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Inside Wal-Mart IT
prostoalex writes "Information Week magazine takes a look at Wal-Mart's IT infrastructure. Wal-Mart's yearly global sales are quoted at more than 250 billion dollars, their IT spending is less than 1% of that. At the same time, the company manages to pursue new venues in optimizing retail with the wonders of technology. And what about outsourcing IT for the sake of optimization? 'We'd be nuts to outsource,' a top IT executive at Wal-Mart replies."
This is important news to CIOs. Walmart has traditionally been pro-business and strongly against organized labor and a "feel good" business approach. Therefore, when they don't outsource, they don't do so for the right business reasons, and CIOs elsewhere will take note. Over the long run, the market will do the right thing if you let it be.
Walmart appears to know this reality.
Strange women lying in ponds distributing swords is no basis for a system of government.
I've read that if you take all the manufacturing companies in China that _only_ manufacture for walmart, and count them as a single company, it would be the biggest manufacturing company in China.
Wal-Mart employs 950 000 people so I'd think they pretty much set the standard for their industry rather than paying above or below it.
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The fact is, their main edge over their competitors is their inventory management system (just-in-time, etc.). If they outsourced this, what is to stop their outsourcee to take the knowledge and then shop it around to Target, KMart, Sears, etc.? Such valuable knowledge must be kept in-house if you want to maintain the edge.
On the other hand, if it plain labor, then Walmart _encourages_ their suppliers to outsource. They keep asking for price cuts till the supplier has no choice. Read for yourself.
When you're Wal-Mart, you don't need to outsource, because you're already paying crap salaries. The slogan "Always low prices, always low pay" didn't come out of nowhere, you know.
Wal-Mart dictates its pricing across the board: to its suppliers, and to employees. When you can pay an American the salary of an Indian and get away with it, why hire the Indian?
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If anybody is good at saving costs it's Wal-Mart. I don't agree with many of their business practices (such as screwing employees out of overtime pay), but saving costs is one thing they're really good at.
They are smart enough to realize that in software development, the real cost savings come from quality and productivity, not per-person labor costs. Hiring, training and retaining people who can produce twice as much per person is much more profitable than hiring people who each cost half as much to employ.
Outsourcing to cheap labor might work well for manufacturing toys or T-shirts, but cheap IT labor doesn't so easily bring your total IT costs down.
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There is inferior bacteria on the interior of your posterior.
or .."We'd be nuts to outsource..." .."because 90% of our products are from China anyways!"
Soviet central planning was a command economy where the government dictated how much and what would be produced. Wal-Mart's central planning is more in response to consumer demand. We can argue about how intelligent that demand is, but it is still demand driven.
A fine is a tax you pay for doing wrong and a tax is a fine you pay for doing all right.
Did you ever look at any of the walmart-branded products and see where they're made?
"...sales are quoted at more than 250 billion dollars, their IT spending is less than 1% of that."
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Let's see here....
$250,000,000,000.00
x
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2,500,000,000.00
Just working with the 1% number, we can see their IT budget is ~2.5 billion bucks. With that much loot, I think it's fair to say, one can move mountains... and still make it back in time for afternoon tea.
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...there would be a big problem. $2.5 Billion in IT costs? For a global supermarket chain? I mean, if it was a technology company with big R&D budgets (like, oh, IBM, or something), that'd be a different story, perhaps.
On the other hand, $250 Billion in sales is just that...sales of largely physical goods. A better indicator would be as compared to profits...or as a percentage of operating costs.
What company in its right mind would do that to Wal-Mart? They're a company with more than enough money to effectively bury any of their little vendors who tried to defraud them like that. And that is exactly what they would be doing if they did that.
Whatever gains they might get, Wal-Mart's vendors could never justify the risks involved. Suppose they only get a few more "sales" here and there. Is that kind of increase in revenue worth getting millions of dollars in legal fees and fines shoved up their ass? Besides if it is a largescale operation, the chances that Wal-Mart would catch on very quickly is very high.
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I don't really see how lashing out at your roommate is going to change the corporate policy.
However, it's certainly going to give you a reputation for being an asshole.
Businesses are always looking for _any_ way to increase profits. It doesn't matter how. It's because that's the CEO/management's job, and if they don't do it every chance they get then the short-term thinkin' fucks who drive the stock market will replace them damn fast. Think of it this way, if I'm a CEO and I save the company 100 million a year by outsourcing, chances are good I'll pocket serveral million as a bonus. 'Strong and stable business'? What do I care, I just pocketed 10 million bucks!
Moreover, companies (and CEOs) are increasigly global entities. They move and operatate on a global scale, and can therefor skirt localized nastiness like recessions in one country or bloody revolutions in another. Marx predicted this, but all anyone can remember from him is that Stalin and Mao used his books for rhetoric.
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Actually, you can understand Walmart better if you think of their business as being compensated for storing consumer goods until people come to get them. Walmart outstrips its competitors largely by being clever about carrying as few goods in inventory as possible. (Think about it this way: assuming that you could service all your customer requests for inventory, would you rather have $2 million in inventory sitting on shelves or $1 million in inventory and $1 million in the bank?) If you can do that, then you only have to beat your competitors a little bit on price to create sales volume, and the money will roll in.
Distribution IT is at the red-hot core of Walmart's business because what makes money for Walmart is using that IT to be super-clever about minimizing inventory on hand. The day you hear that Walmart is outsourcing its distribution IT, sell.
So even though they pay nothing, thanks to that everyone gets a higher standard of living for the same $$$.
In the short term, that's true for people who DON'T work for WalMart. However, do you believe it's still true when your taxes go up tp pay for those government checks? (it doesn't come free even if they just print more money you know!) How about when crime goes up? The fact is, the net standard of living goes down, a little for most, a lot for some. TANSTAAFL.
If you really think about it, Wal-mart is not evil. In fact, Wal-mart gives almost all of the benefit attained through their relentless cost cutting initatives back to consumers. Wal-mart's margins are actualy very small compared to most other businesses. Profits seem big because Wal-mart has sales of $250 billion, but margins are tiny.
Wal-mart does not force people into their stores at gun point. People shop there of their own free will so that they can get the absolute lowest price possible. This behavior has consequences.
Pay a higher price at your local store on main street, and suport their higher cost structure (buying american manufactured goods, higher wages and benefits for employees, lost productivity due to unionized labor force, etc.) or support the Wal-mart way.
Most Americans choose Wal-mart. This is what sends jobs overseas to cheaper labor, encourages "big box store" suburban sprawl, and low quality jobs in the store. Wal-mart is simply supplying what the american consumer wants. this is not evil, this is meeting demand. Wal-mart would not be sucessful if people valued quality jobs over low prices always, in fact, they would be out of business very quickly (remember the low margin thing?)
Which is why the point of CS studies back then wasn't to learn how to program a PDP-11, nor is learning the Win32 API the point of CS studies today.
I take it you do not have a degree. The most important things that a CS degree program will teach you have nothing to do with a particular platform.
But thanks to Wal-Mart, prices move lower and less money is needed to live. So even though they pay nothing, thanks to that everyone gets a higher standard of living for the same $$$. This is the opposite of inflation, which makes it a good thing!
Thanks to WalMart, existing retailers go out of business and people lose their jobs. WalMart buys from China instead of the local companies that served the local retailers. Some of the displaced then work at WalMart for less money and have less to spend. They qualify for assistance which drives up local taxes. BTW, the opposite of inflation is deflation, which is a very bad thing.
Besides, if you don't want to make minimum wage, go to college or something!
Yeah. Get a degree in CS, and rack up many thousands of dollars in student debt. If WalMart won't hire you as one of their few IT people, there is always the high-paying Greeter job.
Some food for thought:
In any situation, 49.99% are bringing the average down.
Finkployd
Wal-Mart may be treating some people right - but is everyone getting the same sort of treatment as you?
What about the associates?
What about the suppliers across the world?
Hmmm, I think the evil tag still sticks.
Wal-Marts vehement anti-union attitude means over half of its 720,000 associates qualify for federal food stamps. Wal-Mart employees average just $7.50/hr. well below the national retail wage average of $8.71/hr. At 30 hours per week, a Wal-Mart worker earns barely $11,700 per year - $2000 below the federal poverty line for a single mother with two children.
And YOU pay for that.
In short, the government indirectly subsidizes Wal*Mart because the government ends up footing the bill for those underpaid employees who need foodstamps, welfare, healthcare, and all that stuff they can't pay for themselves because they are below the poverty line.
Next time you're shopping Wal*Mart, ponder that: you're helping create a welfare state, helping outsource manufacturing jobs to China, and all the rest.
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It hauls off a stunning $220 billion a year
Wal-Mart banks about $7 billion a year in profits, ranking it among the most profitable entities on the planet
7 billion in profit on 220 billion in sales is a miserable 3.18%, making WM modestly successful for a retailer but SAD, SAD, SAD when it comes to a lot of other companies in terms of profitability. And speaking of retailing, plenty of specialty stores have much higher profitability but just haven't grown so large as WM because less people want whatever specialty.
Have you been reading 'No Brands' or similar nonsense again?
Wait a sec... aren't those all pranks I could play on myself? There's got to be a better way to keep things interesting and funny than to make a complete ass of yourself.
...products on the shelves at walmart represent products that one generation ago or less were manufactured inside the US. My beef isn't with the workers at walmart, and no idea how or why you would infer that, so I'll officially dispell that notion right now. My beef is high level collusion, bad foreign policy, supporting massive human rights abusers, and the notion that destroying the US economy and security just to make much less than 1% of the population a ton of loot is a good idea. Nuts to that!
As to folks who lost their jobs over the past 20 years due to outsourcing, I sincerely doubt that ALL those people willingly begged their bosses to please close the factory and take it to china, so that they could shop at some store like a walmart while they looked for a new job. For some folks it has happened multiple times so far. Comes a point in time you got to say "ok, enough" It just happened to them. It was sold to us as opening up global trade, "everyone wins". Yet we CONSISTENTLY run trade imbalances, especially with china? Why is that? Give me an exact answer to that if you can, why the trade imbalance? shouldn't it have settled out by now? (My pov,hint: china makes more money, and a very few very wealthy people make more money with things like that), but I'd still like to hear the official approved version of why this imbalance with "free trade" exists to such a huge extent.
25 years ago, the USA was the worlds largest CREDITOR nation, now we are the worlds largest DEBTOR nation. True facts, look 'emup. Exact same time frame the walmartization-the outsourcing- of the economy occurred.
You may think it's a coincidence, but I sure don't. I wrote and predicted way back then what is happening now would occur. You'll have to take my word on that, but it happened. It's OBVIOUS as all get out what happens when you open up the labor market intenationally WITHOUT opening up the housing and whatnot true "cost of living market" internationally and simultaneously.
I don't claim to know every human who works at walmart,but the three I know personally all had much better jobs that evaporated, and took walmart jobs out of *desperation* to have any income at all. I will grant that it's most probable that humans have an incredible variety of reasons for seeking employment most places. I think though it would be fair to assume that most folks working there would rather have 40 hours with better pay and some bennies, like most "middle class" jobs used to be inside the US.
Like I said, I used to be a supporter of walmart and shopped there, back when it was first open and sam walton ran it and it had mostly all USA products. Now that it's switched to being merely the arm of the Peoples Republic of China-retail division*, I can see that it is harmful to our domestic economy, because of the raw hard observable data, and from the perspective that a truly strong and independent nation *must* have a fully integrated vertical economy. It is an incredibly boneheaded move to fund, develop, enrich the one nation that is most likely to be your biggest global competitor (and most probgably military antagonist) once the oil really starts evaporating. It's a strategic blunder of almost unfathomable proportions. That is my opinion, but it is shared by many people of geopolitical and scholary bent. People who are only concerned about short term financial profits, no, they don't share that opinion. Some folks just have different priorities.
****WHY any nation that values freedom allegedly wants to do business with a one party total dictatorship, with NO RIGHTS whatsoever for it's people,and who have verifiably murdered millions of their own peoples is beyond me. In ww2 we fought against such a system, then we had a massive and expensive cold war against a similar system, but now, an extremly similar situation and nation, differing only in language, ethnicity and gross physical size becomes "most favored nation" trading partner with every big "american" businessman
If you live in Podunk, USA, you probably don't have a choice. This is because Wal-Mart will artificially lower their prices to force out any competitors, once they've wiped everybody out, they raise 'em again. There's an excellent program on PBS recently, see it if you get a chance.
Pay a higher price at your local store on main street, and suport their higher cost structure (buying american manufactured goods, higher wages and benefits for employees, lost productivity due to unionized labor force, etc.)
True, workers in Safeway make $18/hr vs $8/hr for WM. But it's not just that. The PBS show gave some interesting insight into how Wal-Mart works. They get communities to give them huge tax incentives by showing how much sales revenue and jobs they will "generate". What the small towns don't realize is Wal-Mart doesn't "magically" create any more revenue, it just cannibalizes the other stores, so that in fact, total revenue goes down, especially if Wal-Mart headquarters decides they don't need the store anymore, after 10 years or so and closes it. Further, the bulk of the money goes elsewhere, out of the community, back to Bentonville.
Now back to the original point about insurance and pay. It actually turns out worse for the towns, that still have to provide care for their now non-insured population of workers. So they are basically subsidizing Wal-Mart in this way, not just in the tax benefits.
Wal-mart is simply supplying what the american consumer wants. this is not evil, this is meeting demand.
That's what you would think. But now you see it's just another tax loophole essentially, just as the mall sprawl was partially because real estate tax benefits, i.e. I invest my millions in a mall, and get a great ROI, regardless of whether the mall does well or not (see excellent New Yorker article about the history of Malls in the U.S.). Blame it on the accountants.
That's an interesting way to think of it. If I am already subsidizing the workers of Wal-Mart, I should start shopping there so I can at least benefit from what I am already paying for.
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