TOPICS > Economy

Wal-Mart the Global Giant

August 20, 2004 at 12:00 AM EDT
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WAL-MART EMPLOYEES: Give me a “w”! Give me an “a”!

PAUL SOLMAN: Wal-Mart is under siege these days for, among other things, underpaying its workers. But here in Arkansas, where Wal-Mart was born and is still based, workers think even PBS reporters ought to be gung-ho.

This energy not only drives Wal-Mart but, arguably, the U.S. economy as a whole because the key to economic growth is productivity – doing more with less. And that’s the key to success at America’s largest company ever.

More than a million Wal-Mart workers sold a quarter trillion dollars worth of goods last year in some 3,700 stores like this one.

But the number that makes Wal-Mart a key to U.S. economic success is its productivity growth. America’s productivity has grown at more than 2.5 percent a year for most of the last decade. Wal-Mart alone accounts for more than 10 percent of that growth, a number we found – well, astounding. So, how’s it possible?

This distribution center may look mundane, but it illustrates the passion for productivity that is the Wal-Mart way.

ROLLIN FORD, Executive Vice President, Wal-Mart: What you see here today is gone tomorrow. It completely turns -

PAUL SOLMAN: Executive Vice President for Logistics Rollin Ford.

PAUL SOLMAN: You mean everything that’s here–

ROLLIN FORD: Gone tomorrow.

PAUL SOLMAN: — Gone tomorrow?

ROLLIN FORD: Yes.

PAUL SOLMAN: One of 110 such facilities around the country, this place takes in more than a quarter-of-a-million cases a day from manufacturers, records them, sorts them, stores them, and gets them onto the right trucks for the Wal-Mart stores that need the merchandise, in twenty four hours. In warehouses of old, goods sat around for a month or more.

ROLLIN FORD: Efficiency and processing is the key. For example, this trailer right here that this young lady is unloading, she’s putting it on the conveyor immediately upon receipt; never gets slotted, never sits in a rack, goes immediately to our stores.

PAUL SOLMAN: And how does that affect productivity?

ROLLIN FORD: Well, obviously the less times that you have to handle a case, if she’s only touching it once, that’s the most efficient that you can get.

PAUL SOLMAN: Productivity: Getting more output at Wal-Mart, more stuff to the consumer with less input; fewer touches, thus fewer people. They say speed kills. Here, it’s more likely to kill the competition, though hopefully not the tour guide and his guest.

ROLLIN FORD: So you got a forklift behind you. Let’s…

PAUL SOLMAN: The fastest forklift drivers I’ve ever seen in any facility I’ve been in. I have to tell you. I notice you walk a little quicker than people normally walk.

ROLLIN FORD: In distribution logistics we were raised on the theory of efficiency, productivity.

PAUL SOLMAN: Historically, of course, Wal-Mart is just a recent example of a far-from-recent trend. The industrial revolution was machines replacing people, the McCormack reaper replacing the human version, for instance. A hundred years later, Henry Ford’s moving assembly line replaced another generation of workers.

Today, a modern factory is run by robot and computer with hardly a human in sight. And that’s what they’re shooting for at Wal-Mart’s distribution centers. As it is, cartons queue up for the loading dock with no human touches at all. Meanwhile, Wal-Mart uses scanning technology to tell managers and vendors what’s moving through the system. Mike Graen of Proctor & Gamble:

MIKE GRAEN, Proctor & Gamble: Every single store, every single day, every single item: What’s selling, what’s not selling.

PAUL SOLMAN: So P&G knows what to supply, when to supply it.

MIKE GRAEN: To make sure that orders that we get from Wal-Mart are coming in seamlessly, they’re flowing directly to our plant in an automated fashion; we’re turning around and filling those trucks and getting into the Wal-Mart store shelves as quickly as possible.

PAUL SOLMAN: And so suppliers like Proctor & Gamble and others huddle here in Vendorville, in permanent satellite offices they’ve set up near the headquarters of their number-one customer to work hand-in-glove with their biggest account and learn its techniques for delivering more, using less — kind of like I’m reading this more quickly than usual to get you more information in the same amount of time.

LINDA DILLMAN: This device is probably the most valuable tool we have in the store.

PAUL SOLMAN: Back in the stores, this mobile computer has sales data going back days, months, years, so managers can immediately see what might sell. This weekend was a holiday. Charcoal and ketchup sales figured to be up. But store manager Gary Rains just learned that deck wash also spiked this time last year.

GARY RAINS: We normally would have sold maybe eight, and we found that we were selling twenty-nine. So and as a customer, you’re going to come in and you’re going to want the deck wash sprayer, and if we don’t have it, you’re going to be disappointed.

PAUL SOLMAN: Rains says the new technology has cut the time he spends ordering inventory by 90 percent, freeing him to chat up the customers.

GARY RAIN: Are you getting what you’re needing?

CUSTOMER: Yes.

GARY RAIN: Okay. Well, you have a nice day.

LINDA DILLMAN: It’s a productivity loop, if you will.

PAUL SOLMAN: Executive vice president Linda Dillman is Wal-Mart’s chief information officer.

LINDA DILLMAN: They spend more time out here with the customers on the floor. As a result, that brings more customers into our stores. They buy more, and it just continues.

PAUL SOLMAN: Meanwhile, down the road from the Wal-Mart Gary Rains runs, Super Center Manager Betty Dutton has an even more direct way to increase sales: An end-aisle promotion for packs of plastic hangers.

BETTY DUTTON: This is my VPI, it’s my item.

PAUL SOLMAN: VPI?

BETTY DUTTON: Is a volume producing item.

PAUL SOLMAN: Volume producing item.

BETTY DUTTON: And what we have done is each one, associates and management, all of us in the store will pick an item, and we will put our pictures on it, and we will try to outsell the other associates in the store. That’s me.

PAUL SOLMAN: So how are you doing in the competition?

BETTY DUTTON: I’m doing great. I’m ahead of all management.

EMPLOYEES: Whose Wal-Mart is it?

EMPLOYEES: My Wal-Mart!

PAUL SOLMAN: And if you think Betty Dutton seems psyched, you should see her staff.

EMPLOYEE: I think it’s awesome to represent a company that’s number-one in the world.

PAUL SOLMAN: Oh, is that a big thing, the pride factor?

EMPLOYEE: It’s incredible. Everybody knows Wal-Mart everywhere. And it’s something to be proud about.

PAUL SOLMAN: Finally, and perhaps most importantly, Wal-Mart productivity seems to work for its customers. Eighty percent of U.S. households shop at Wal-Mart at least once a year, accounting for 8 percent of all retail purchases in America, 20 percent of all groceries. One in four Americans says Wal-Mart’s their “favorite store.”

CUSTOMER: I like shopping at Wal-Mart because it’s the best store in the world.

CUSTOMER: I usually end up buying stuff that don’t really need but I want. ( Laughs )

CUSTOMER: The prices is wonderful, and they have also wonderful stuff.

PAUL SOLMAN: How much were these?

CUSTOMER: Only $2.50.

PAUL SOLMAN: $2.50.

PAUL SOLMAN: No wonder then that the Wal-Mart cheer, performed every morning at every store at the beginning of every shift declares the customer number-one.

EMPLOYEES: Who’s number one? The customer!

PAUL SOLMAN: There is, however, more than a little something wrong with this picture, at least according to a number of current and former Wal-Mart employees who are suing the company.

WOMAN: They are psyched.

PAUL SOLMAN: What do you mean? They’re psychologically disturbed. [Laughter.]

WOMAN: Brainwashed.

WOMAN: By Wal-Mart.

PAUL SOLMAN: These plaintiffs, suing Wal-Mart for sex discrimination, may have an axe to grind, but they’re among those who say Wal-Mart hasn’t just increased productivity through technology. As business historian Jim Hoopes puts it…

JAMES HOOPES, Babson College: There’s a second way to make employees more productive, and that’s simply to demand more effort from them, to sweat more work out of them. The issue with Wal-Mart is that it’s accused not simply of giving workers better tools to work with, better technology, but it’s accused of demanding more from them every year.

CLAUDIA RENATI, Former Sam’s Club employee: We were lifting 50-pound bags of everything, and I ended up having both my knees had to have surgery on them.

PAUL SOLMAN: Because?

CLAUDIA RENATI: Because I was lifting on the floor during Christmas.

EDITH ARANA, Former Wal-Mart employee: It’s like the women bear this weight of Wal-Mart. I don’t know how else to explain it. They would come in on their days off. Some of us would come in when it’s our children’s birthday. But our store manager says, “Well, if you don’t come, hmm, I don’t know what might happen. I don’t know.”

PAUL SOLMAN: Vice President for Corporate Communications Mona Williams of Wal-Mart, which has appealed the class-action decision:

MONA WILLIAMS: We have 1.3 million people in this country. I think that’s the size of the City of San Antonio. Yes, we have had folks who have made the bad decisions. But how do we deal with that? If anybody does that we deal with that manager. We fire managers who make decisions that abuse associates.

PAUL SOLMAN: But some employees charge their jobs remain on the line for seemingly minor infractions– for example, failing to observe what’s known as the ten-foot rule, which these women say is one reason for all those smiling associates. That is, if a customer comes within ten feet of you, you’d better show them some love.

CHRIS KWAPNOSKI: I mean, you could be the grumpiest person or have life experiences outside work and not feel like saying “hi” to somebody. But if someone catches you not saying “hi” and being just, you know, super bubbly, you get knocked off on your evaluations for it.

PAUL SOLMAN: But wait a second, what’s wrong with an organization providing incentives for its employees to be friendly to other people in a retail environment?

BETTY DUKES: We should be friendly. We should treat our customers with respect and dignity. But they take you beyond the norm of daily routine in working. They want you to perform at not 100 percent; they want you to give 210 percent.

PAUL SOLMAN: The issue these women raise is one that’s echoed by critics of the Wal-Mart way, that the chain’s remarkable prices, profits and productivity come at too high a cost: Exploited workers, disrupted communities, and a worldwide so-called “race to the bottom,” issues we’ll explore at length in an upcoming story.