Walton Get IT? • 1966 – Store #5 was under construction • I knew we had to get better organized than we were. • We had lists of items we were supposed to carry, and we were dependent on the people in the stores to keep records of everything manually – this was at a time when quite a few people were beginning to go into computerization.

45. How did Walton Get IT? • I had read a lot about that, and I was curious. I made up my mind I was going to learn something about IBM computers. • So I enrolled in an IBM school for retailers in Poughkeepsie, New York. One of the speakers was from the National Mass Retailers’ Institute - Abe Marks, Head of a Discount Retailer in Connecticut. • I visited with Abe a number of times at his New York office, and he was a very open guy. He shared with me how he used computers to control your merchandise.

46. “Best Utilizer of InformationTo Control Absentee Ownerships” “Sam knew that you are putting your stores where you, as management, aren’t. If he wanted to grow, he had to learn to control it.” â • Need Timely “I” to Service the Stores • How much merchandise is in the store? • What is selling? What is not? • What is to be ordered? Marked down? â • Key Metric: Inventory Turnover • Ratio of Sales to Inventory • Higher Inventory Turnover à Less Working Capital â “The man is a genius. He realized – even at the rudimentary level he was on in 1966, operating those few stores that he had – that he couldn’t expand beyond that horizon unless he had the capability to capture this information on paper so that he could control his operations, no matter where they might be … Gave him the ability to open many stores, and run them well, and be profitable.”

47. Growth of Wal-Mart Stores Year# of StoresSales (million $) 1 1966 5 1968 13 1970* 32 31 1972 51 78 1974 78 168 1976 125 340 1978 195 678 1980 276 1,200 1990 1,528 26,000 • * Went public on Oct 1, 1970 • 100 shares in 1970 @ $16.50 • Nine Two-For-One Stock Splits • 51,200 shares in 1990 @ $62.50 • Initial Investment of $1,650 in 1970 worth $3M in 1990

48. How Did Walton Manage IT? • I knew I’d never be any whizbang computer guy myself, so I had another reason for going to that school. I was looking to have a good, bright systems person, and I figured I might find one there. • That’s where I first met Ron Mayer, then the smart young CFO at Duckwall Stores in Abilene, Kansas. I targeted him as the guy we needed at Wal-Mart, and started wooing him right there. • Like so many of them, he wasn’t interested just then in moving to Bentonville, Arkansas, to work for somebody he knew next to nothing about. Later on, we changed his mind … He joined Wal-Mart in 1968 as VP for finance and distribution.

49. How Did Walton Manage IT? • From Ron Mayer’s arrival on, we as a company have been ahead of most other retailers in investing in sophisticated equipment and technology. • The funny thing is: everybody at Wal-Mart knows that I have fought all these technology expenditures as hard as I could. The truth is: I did want it. I knew we needed it, but I just couldn’t bring myself to say, OK, sure, spend what you need. • I always questioned everything. It was important to me to make them think that may be the technology wasn’t as good as they thought it was, or may be it wasn’t the end-all they promised it would be.

50. Growth of IT in Wal-Mart • 1978: Bar Coding & SKU Inventory System When Jack Shewmaker became our COO in 1978, he worked really hard at getting me to invest in more and better computer systems, so that we could track sales and inventories across the company, especially in-store transactions. • 1983: Satellite Communication System Once we had those scanners in the stores, we had all this data pouring into Bentonvile over phone lines. Those lines have a limited capacity, so as we added more and more stores, we had a real logjam of stuff coming in from the field. I like my numbers as quickly as I can get them. The quicker we get that information, the quicker we can act on it. “The technology did not really exist to do this for a retailer in the early Eighties. But we got together with Macom & Hughes Corporation and worked out a contract … Committed $24 M to build it … It was not an immediate success. But we got it working. Now, everybody has one” - Jack Shewmaker